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CHAPTER3.TXT
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Chapter 3:
"The Matrix"
This chapter contains an essential key with the potential to
set you free. One of the biggest obstacles to understanding
federal tax law is that it never uses diagrams or pictures. If a
picture is worth a thousand words, then the Internal Revenue Code
(IRC) would certainly lose a lot of weight if it were reduced to
pictures; but there would still be a lot of pictures! A careful
examination of certain key terms like "resident" and "citizen"
reveals a certain two-dimensional quality to the statutory
relationship among these terms. Specifically, you are an alien
if you are not a citizen, and you are a nonresident if you are
not a resident. This careful examination led to the following
diagram, which I like to call "The Matrix". The Matrix is the
key that unlocks the whole puzzle of federal income taxation.
When you understand The Matrix, you will know exactly where you
stand with respect to the federal zone:
column 1: column 2:
+-----------------------------------+
| United States** | |
| citizen | alien |
|-----------------+-----------------|
| | |
| | |
resident | X | X | row 1
| | |
|-----------------+-----------------|
| | |
| | |
nonresident | X | | row 2
| | |
+-----------------------------------+
The validity of The Matrix is supported by a large body of
evidence, only a small part of which can be covered effectively
in a single book. The IRC is not a good place to begin, because
Chapter 1 of that Code imposes a tax on the taxable income of
"individuals", a term which the Code simply does not define. The
definitions that do exist are found in Chapter 79 and in other
places which are spread around the Code like leaves blowing in
the wind. The Code of Federal Regulations (CFR) is a much better
place to begin a review of the evidence. The regulations in the
CFR are considered to be official publications of the federal
government because they are "judicially noticed" (courts must
defer to them) and because they are considered by law to be
official supplements to The Federal Register. According to the
regulations which promulgate Title 26, the Internal Revenue Code,
the liability for federal income tax is imposed on all citizens
of the United States** and all residents of the United States**,
as follows:
Page 3 - 1 of 10
The Federal Zone:
In general, all citizens of the United States**, wherever
resident, and all resident alien individuals are liable to
the income taxes imposed by the Code whether the income is
received from sources within or without the United States**.
... As to tax on nonresident alien individuals, see
sections 871 and 877.
[26 CFR 1.1-1(b)]
Thus, the regulations impose an income tax on all citizens,
whether they are resident or nonresident (column 1 in The
Matrix), and on all residents, whether they are citizens or
aliens (row 1 in The Matrix). These same regulations define a
United States** citizen as someone who is either born or
naturalized in the United States** and who is subject to the
jurisdiction of the United States**, as follows:
Every person born or naturalized in the United States** and
subject to its jurisdiction is a citizen.
[26 CFR 1.1-1(c)]
[emphasis added]
The official IRS "Publications" are another excellent source
of evidence which supports the validity of The Matrix. These
publications can be obtained by ordering them directly from the
Internal Revenue Service. For example, Publication number 519,
U.S. Tax Guide for Aliens, begins with the following statements:
Introduction
For tax purposes, an alien is an individual who is not a
U.S.** citizen. Aliens are classified as nonresident aliens
and resident aliens. ...
[emphasis in original]
Clearly, an alien is an individual who is not a U.S.**
citizen. Aliens are individuals who were born outside of the
federal zone, and who never elected to become U.S.** citizens via
naturalization. Publication 519 then explains the difference
between a resident alien and a nonresident alien, as follows:
Resident or nonresident?
Resident aliens generally are taxed on their worldwide
income, the same as U.S.** citizens. Nonresident aliens
generally are taxed only on their income from sources within
the United States**. ...
[continued ...]
Page 3 - 2 of 10
The Matrix
Nonresident aliens are taxed on their U.S.** source income
(and on certain foreign source income that is effectively
connected with a trade or business in the United States**).
[emphasis in original]
How does one become a "resident" of the United States**?
Remember, as used in Title 26 and its regulations, the term
"United States**" means the area over which Congress exercises
exclusive legislative jurisdiction, that is, the federal zone.
The IRC contains a relatively clear definition of the terms
"resident alien" and "nonresident alien", as follows:
Definition of Resident Alien and Nonresident Alien. --
(1) In General. -- For purposes of this title (other than
subtitle B) --
(A) Resident Alien. -- An alien individual shall be
treated as a resident of the United States** with
respect to any calendar year if (and only if) such
individual meets the requirements of clause (i),
(ii), or (iii):
(i) Lawfully Admitted for Permanent Residence.
-- Such individual is a lawful permanent
resident of the United States** at any time
during such calendar year.
(ii) Substantial Presence Test.
-- Such individual makes the election
provided in paragraph (3).
(iii) First Year Election.
-- Such individual makes the election
provided in paragraph (4).
(B) Nonresident Alien. -- An individual is a
nonresident alien if such individual is neither a
citizen of the United States** nor a resident of
the United States** (within the meaning of
subparagraph (A)).
[26 USC 7701(b), emphasis added]
Being lawfully admitted for permanent residence is also
called "the green card test". IRS Publication 519 explains the
green card test as follows:
Page 3 - 3 of 10
The Federal Zone:
You are a resident for tax purposes if you are a lawful
permanent resident of the United States** at any time during
the calendar year. ... This is known as the "green card"
test. You are a lawful permanent resident of the United
States** at any time if you have been given the privilege,
according to the immigration laws, of residing permanently
in the United States** as an immigrant, and this status has
not been taken away and has not been administratively or
judicially determined to have been abandoned. You have this
status if you have been issued an alien registration card,
also known as a "green card," by the Immigration and
Naturalization Service.
[emphasis in original]
American Citizens who were born free in one of the 50 States
of the Union are not required to obtain an alien registration
card, because their presence in one of the 50 States is not a
privilege; on the contrary, it is an unalienable right which is
guaranteed to them by the United States Constitution because they
were born free and Sovereign. The Constitution refers to these
people as "natural born Citizens" (2:1:5), "free Persons" (1:2:3)
and "Citizens of a State" (3:2:1 and 4:2:1). On the basis of
this criterion alone, the natural born State Citizen enjoys a
significant right which is not enjoyed by a person who must apply
for residence as a privilege granted by government. (Throughout
this book, the terms "native American Citizen", "native-born
American Citizen" and "American Citizen" will be synonymous with
"natural born Citizens" as in 2:1:5 of the Constitution, and with
"State Citizens" as in 3:2:1 and 4:2:1 of the Constitution, to
avoid problems that do arise solely from terminology.)
Publication 519 explains the "substantial presence test"
using rules which closely parallel those which are actually found
in the Internal Revenue Code (26 USC):
You will be considered a U.S.** resident for tax purposes if
you meet the substantial presence test for the calendar
year. To meet this test, you must be physically present in
the United States** on at least:
(1) 31 days during the current year, and
(2) 183 days during the 3-year period that includes
the current year and the 2 years immediately
before, counting:
- all the days you were present in the current
year ... , and
- 1/3 of the days you were present in the first
year before the current year ... , and
- 1/6 of the days you were present in the
second year before the current year ...
Page 3 - 4 of 10
The Matrix
Example. You were physically present in the United States**
on 120 days in each of the years 1988, 1989, and 1990. To
determine if you meet the substantial presence test for
1990, count the full 120 days of presence in 1990, 40 days
in 1989 (1/3 of 120), and 20 days in 1988 (1/6 of 120).
Since the total for the 3-year period is 180 days, you are
not considered a resident under the substantial presence
test for 1990.
[emphasis in original]
An individual may elect to be treated as a resident of the
United States**. The rules for making this election are found in
the statute (26 USC 7701(b)(4)) and in the CFR regulations which
promulgate this statute (26 CFR 1.871 et seq.). Why anyone would
want to do this, without actually residing in the United
States**, remains a mystery to me. Many Americans have been
duped into believing that electing to be treated as a resident is
a "beneficial" thing to do. Subsequent chapters will discuss the
so-called "benefits" of U.S.** residence and U.S.** citizenship
by contrasting revocable privileges and unalienable rights.
At last, we arrive at the definition of "nonresident alien".
We have taken the long way around the mountain, but it is the
only way around the mountain (as it turns out) because Chapter 1
of the Internal Revenue Code imposes the tax on undefined
"individuals". It is in Chapter 79, near the end of the Code,
where it states that an individual is a nonresident alien if such
individual is neither a citizen of the United States** nor a
resident of the United States**. If you were born outside the
federal zone, either as a Sovereign Citizen natural born free in
one of the 50 States of the Union, or as a native citizen of a
foreign country like France, then you are not automatically a
"citizen of the United States**". You may, of course, obtain
"U.S.** citizenship" by applying for this "privilege" with the
Immigration and Naturalization Service, even if you are a
Sovereign State Citizen. You may also relinquish U.S.**
citizenship at will, through a process known as "expatriation".
If you were born inside the federal zone, then you are
automatically a "citizen of the United States**". The rules for
residency have already been reviewed above.
The validity of The Matrix is also reinforced clearly by a
man named Roger Foster who, in the year 1915, wrote a forgotten
treatise on the Act of 1913, the year the so-called 16th
Amendment was declared ratified. Some people argue that these
older materials are not relevant because they do not take into
account the changes that have occurred in the statute and its
regulations. Although changes have indeed occurred, the
relevance of these materials lies in their proximity in time to
the origins of income taxation in America, and to the intent of
the original statutes. It is a principle of law that the intent
of a statute is always decisive. The following excerpt is taken
from A Treatise on the Federal Income Tax under the Act of 1913,
Page 3 - 5 of 10
The Federal Zone:
by Roger Foster of the New York Bar, published by The Lawyers
Co-operative Publishing Company, Rochester, New York, in 1915:
Section 35: Incidence of the tax with respect to persons.
Under [the statute] four possible cases arise. Two are
of citizens, with reference to their residence or
nonresidence, and two are of aliens, with reference likewise
to their residence or nonresidence. There is no question as
to the first two, that the whole income of every citizen
whether residing at home or abroad is taxed; it is so
specifically provided in the act. Similarly, it is
expressly provided in the act that every person residing in
the United States** shall pay a tax upon all his income,
from whatever source derived, which without question
includes all resident aliens. Whatever, therefore, the
power of Congress may be, its intent is clear, that in case
of non-resident aliens the only measure of the tax is income
derived within the United States**.
With reference to aliens, therefore, it must be
determined whether they are resident in which case they must
pay the tax on their whole income; or if not resident
whether they own property or carry on a business, trade or
profession in the United States**.
In the latter case, they are taxable only with
reference to income earned or paid in this country. If they
are non-resident and do not derive an income from any source
within our territory of course they are not taxable at all.
[pages 153 to 155]
[emphasis added]
Note, in particular, that Foster makes reference to "income
earned or paid in this country". You might be sorely tempted to
conclude, therefore, that he meant to define the "United States"
to mean the several States of the Union (then 48) in addition to
the federal zone. He did not. This question is squarely settled
in another section of his treatise, in which he considers the
incidence of the tax with respect to territory:
Section 34: Incidence of the tax with respect to territory
and places exempted from the same.
The tax ... is levied in Alaska, the District of Columbia,
Porto Rico [sic] and the Philippine Islands. ... The Act
expressly directs:
"That the word 'State' or 'United States**' when used
in this section shall be construed to include any
Territory, Alaska, the District of Columbia, Porto
Rico, and the Philippine Islands, when such
construction is necessary to carry out its provisions."
Page 3 - 6 of 10
The Matrix
Although there might be ground for argument that the phrase
"any Territory" applies to the Hawaiian Islands, it was the
evident intention of Congress that the residents of Hawaii,
at least when not citizens of the United States**, are
exempt from the tax, for the reason that the Legislature of
Hawaii has imposed an Income Tax upon all residents of that
territory.
[pages 152 to 153]
[emphasis added]
There you have it! Four possible cases arise. Go back to
The Matrix and to the cover of this book. Focus carefully on the
lonely cell found at row 2, column 2. You are a nonresident
alien if you are not a citizen of the United States** and you are
not a resident of the United States**:
The term "nonresident alien individual" means an individual
whose residence is not within the United States**, and who
is not a citizen of the United States**.
[26 CFR 1.871-2]
At this point, you may still be wondering if it is indeed
correct to use the term "nonresident alien" to describe Sovereign
State Citizens who were born free in one of the 50 States of the
Union, and who also live and work in one of the 50 States of the
Union. All that remains to prove it correct is to verify the
legal meaning of the term "United States**" in Title 26, the
Internal Revenue Code (IRC). This proof requires an overview of
the several meanings of the terms "United States" and "State" as
they are defined in the statute itself, in the case law, and
elsewhere.
An exhaustive proof is not necessary here because other
capable authors have already completed a massive amount of work
on this subject. Interested readers are encouraged to review the
Bibliography, found in Appendix N, and to obtain copies of the
key publications entitled Good-Bye April 15th! by Boston T.
Party, Which One Are You? by The Informer, United States Citizen
versus National of the United States and A Ticket to Liberty both
by Lori Jacques, The Omnibus by Ralph F. Whittington, and Free At
Last -- From the IRS by N. A. "Doc" Scott. Taken as a group,
these authors have published a wealth of irrefutable
documentation which proves, beyond any doubt, the true meaning of
"nonresident alien" in the federal income tax statutes. Author
Ralph Whittington's book is particularly valuable because its
appendices contain true and correct copies of key documents like
Roger Foster's treatise and selected Acts of Congress.
The following anecdote summarizes nicely many of the key
points which we have covered thus far:
Page 3 - 7 of 10
The Federal Zone:
Several years ago in a coffee shop while talking with a
friend about "tax matters," a man in the adjacent booth
overheard our conversation and asked to join us. The
conversation continued, and centered mainly on IRS abuses.
This gentleman seemed particularly knowledgeable about the
subject and we asked him what he did for a living. He told
us his name and that he was an attorney with the Tax
Division of the Department of Justice in Washington.
Naturally, this put us on guard, but he quickly put us at
ease by agreeing in large part with the conclusion we had
drawn.
Reluctantly, I asked him this question, "Why are
defendants in federal district court always asked if they
are 'citizens of the United States'?" He replied without
hesitation, "So we can determine jurisdiction. In many
cases the federal court does not have jurisdiction over a
citizen unless they testify they are a citizen of the United
States -- meaning a federal citizen under the 14th
Amendment."
My friend innocently asked, "What's a federal citizen?"
The attorney replied, "That's a person who receives benefits
or privileges or is an alien that has been admitted as a
citizen of the United States."
I quickly interjected, "What if the individual denied
being a citizen of the United States and claimed to be a
sovereign citizen of Oklahoma?" The attorney bowled me over
with, "We don't get jurisdiction."
He had to catch a plane.
[Freeman Letter, March 1989, page 6, emphasis added]
[as quoted in "Brief of Law for Zip Code Implications"]
[by Walter C. Updegrave, revised March 28, 1992]
The implications of the 14th Amendment are considered in
some detail in Chapter 11 and in Appendix Y. For now, it is best
to remember that we have in America a government of the United
States** and a government of each of the several States;
moreover, each has citizens of its own. In parallel with the
federal and State governments, there are federal citizens and
there are State Citizens. Federal citizens are the same as
"U.S.** citizens" and "citizens of the United States**". If you
are not a federal citizen, then you are an "alien" with respect
to the federal government. If you get confused, just recall the
familiar distinction between State and federal governments, and
then remember that each has citizens of its own. For consistency
throughout this book, federal citizens will be spelled with a
lower-case "c" and State Citizens will be spelled with an
UPPER-CASE "C". This convention is strictly obeyed throughout
the Internal Revenue Code (IRC) and throughout the Code of
Federal Regulations (CFR) which promulgate the IRC.
Page 3 - 8 of 10
The Matrix
Summary
The citizen/alien distinction explains the two columns of
The Matrix. By definition, you are an alien with respect to the
United States** if you are not a citizen of the United States**.
The happy result of The Matrix is the legal and logical equation
which exists between most State Citizens and nonresident aliens.
A citizen of the United States** is the same thing as a federal
citizen. A State Citizen is not necessarily a federal citizen.
Anyone who is not a federal citizen is an "alien" with respect to
the United States**. Therefore, a State Citizen is an "alien" as
that term is defined in the IRC. State Citizens are free to
reside wherever they choose, because their right to travel is an
unalienable right. However, the term "resident" has a very
specific meaning in the IRC, whether it is used as an adjective
or a noun.
The resident/nonresident distinction explains the two rows
of The Matrix. An alien can be either a resident alien, or a
nonresident alien. Three criteria distinguish resident aliens
from nonresident aliens: (1) lawful admission for permanent
residence (2) substantial presence test and (3) election to be
treated as a resident. All 3 of these criteria depend for their
legal meaning upon the statutory definition of "United States".
Therefore, if State Citizens are "residents" of the United
States** according to these criteria, then they are resident
aliens, by definition. If State Citizens are not "residents" of
the United States** according to these criteria, then they are
nonresident aliens, by definition. A deliberately confusing
statute is clarified considerably by understanding the legal and
logical equation which exists between State Citizens and
nonresident aliens. They are one and the same thing, to the
extent that State Citizens do not reside in the United States**.
Page 3 - 9 of 10
The Federal Zone:
Reader's Notes:
Page 3 - 10 of 10
