STOP!

IRS Liens and Levies Know The Truth Many of us are only too familiar with the story of a friend or family member who went to an ATM machine to ta e out some cash only to discover that their balance had somehow dro!!ed to "#$%$$%" The IRS& without warnin'& had em!tied their ban account% Others may have had their wee ly !aychec "attached" by the IRS% Such individuals& in describin' their intense feelin's of an'er and frustration over the a!!arent outri'ht theft of their !ersonal !ro!erty& s!ea of havin' been "robbed"& yet seemin'ly have no le'al recourse% In fact& there is recourse under the law for those Americans willin' to !ursue their constitutional !rotected ri'hts to their !ro!erty ( namely& their money& and the heard(earned fruits of their labor% The Internal Revenue )ode *Title 26+ is the body of law that contains the le'al authority for the Secretary of the Treasury to administer !rovisions !ertainin' to the collection of income ta,es% It is& however& not unusual for the Service to cite the Internal Revenue Manual as their le'al authority for various as!ects of a collection !rocedure% At least si, )ourts have now ruled that the Manual is only "directory" in nature and that it does not convey any such le'al authority% how devastatin' such rulin's are to the IRS% It will also relate the s!ecific effect that this will have on a'ency em!loyees who fail to reco'ni-e the limited nature of their authority and other !rovisions !ertainin' to& for e,am!le& liens and levies% Affirmati& non ne'anti incumbit !robation defined. The !roof lies u!on him who affirms& not on him who denies% The Levy It 'oes without sayin' that one of the most dreaded forms that any !erson can receive from the IRS is the /orm 001(2% This form is the "3otice of Levy" that is sent to third !arties for the !ur!ose of collectin' ta,es that are alle'edly owed% The le'al authority for its use is e,tremely limited& but since the 'eneral !ublic is unaware of the statutory !rovisions for "levyin'" u!on the wa'es& accrued salary& or other !ro!erty of !eo!le& the le'al im!otence of the IRS is un nown to them% The reason is. when the form was desi'ned& the cite of authority that would reveal its limited a!!lication was conveniently omitted ( a cite that must& by law& accom!any the notice% 4ut& then a'ain& if the IRS actually cited the authority for the levy on the form& it is doubtful they could coerce !eo!le into honorin' the levy% The individual who actually receives the "3otice of Levy" is& of course& a third !arty 5i%e%& a ban mana'er6% 4ut rarely& if ever& does that third !arty reali-e the res!onsibility for correctly determinin' that the validity of the levy is theirs% 3or do they fully reali-e the im!ortance of ma in' a correct le'al determination& since an incorrect determination can lead to a !ersonal liability% 7ven worse& it could lead to a criminal char'e called "conversion of !ro!erty%" The ma8ority of !eo!le have little or no understandin' of the law and so they are not co'ni-ant of the re9uisite statutory authority or its limitations% As far as the "3otice of Levy" is concerned& most !eo!le assume that the res!onsibility for these determinations rests with the IRS% It naturally follows& in their mind& that the IRS is then le'ally res!onsible for that "determination%" 2hat they fail to consider& is that& since they are in !ossession of the !ro!erty& it is they who are ultimately res!onsible for any determination havin' to do with its dis!osition& not the IRS% The a'ent who sends a levy is merely actin' on "!resum!tion" that the authority may be valid% If the a'ent was nowled'eable& it mi'ht be considered unethical& but unless the a'ent had full nowled'e of all of the circumstances and the actual limitation of the authority in 9uestion& his or her actions could be considered to be within the law% It is easy for someone who is co'ni-ant of the limitations to 8um! to conclusions and assume that such action is ille'al% Maybe it is& but did the IRS a'ent ever su''est that the authority for the levy was valid or a!!licable: Probably not! 3or did he or she necessarily su''est that the !ro!erty of the individual that was under the control of the third !arty was "sub8ect to levy%" /or that matter& the a'ent was !robably as i'norant of the law as the third !arty who received the levy! It was not the a'ent;s res!onsibility to tell the third !arty that the levy was invalid without the necessary court order& and more than li ely& the a'ent didn;t even now that himself% Rather& because the third !arty is in control of the

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!ro!erty& it is their res!onsibility to now the law and act in accordance with the law& or& if unfamiliar with the law& to see com!etent le'al advice *assumin' any can be found+% The bottom line is& were it not for the many !arties involved and the various le'al as!ects that seem to confuse the avera'e attorney& it would be im!ossible for the IRS to sei-e !ro!erty under the 'uise of collectin' ta,es% The 9uestion that most !eo!le as is. who is to blame: Is the a'ent at fault because his or her trainin' was incom!lete: 2as it their instructor;s fault& or was the instructor only doin' what he or she was told: To a lar'e de'ree the "mis!erce!tions" discussed here result from i'norance that has been !er!etuated as much by natural !rocesses as by any desi'n& and it has 'one on for such a lon' time that no one is willin' to admit that they really can not e,!lain why certain actions and !rocedural anomalies *for which they may be res!onsible+ seem to conflict with the law% The best that any IRS em!loyee can ho!e to do& is !retend that they now what they;re doin' and ho!e that they can convince everyone else that what they have been doin' is !ro!er and lawful% Is the third !arty to blame: Perha!s& but then& how can anyone e,!ect the avera'e !erson to understand these limitations when the a'ents themselves do not understand: The lawyers that are called u!on to 'ive le'al advice concernin' levies have virtually no e,!erience in ta, law and end u! callin' the very a'ents that were 8ust mentioned because they don;t now either% Ironically& everyone seems to have a sincere desire to obey the law& even many of the a'ents% They 8ust refuse to believe that what they;ve been doin' for years is outside the law (( surely there must be some other law that would !ermit them to continue doin' thin's the way they were told! Li e the children=s fairy tale about the em!eror who had no clothes& the !eo!le involved 8ust can;t believe their own eyes% The lower level a'ents believe their su!ervisors wouldn;t lie to them& and the su!ervisors believe that what they have been told is correct and on u! the ladder it 'oes% In the case of the fairy tale em!eror& the !eo!le 8ust couldn;t believe that the em!eror was really as na ed as their eyes would seem to su''est% After all& there must be some other e,!lanation% Surely he *or in this case the avera'e IRS a'ent+ wasn;t that 'ullible! The real !roblem is that none of the authorities involved are willin' to admit the !ossibility that they are wron'% That would be dan'erously close to admittin' that they had been needlessly destroyin' the lives of their fellow countryman& and the more evidence that surfaces to !rove or dis!rove the various !oints in contention& the more obsessive the bureaucrats desire to blindly& and without basis& insist otherwise% The funny thin' about a lie& is that& the more a !erson re!eats it& the 'reater the tendency there is to believe it% /or some& the misa!!lication of the income ta, has been a ni'htmare& not a fairy tale& but it has been !er!etuated by what in some cases seem to be well meanin'& yes& bureaucrats% )onsider former )ommissioner Shirley Peterson;s s!eech at Southern Methodist >niversity% She blasted the income ta, and said that it must be done away with& echoin' none other than former President ?immy )arter;s own words when he said& "the income ta, is a dis'race to the human race%" It was once difficult for us to believe that officials as hi'h as Ms% Peterson were ca!able of such 'ross i'norance of the law& but in a recent court ordered interro'atory& she stated that "wa'es" and "salaries" were clearly includable in "section 61*a+" *'ross income+% 2e !ointed out to the commissioner that not only were "wa'es" and "salaries" not mentioned in the te,t of section 61& which is Subtitle A& but that they were by definition& strictly limited to Subtitle C% Moreover& a !erson cannot even have what is le'ally defined as a "wa'e" unless he has a!!lied to !artici!ate in the entitlement !ro'rams% 2e added that. nowin' she would not deliberately lie to the court& her statements could only result from 'ross i'norance of the law% That bein' the case& it may be that even the hi'hest level officials within the IRS may be under the false im!ression that they are in com!liance with the law *as hard as that may be for some to believe+% In the fairy tale& you may recall& it was the innocent admission of a youn' boy who !ointed to the em!eror and as ed where his clothes were% The boy was unconcerned with any !otential fear of re!risal and his candid observation "e,!osed" the bare truth for all to see% Of course& everyone already new that the royal rascal was buc (na ed because they could see it with their own eyes% They were 8ust unwillin' to admit it because they were afraid of what the em!eror mi'ht do% 7veryone was astounded by the youn'ster;s honesty and when everyone be'an to admit the truth& the em!eror had no choice but to reali-e he had been rather foolish%

The bindin' !sycholo'ical !rinci!le that is at wor here is not dissimilar with the authority& the misa!!lication& and the subse9uent "I;m 8ust doin' what I was told" res!onse that is usually received when 'overnment em!loyees are confronted with the facts in 9uestion% Pride& fear& and confusion do not allow the e'o(driven authoritarian *i%e% in this case& the !rofessional bureaucrat+ to admit that they are wron'% To do so& would be to sub8ect themselves to the embarrassment and ridicule that would deflate the e'o(tri! that is the drivin' force behind this ty!e of individual& and to admit to such utter ne'li'ence or i'norance is sim!ly unthin able% 4ut 8ust li e in the fairy tale& when everyone was forced to confront the na ed truth& the em!eror had no recourse but to admit that he had been the fool% So 8ust how na ed is the em!eror: The Authority /or The Levy The authority to levy is restricted to and contained within Section 6331*a+ of the Internal Revenue )ode% IRC 6331 - Levy and distraint. *a+ Authority of Secretary% If any !erson liable to !ay any ta, ne'lects or refuses to !ay the same within <$ days after notice and demand& it shall be lawful for the Secretary to collect such ta, *and such further sum as shall be sufficient to cover the e,!enses of the levy+ by levy u!on all !ro!erty and ri'hts to !ro!erty *e,ce!t such !ro!erty as is e,em!t under section 0AAB+ belon'in' to such !erson or on which there is a lien !rovided in this cha!ter for the !ayment of such ta,% Levy may be made u!on the accrued salary or wa'es of any officer& em!loyee& or elected official& of the >nited States& the Cistrict of )olumbia& or any a'ency or instrumentality of the >nited States or the Cistrict of )olumbia& by servin' a notice of levy on the em!loyer *as defined in section AB$<*d++ of such officer& em!loyee& or elected official+% If the Secretary ma es a findin' that the collection of such ta, is in 8eo!ardy& notice and demand for immediate !ayment of such ta, may be made by the Secretary and& u!on failure or refusal to !ay such ta,& collection thereof by levy shall be lawful without re'ard to the <$(day !eriod !rovided in this section% 57m!hasis Added6 Section 0AA< is the only authority in the entire IR )ode that !rovides for the levy of wa'es and salaries etc%& and the "limitation" of that authority should be rather obvious since it !ertains O3LD to certain officers& em!loyees& and elected officials of the 'overnment and of course& their em!loyer& the 'overnment% Moral Res!onsibility vs% Le'al Obli'ation It could be said that the IRS has a moral res!onsibility& however& in reality& there is a difference between a moral res!onsibility& and a le'al obli'ation% Therefore& ethical 9uestions may be reduced to the actual "intent" or the "frame of mind" of any 'iven a'ent who mista enly e,ercises such authority% )ertainly& the IRS a'ent has a moral res!onsibility to refrain from misusin' authority& but if he or she is unaware of the limitations of that authority& then technically& the actual le'al obli'ation to ma e a correct determination and acce!t that authority *if a!!ro!riate+ or not acce!t that authority *if ina!!ro!riate+ remains that of the third !arty% It is e9ually im!ortant to understand that des!ite this ethical "loo! hole" which would seem to e,onerate and !rovide an esca!e for an a'ent errantly e,ercisin' a "!resumed" authority& there are other !rovisions that do hold him res!onsible for its administration% S!ecifically& these !rovisions deal with what are called "dele'ation orders" because no a'ent may administer a !rovision of law without a !ro!er order dele'atin' such authority% The Cele'ation Order The authority to "administer" the !rovisions of Section 6331& re'ardless of its a!!licability& is further restricted by national and local "dele'ation orders" desi'ned to ensure a'ency com!liance with the limited a!!lication of the law% As with all authority under the IR )ode& it is the Secretary who must administer the !rovisions for the levy or dele'ate the authority if and when a!!ro!riate% The "dele'ation orders" that do e,ist for liens and levies are remar ably limited% Interestin'ly& the bac of the levy form itself also shows a similar !eculiarity% On the 001(2 levy form& the authority listed includes 6331*b+ throu'h 6331*e+ but omits the elusive 6331*a+ which is the actual authority for a levy and the Section u!on which the others rely and refer to% 2hy is it not cited on the form: In the "dele'ation order&" the remainder of the cite references the "Internal Revenue Manual" which is of

course only "directive" in nature% Since it is not the law& it cannot !ossibly convey actual le'al authority% It can only clarify& for the benefit of a'ents see in' to identify such authority& what that authority is or how it is limited& and whether they would be actin' within their authority when administerin' its !rovisions% A search of each "dele'ation order" nationwide reveals that Section 6331*a+ has indeed been omitted from each and every one& but then a'ain& if the authority for the levy !ertains only to 'overnment a'encies within the territories *which is what it actually says+& then it should certainly come as no sur!rise that "dele'ation orders" !ertainin' to service centers and district offices within the E$ states cannot authori-e such a levy% If an a'ent is !u--led by this& his only other source for clarification is the "Internal Revenue Manual%" The Internal Revenue Manual As lon' as there is some illusion of authority& it is easy for an IRS a'ent to 8ustify *in his or her own mind+ that certain actions are within the sco!e of their authority& and as mention !reviously& the "dele'ation orders" do list another "authority&" s!ecifically the "IR Manual%" 4ut now that research has revealed that at least 0 courts have ruled that the Manual does not have the force of law& these a'ents are 'oin' to have to swallow one more wa e(u! !ill% The courts have correctly ruled that the !rovisions of the "Internal Revenue )ode" are only "directory in nature" and 3OT mandatory% 5See Lurhin' v% Flot-bach& A$B /%@d A0$ *Bth )ir% <G0@+H 7inhorn v% Ce2itt& 0<1 /%@d ABI *Eth )ir% <G1$+H and >nited States v% Foldstein& AB@ /% Su!!% 00< *7%C%3%D% <GI@+6% )ourts have also held that the !rovisions of the "Internal Revenue Manual" are not mandatory and lac the force of law% 5See 4oule- v% )%I%R%& 1<$ /%@d @$G *C%)% )ir% <G1I+H >nited States v% 2ill& 0I< /%@d G0A& G0I&*0th )ir% <G1@+6% These decisions are of course absolutely correct% The fact is& the Manual may not be relied u!on as the le'al authority for any !art of a collection action% The only !roblem is& that leaves Section 6331*a+& as the sole authority for a levy& and as we;ve 8ust seen& this Section is rather severely limited% So it would seem that the awesome non8udicial collection !owers of the IRS are not as awesome as some IRS officials would li e the !ublic to believe% Or is it 8ust another case of the em!eror deludin' himself% 7ither way& it doesn;t end there! The "3otice and Cemand" is another nail in the coffin% The J3otice And CemandK The "non8udicial" collection authority is wholly de!endent u!on a statute *Section 6321+ which !rovides for a lien to automatically arise when a ta,!ayer fails to ma e !ayment of a ta, that is demanded via a "3otice and Cemand" under Section 6303% If such "demand" is not& or cannot be made& then a lien cannot automatically arise and subse9uent collection activity cannot occur% All of the available case law confirms this% In Linwood 4lac stone et%al%& v% >nited States of America& *II1 /%Su!! @BB 5C% Md% <GG<6+& the )ourt held that. "The 'eneral rule is that no ta, lien arises until the IRS ma es a demand for !ayment% "2ithout a valid notice and demand& there can be no ta, lienH without a ta, lien& the IRS cannot levy a'ainst the ta,!ayer;s !ro!erty %%% this )ourt concludes& consistent with the views e,!ressed in 4erman& Marvel& and )hila that the a!!ro!riate "sanction" a'ainst the IRS for its failure to com!ly with the 6303*a+ notice and demand re9uirement is to ta e away its awesome non8udicial collection !owers%" Myric v% >nited States& 50@(< >ST) G<<@6& @G0 / @d A<@ *Eth )ir% <G0<+% The Internal Revenue )ode section 0A$A is the law that re9uires a "3otice and Cemand" to be issued& however& the IRS does not issue such notices for reasons& which are beyond the sco!e of this article% IR) 0A$A ( 3otice and demand for ta,% *a+ Feneral Rule %%% the Secretary shall %%% 'ive notice to each !erson liable for un!aid ta,& statin' the amount and demandin' !ayment thereof% As evident from the )ourt case 8ust mentioned& it would be& and is& im!ossible for the IRS to move forward with the le'al action that is re9uired by Section IB$A if they have not issued a "3otice and Cemand%" The "3otice of Levy" that is 'iven to a third !arty& in most *if not all cases+& falsely states that a "3otice and Cemand" has been issued& but if the IRS errs by failin' to issue the re9uired "3otice and Cemand" !ursuant to IR) 0A$A& then they can not !ossibly obtain the necessary le'al sanction throu'h a court of law to enforce the levy% 2hy: 4ecause in order to obtain the sanction of the court they would need to !roduce a co!y of the "3otice and Cemand" that was referenced on the levy form& and they can;t do that if it doesn;t e,ist% If the IRS is unable to send the "3otice and Cemand&" then it naturally

follows that it would be im!ossible to obtain the necessary )ourt Order% Throu'hout this e,!lanation& it is im!ortant to ee! in mind that no sin'le IRS official is necessarily 'uilty of fraud% It is more accurate to say that the !rocess itself is constructively fraudulent% In other words& it is not necessarily intentional% 2hether it was desi'ned with that in mind is not for us to say% It is sufficient to e,!lain that there are many IRS em!loyees involved and that the em!loyee res!onsible for any 'iven !art of the "!resumed correctness" of any 'iven action& rarely& if ever& has any communication with any of the other em!loyees who then act on those "!resum!tions%" Those who have wor ed in a ty!ical busy office environment now that the res!onsibility for 'ettin' thin's done often falls to a low level em!loyee who is tryin' to do the wor of <$ !eo!le% The shortcuts they teach their fellow wor ers are not necessarily in the best interest of their em!loyer but since they are unfamiliar with the details of their com!anies inner wor in's& the reason that it is a detriment is beyond their understandin'% Of course& if there is no economic detriment to their actions& the li elihood that their in'enious "!rocedure" will be corrected by a su!erior is slim% 2hen new em!loyees are hired& they learn the same defective way of doin' thin's% The 'overnment is more !rone to this situation than any business in the !rivate sector because its em!loyees are 'enerally less !roductive% In the situation we are e,aminin'& the law is written to !rotect !eo!le from these inadvertent "shortcuts" made by lower level em!loyees& and that is why a )ourt Order is necessary to affect levy% )ourt Order 3ecessary Pa'e EI*<0+ of the Internal Revenue Manual entitled "Le'al Reference Fuide for Revenue Officers" confirms *in the u!!er ri'ht hand corner of the !a'e+ that a )ourt Order *warrant of distraint+ is necessary% 2e say "confirms" because the Manual is merely referrin' to established !rinci!les of law& it is not in and off itself the law that re9uires it% Moreover& the IR Manual shows that the IRS even a'rees with those established !rinci!les and encoura'es their a'ents to abide by those !rinci!les by citin' the authority of >nited States v% O; Cell which says that a !ro!er levy a'ainst amounts held as due and owin' by em!loyers& ban s& stoc bro ers& etc%& must issue from a warrant of distraint *)ourt Order+ and not by mere notice% The O;Cell )ourt s!ecifically stated that. "The method of accom!lishin' a levy %%% is the issuin' of warrants of distraint %%%" and that the Internal Revenue Service must also serve "%%% with the notice of levy& 5a6 co!y of the warrants of distraint and 5the6 notice of lien%" The court em!hasi-ed that the "%%% Levy is not effected by mere notice%" A'ents who bother to read the Manual now that the "warrant of distraint" mentioned above& is the )ourt Order& which is re9uired !ursuant to IR) IB$A% IR) IB$A ( Action to enforce lien or to sub8ect !ro!erty to !ayment of ta, *c+ Ad8udication and decree. The court shall& after the !arties have been duly notified of the action& !roceed to ad8udicate all matters involved therein and finally determine the merits of all claims to and liens u!on the !ro!erty% In a more recent decision involvin' the ta, indebtedness of Ste!hens 79ui!ment )o%& Inc%& debtor&" *EB 4R& 0@0 5C%)% <G1E6+& the court said. "The role of the district court in issuin' an order for the sei-ure of !ro!erty in satisfaction of ta, indebtedness is substantially similar to the court;s role in issuin' a criminal search warrant% In either case& there must be a sufficient showin' of !robable cause%" More im!ortantly& the court held that in order to substantiate such an Order& the IRS must !resent the court with certain validation% The court stated that "%%% to effect a levy on the ta,!ayer;s !ro!erty 5an Order6 must contain s!ecific facts !rovidin' the followin' information. An assessment of ta, has been made a'ainst the ta,!ayer& includin' the date on which the assessment was

made& the amount of the assessment& and the ta,able !eriod for which the assessment was madeH 3otice and demand have been !ro!erly made& includin' the date of such notice and demand and the manner in which notice was 'iven and demand madeH The ta,!ayer has ne'lected or refused to !ay said assessment within ten days after notice and demandH %%%Pro!erty& sub8ect to sei-ure and !articularly described !resently e,ists at the !remises sou'ht to be searched and that said !ro!erty either belon's to the ta,!ayer or is !ro!erty u!on which a lien e,ists for the !ayment of the ta,esH and /acts establishin' that !robable cause e,ists to believe that the ta,!ayer is liable for the ta, assessed% Is it any wonder that the IRS cannot see a )ourt Order: 3evertheless& the ")ourt Order" is a statutory re9uirement for the levy !rocedure because it establishes the validity of the IRS;s claim to the third !arty to whom the levy is !resented% Pro!er !rocedures assure the third !arty that the lien and subse9uent levy have been e,ecuted in a lawful manner% The ")ourt Order" also !rotects the third !arty from a liability which may arise under )%/%R% @0 *)ode of /ederal Re'ulations+ A$<%0AA@(<*c+ which states in !art. "%%% Any !erson who mista enly surrenders to the >nited States !ro!erty or ri'hts to !ro!erty not !ro!erly sub8ect to levy 5i%e%& the ban mana'er6 is not relieved from liability to a third !arty who owns the !ro!erty %%%" And& the )ourt Order !revents some a'ent from ta in' a "shortcut" as !reviously discussed% These details were brou'ht to the attention of a cor!oration who had received a "3otice of Levy" on one its em!loyees by the /ellowshi!;s 3ational 2or er;s Ri'hts )ommittee *32R)+% The 32R) not only wrote to the em!loyer& but in a tele!hone conversation& one of our !arale'als e,!lained the limited nature of the authority of Section 0AA<*a+% The !resident of the cor!oration was ama-ed and wrote to the IRS a'ent who had issued the levy to inform him that they were not a federal "em!loyer" as mentioned within that Section and that they could not honor a levy without !ro!er authority% The a'ent be'an to harass the !resident of the cor!oration by !ayin' a visit to each of his nei'hbors but the !resident would not bud'e% Instead& the !resident of the cor!oration informed the a'ent that if he did not sto! harassin' him& he would sue the a'ent& whereu!on& the a'ent bac ed off% It is ama-in' what ha!!ens when !eo!le insist that the IRS obey the law& but what is more ama-in' is that more and more !eo!le are doin' this each and every day and the !olitical !ressure is now becomin' im!ossible for the IRS to i'nore% Accordin' to former )ommissioner Shirley Peterson in a s!eech before the 3ational Association of 7nrolled A'ents in 3evada& on Au'ust @0& <GGA& as of this year& < in E !eo!le have now sto!!ed filin' and the situation is out of control% 2e would say 8ust the o!!osite ( it is finally becomin' controllable because the !ublic seems to have develo!ed the will to now the law and confine the IRS within the law% Summary In this article we have reviewed the nature of& confusion surroundin'& and authority for the levy% 2e have e,amined it in li'ht of its a!!lication& the !ertinent "Cele'ation Orders&" the missin' "3otice and Cemand" that is the cornerstone of the !rocess leadin' u! to the lienLlevy !rocedure& and we have shown why the IRS may not obtain the necessary ")ourt Order" without it% And finally& we have 'iven an e,am!le of what ha!!ens when a third !arty becomes nowled'eable enou'h to insist that the IRS obey the law% If we have been incorrect by assumin' that hi'h ran in' IRS officials now they are in violation of the law& then !erha!s former )ommissioner Shirley Peterson summed it u! best in her s!eech at Southern Methodist >niversity when she 9uoted former President 2arren F% Mardin' who said. "I can;t ma e a damn thin' out of this ta, !roblem% I listen to one side and they seem ri'ht& and then %%% I listen to the other side and they seem ri'ht %%% % I now somewhere there is a boo that will 'ive me the truth& but I couldn;t read the boo % I now somewhere there is an economist who nows the truth& but I don;t now where to find him and haven;t the sense to now him and trust him when I find him %%% 2hat a 8ob!" 2arren F% Mardin' conversation& <G@@H re!orted in ?ose!h R% )onlin;s& "The Morrow 4oo of Nuotations in American Mistory" and 9uoted in Cavid /% 4radford;s&

">ntan'lin' the Income Ta,"% Officials& li e former )ommissioner Peterson& may feel the same way% Mowever& re'ardless of whether Ms% Peterson is correct or incorrect& she is at least far si'hted enou'h to see what will ha!!en in the ne,t few years if the 'overnment does not do somethin'% If they can;t or won;t rei'n in the ro!es on IRS em!loyees who refuse to obey the letter of the law& then !erha!s doin' away with the law is the only answer% Public sentiment a'ainst the income ta,& those who administer its !rovisions& and 'overnment in 'eneral *for not addressin' the !roblem+ has become so overwhelmin' that even the hi'hest(ran in' officials within the IRS are loo in' for a way to 'et off the sin in' shi!% They now the situation is out of control% Ms% Peterson;s s!eech is 8ust one of many that will echo the same sentiments% 3o man;s conscience would allow such a thin' to continue: The limitation !ertainin' to the authority to levy that was e,amined in this article is 8ust one minor !u--le that they can;t e,!lain !er their own errant understandin' of the law& and it is one more chin in the armor of those who would i'norantly or intentionally misa!!ly the law% The only alternative is for the IRS to bow out 'racefully and su!!ort !lans for an alternative system of ta,ation& and in case you haven;t heard& that is e,actly what they are doin'% 2hereas defined !ursuant toH Levy and Cistraint. *a+ Authority of Secretary% % % % Levy may be made u!on the accrued salary or wa'es of any officer& em!loyee& or elected official& of the >nited States& the Cistrict of )olumbia& or any a'ency or instrumentality of the >nited States or the Cistrict of )olumbia& by servin' a notice of levy on the em!loyer *as defined in section AB$<*d++ of such officer& em!loyee& or elected official+% I am not an officer& em!loyee& or elected official of the >nited States& the Cistrict of )olumbia& or any a'ency or instrumentality of the >nited States or the Cistrict of )olumbia% 2ho is an officer& em!loyee or elected official or officer of the >nited States: 2hereas defined !ursuant toH Title @0 >%S%)% ( "Internal Revenue )ode" Subtitle ) ( 7m!loyment Ta,es )ha!ter @B ( )ollection of Income Ta, at Source on 2a'es @0 >S) Sec% AB$<% Cefinitions. *a+ 2a'es. /or !ur!oses of this cha!ter& the term ;;wa'es;; means all remuneration *other than fees !aid to a !ublic official+ for services !erformed by an em!loyee for his em!loyer% *c+ 7m!loyee. /or !ur!oses of this cha!ter& the term ;;em!loyee;; includesO an officer& em!loyee& or elected official of the >nited States& a State& or any !olitical subdivision thereof& or the Cistrict of )olumbia& or any a'ency or instrumentality of any one or more of the fore'oin'% The term ;;em!loyee;; also includes an officer of a cor!oration% O"Include *Lat% Inclaudere+& to shut in& ee! within% To confine within& hold as in an enclosure& ta e in& attain& shut u!& contain& enclose& com!rise& com!rehend& embrace& involve%" 4lac ;s Law Cictionary Bth 7d% *)omment ( As in the case of a restaurant menu& the !rice of a stea dinner includes a salad& !otato& and a ve'etableH those thin's that are not included& ie% a drin and desert& bein' not included in the dinner descri!tion& are e,cluded%+ *d+ 7m!loyer. /or !ur!oses of this cha!ter& the term ;;em!loyer;; means the !erson for whom an individual !erforms or !erformed any service& of whatever nature& as the em!loyee of such !erson& Are you an 7m!loyer: Dou are not my 7m!loyer% 3or am I your em!loyee% 2hereas defined !ursuant to Title @0 >%S%)% Sec% AB$<*c+& It is clear that I have no liability and I am immune% 2hereas defined !ursuant toH JA !rivate law is one which is confined to !articular individuals& associations& or cor!orationsK. E$ Am%?ur%. <@ ! @1% In the instant case the revenue code !ertains to ta,!ayers%

The distinction between !ublic and !rivate acts is not always shar!ly defined when !ublished statutes are !rinted in their final form. !ursuant toH )ase v% Kelly& <AA >S @< *<1G$+% Statutes creatin' cor!orations are !rivate acts. !ursuant toH @$ Am%?ur% AE& ! 0$% In this connection& the /ederal Reserve Act is !rivate law% /ederal Reserve ban s derive their e,istence and cor!orate !ower from the /ederal Reserve Act. defined !ursuant toH Armano v% /ederal Reserve 4an & B01 /%Su!!% 0IB *<GIG+% A !rivate act may be !ublished as a !ublic law when the 'eneral !ublic is afforded the o!!ortunity of !artici!atin' in the o!eration of the !rivate law% The Internal Revenue )ode is an e,am!le of !rivate law which does not e,clude the voluntary !artici!ation of the 'eneral !ublic% Mad the Internal Revenue )ode been written as substantive !ublic law& the code would be re!u'nant to the )onstitution& since no one could be com!elled to file a return and thereby become a witness a'ainst himself% >nder the fifty titles listed on the !reface !a'e of the >nited States )ode& the Internal Revenue )ode *@0 >S)+ is listed as havin' not been enacted as substantive !ublic law& concedin' that the Internal Revenue )ode is !rivate law% 4ouvier declares that !rivate law Jrelates to !rivate matters which do not concern the !ublic at lar'e%K It is the voluntary use of !rivate credit& which im!oses u!on the user the 9uasi(contractual or im!lied obli'ation to ma e a return of income% 2hereas !ursuant toH Su!reme )ourt Annotated Statute. Polloc v% /armer=s Loan P Trust )o%& <E1 >S 0$< *<1GE+& the Su!reme )ourt had declared the income ta, of <1GB to be re!u'nant to the )onstitution& holdin' that ta,ation of rents& wa'es and salaries must conform to the rule of a!!ortionment% 2hereas defined !ursuant toH @0 >S) Q I@$0 ( /raud and false statementsH Any !erson whoR <+ Ceclaration under !enalties of !er8ury 2illfully ma es and subscribes any return& statement& or other document& which contains or is verified by a written declaration that it is made under the !enalties of !er8ury& and which he does not believe to be true and correct as to every material matterH or *@+ Aid or assistance 2illfully aids or assists in& or !rocures& counsels& or advises the !re!aration or !resentation under& or in connection with any matter arisin' under& the internal revenue laws& of a return& affidavit& claim& or other document& which is fraudulent or is false as to any material matter& whether or not such falsity or fraud is with the nowled'e or consent of the !erson authori-ed or re9uired to !resent such return& affidavit& claim& or documentH or *A+ /raudulent bonds& !ermits& and entries Simulates or falsely or fraudulently e,ecutes or si'ns any bond& !ermit& entry& or other document re9uired by the !rovisions of the internal revenue laws& or by any re'ulation made in !ursuance thereof& or !rocures the same to be falsely or fraudulently e,ecuted& or advises& aids in& or connives at such e,ecution thereofH or *B+ Removal or concealment with intent to defraud Removes& de!osits& or conceals& or is concerned in removin'& de!ositin'& or concealin'& any 'oods or commodities for or in res!ect whereof any ta, is or shall be im!osed& or any !ro!erty u!on which levy is authori-ed by section 0AA<& with intent to evade or defeat the assessment or collection of any ta, im!osed by this titleH or *E+ )om!romises and closin' a'reements In connection with any com!romise under section I<@@& or offer of such com!romise& or in connection with any closin' a'reement under section I<@<& or offer to enter into any such a'reement& willfullyR*A+ )oncealment of !ro!erty )onceals from any officer or em!loyee of the >nited States any !ro!erty belon'in' to the estate of a ta,!ayer or other !erson liable in res!ect of the ta,& or *4+ 2ithholdin'& falsifyin'& and destroyin' records Receives& withholds& destroys& mutilates& or falsifies any boo & document& or record& or ma es any false statement& relatin' to the estate or financial condition of the ta,!ayer or other !erson liable in res!ect of the ta,H shall be 'uilty of a felony and& u!on conviction thereof& shall be fined not more than #<$$&$$$ *#E$$&$$$ in the case of a cor!oration+& or im!risoned not more than A years& or both& to'ether with the costs of !rosecution% 2hereas defined !ursuant toH @0 >S) Q I@<B ( Offenses by officers and em!loyees of the >nited States *a+ >nlawful acts of revenue officers or a'ents Any officer or em!loyee of the >nited States actin' in connection with any revenue law of the >nited StatesR *<+ who is 'uilty of any e,tortion or willful o!!ression under color of lawH or *@+ who nowin'ly demands other or 'reater sums than are authori-ed by law& or receives any fee& com!ensation& or reward& e,ce!t as by law !rescribed& for the !erformance of any dutyH or *A+ who with intent to defeat the a!!lication of any !rovision of this title fails to !erform any of the

duties of his office or em!loymentH or *B+ who cons!ires or colludes with any other !erson to defraud the >nited StatesH or *E+ who nowin'ly ma es o!!ortunity for any !erson to defraud the >nited StatesH or *0+ who does or omits to do any act with intent to enable any other !erson to defraud the >nited StatesH or *I+ who ma es or si'ns any fraudulent entry in any boo & or ma es or si'ns any fraudulent certificate& return& or statementH or *1+ who& havin' nowled'e or information of the violation of any revenue law by any !erson& or of fraud committed by any !erson a'ainst the >nited States under any revenue law& fails to re!ort& in writin'& such nowled'e or information to the SecretaryH or *G+ who demands& or acce!ts& or attem!ts to collect& directly or indirectly as !ayment or 'ift& or otherwise& any sum of money or other thin' of value for the com!romise& ad8ustment& or settlement of any char'e or com!laint for any violation or alle'ed violation of law& e,ce!t as e,!ressly authori-ed by law so to doH shall be dismissed from office or dischar'ed from em!loyment and& u!on conviction thereof& shall be fined not more than #<$&$$$& or im!risoned not more than E years& or both% The court may in its discretion award out of the fine so im!osed an amount& not in e,cess of one(half thereof& for the use of the informer& if any& who shall be ascertained by the 8ud'ment of the court% The court also shall render 8ud'ment a'ainst the said officer or em!loyee for the amount of dama'es sustained in favor of the !arty in8ured& to be collected by e,ecution% *c+ )ross reference /or !enalty on collectin' or disbursin' officers tradin' in !ublic funds or debts of !ro!erty& see <1 >%S%)% <G$<% 2hereas defined !ursuant toH <1 >S) Q <G$< ( )ollectin' or disbursin' officer tradin' in !ublic !ro!erty 2hoever& bein' an officer of the >nited States concerned in the collection or the disbursement of the revenues thereof& carries on any trade or business in the funds or debts of the >nited States& or of any State& or in any !ublic !ro!erty of either& shall be fined under this title or im!risoned not more than one year& or bothH and shall be removed from office& and be inca!able of holdin' any office under the >nited States% 2hereas defined !ursuant toH @0 >S) Q I<$< ( /orm of bonds 2henever& !ursuant to the !rovisions of this title *other than section IB1E+& or rules or re'ulations !rescribed under authority of this title& a !erson is re9uired to furnish a bond or securityR*<+ Feneral rule Such bond or security shall be in such form and with such surety or sureties as may be !rescribed by re'ulations issued by the Secretary% *@+ >nited States bonds and notes in lieu of surety bonds The !erson re9uired to furnish such bond or security may& in lieu thereof& de!osit bonds or notes of the >nited States as !rovided in section GA$A of title A<& >nited States )ode% 2hereas defined !ursuant toH Su!reme )ourt Annotated Statute. MAL7 S% M73K7L @$< >%S% BA at 1G *<G$0+. Male v% Men el was decided by the united States Su!reme )ourt in <G$0% The o!inion of the court states. "The "individual" may stand u!on "his )onstitutional Ri'hts" s a )ITIT73% Me is entitled to carry on his "!rivate" business in his own way% "Mis !ower to contract is unlimited%" Me owes no duty to the State or to his nei'hbors to divul'e his business& or to o!en his doors to an investi'ation& so far as it may tend to incriminate him% Me owes no duty to the State& since he receives nothin' there from& beyond the !rotection of his life and !ro!erty% "Mis ri'hts" are such as "e,isted" by the Law of the Land *)ommon Law+ "lon' antecedent" to the or'ani-ation of the State"& and can only be "ta en from him by "due !rocess of law"& and "in accordance with the )onstitution%" Me owes nothin'" to the !ublic so lon' as he does not tres!ass u!on their ri'hts%" 2hereas defined !ursuant toH Su!reme )ourt Annotated Statue. JKnowin' failure to disclose material information necessary to !revent statement from bein' misleadin'& or ma in' re!resentation des!ite nowled'e that it has no reasonable basis in fact& are actionable as fraud under law%K Rubinstein v% )ollins& @$ /%Ad <0$& <GG$ 2hereas defined !ursuant toH Su!reme )ourt Annotated Statute. >nder federal Law& which is a!!licable to all states& the >%S% Su!reme )ourt stated that "if a court is without authority& its 8ud'ments and orders are re'arded as nullities% They are not voidable& but sim!ly void& and form no bar to a recovery sou'ht& even !rior to a reversal in o!!osition to them% They constitute no 8ustification and all !ersons concerned in e,ecutin' such 8ud'ments or sentences are considered& in law& as tres!assers%" Friffin v% Mathews& A<$ Su!!% AB<& B@A /% @d @I@ Ma'ans v% Lavine& B<E >%S% E@1

Mowlett v% Rose& BG0 >%S% AE0 *<GG$+ /ederal Law and Su!reme )ourt )ases a!!ly to State )ourt )ases% The laws and Su!reme )ourt Rulin's that bind officers and officials& em!loyees& includin' but not limited toH the lower courts& all 8ud'es& all attorneys& the state le'islature& all federal& state& city& county& munici!al officials& etc% Since all /ederal )rimes are statutory 5see >nited StatesOO v Mudson& << >%S% A L% 7d @EG *<1<@+6 and all criminal !rosecutions in the /ederal courts are based on acts of )on'ress%K In order to define the 8urisdiction of the /ederal courts to conduct criminal !rosecutions& one would have to find out what the s!ecial definitions of JAct of )on'ressK means% One finds such a definition in Rule EB) of the /R)rP& wherein defined& JAct of )on'ress%K Rule EB) states. JAct of )on'ressK includes any act of )on'ress locally a!!licable to and in force in the Cistrict of )olumbia& in Puerto Rico& in a territory or in an insular !ossession%K Althou'h& )on'ress did create federal re'ions& territories. AL AK AT AR )A )O )T C7 /L FA MI IC IL I3 IA KS KD LA M7 MC MA MI M3 MS MO MT 37 3S 3M 3? 3M 3D 3) 3C OM OK OR PA RI S) SC T3 TU >T ST SA 2A 2S 2I 2D So )on'ress can rule the federal re'ions& territories& enclaves and insular !ossessions but )on'ress cannot rule the E$ >nion states% The definition of the ">nited States" is limited to its territories. <+ The Cistrict of )olumbia @+ )ommonwealth of Puerto Rico A+ >%S% Sir'in Islands B+ Fuam E+ American Samoa 0+ 3orthern Mariana Islands I+ Trust Territory of the Pacific Islands 1+ Military bases within the several states G+ /ederal a'encies within the several states It does not include the E$ >nion states& as is confirmed by the followin' cites. "2e have in our !olitical system a Fovernment of the >nited States and a 'overnment of each of the several States% 7ach one of these 'overnments is distinct from the others& and each has citi-ens of its own who owe it alle'iance& and whose ri'hts& within its 8urisdiction& it must !rotect% The same !erson may be at the same time a citi-en of the >nited States and a )iti-en of a State& but his ri'hts of citi-enshi! under one of these 'overnments will be different from those he has under the other%" Slau'hter Mouse )ases >nited States vs% )rui shan & G@ >%S% EB@ *<1IE+% The !remise that the )ommissioner has dele'ated authority to summons State )iti-ens !ursuant to IR) Section I0$@& and )ommissioner=s Cele'ated Order 3o% B as set fourth in IR Manual <@@G is flawed& since these are merely !rima facie evidence of such authority% "TM7 >3IT7C STAT7S FOS7R3M73T IS A /OR7IF3 )ORPORATIO3 2ITM R7SP7)T TO A STAT7%" 5em!hasis added6 Solume @$. )or!us ?uris Sec% Q<I1E. 3D re. Merriam A0 3%7% E$E <BB< S%)t%<GIA& B< L%7d%@1I% This is further confirmed by the followin' 9uote from the Internal Revenue Service. /ederal 8urisdiction "includes the Cistrict of )olumbia& the )ommonwealth of Puerto Rico& the Sir'in Islands& Fuam& and American Samoa%" ( Internal Revenue )ode Section A<@*e+% In le'al terminolo'y& the word "includes" means "is limited to%" 2hen referrin' to this "Cistrict" >nited States& the Internal Revenue )ode uses the term "2ithin" the

<$

>nited States% 2hen referrin' to the E$ >nion states& the Internal Revenue )ode uses the term "2ithout" the >nited States% Co-ens& !erha!s hundreds& of court cases !rove that federal 8urisdiction is limited to the few federal territory areas above indicated% /or e,am!le& in two Su!reme )ourt cases& it was decided. "The laws of )on'ress in res!ect to those matters do not e,tend into the territorial limits of the states& but have force only in the Cistrict of )olumbia& and other !laces that are within the e,clusive 8urisdiction of the national 'overnment&" )aha v% >nited States& <E@ >%S%& at @<E% "2e thin a !ro!er e,amination of this sub8ect will show that the >nited States never held any munici!al soverei'nty& 8urisdiction& or ri'ht of soil in and to the territory& of which any of the new E$ >nion states were formed%%%" "546ecause& the >nited States has no constitutional ca!acity to e,ercise munici!al 8urisdiction& soverei'nty& or eminent domain& within the limits of any E$ >nion states or elsewhere& e,ce!t in the cases in which it is e,!ressly 'ranted%%%" "Illinois is therefore entitled to the soverei'nty and 8urisdiction over all the territory within her limits& sub8ect to the common law&" Pollard v% Ma'an& BB >%S% @@<& @@A& @@1& @@G% Li ewise& Title <1 of the >nited States )ode at QI s!ecifies that the "territorial 8urisdiction" of the >nited States e,tend only outside the boundaries of lands belon'in' to any of the E$ >nion states%

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