Although this makes for interesting reading the American Rights Litigators (ALR) are linked to the Wesley Snipes case and to various tax scams. In this regard, it appears that some of their methods are extremely aggressive. Despite this, their interpretation of various provisions may be useful in formulating alternative arguments in relevant circumstances.
Asking IRS For A Verified Bill Bryan Malatesta is the CPA with American Rights Litigators (ARL) that has been doing IRS due process hearings for clients for some time now. He conducts the hearings telephonically with the appeals officer while ARL hires a court reporter go into the IRS office and take everything down over a speaker phone. The due process hearings came about because of the IRS Restructuring and Reform Act of 1998.
The purpose of those hearings is to give us a chance to make sure that the IRS followed all of their procedural requirements before they engage in any enforcement action. ARL has had many such hearings for clients where they pointed out various procedural violations to the appeals officer. However, the due process hearings always concluded with an adverse determination from the appeals officer, despite the arguments raised.
Mr. Malatesta had two more due process hearings to do today for ARL clients, but this time Eddie Kahn had him use a different strategy. After the first hearing started, the first thing Mr. Malatesta asked the appeals officer was whether he verified if everything was done properly or not. The key emphasis was on the word "verify", because in Black's law dictionary the term doesn't mean that someone just goes to look.
Mr. Malatesta asked the appeals officer if he verified that there was a bill due and owing by the client. Then he asked him if the numbers that the IRS claimed the client owed were true, correct and complete. The appeals officer claimed to have done all that, so Mr. Malatesta told him that he conditionally accepted the IRS' bill for payment. All he needed to see was a verified bill.
Of course, the appeals officer had no idea what that was, so Mr. Malatesta read to him what the concept of that was out of Black's law dictionary. It says the word "verify" means to confirm or substantiate by oath or affidavit; and, it says the word "verified" when used in a statute ordinarily imports a verity attested by the sanctity of an oath. Lastly, Black's law dictionary also says that the term "verified" is frequently interchanged with the word "sworn".
Once the appeals officer understood what Mr. Malatesta was getting at he claimed that the signed 4340 was the bill. For reference, a 4340 is something like a spreadsheet that shows an explanation of the transactions, assessments, credits, account numbers, Form 23C dates, etc. Then there is someone who signs it. The only problem is when you look at a 4340 it doesn't state what specific tax it is. It doesn't even show that the figures pertain taxes at all.
Now, how can that thing be a bill when it doesn't even say that it's a tax that the IRS is trying to collect? The person that signs the 4340 is just saying that it's an accurate transcript; they don't claim that anyone owes anything. Thus, the 4340 is not and cannot be a bill because a bill can only be something that specifically identifies you as owing a specific amount.
A verified bill is where someone swears under penalties of perjury that you owe the amount shown on the bill. The 4340 is neither of these things. Well, the first appeals officer wasn't going to go for that at all; the 4340 was it as far as he was concerned. When ARL gets his determination letter back, they are going to remind him that he doesn't have any authority to make a determination. If he issues one, (which we know with virtual certainty will be an adverse one) it will have no force and effect. That's because a determination can only come into play when there is a controversy.
In other words, when someone says that you owe something and you say that you don't, then there has to be a determination to settle the controversy. However, when there is an offer to pay like what Mr. Malatesta gave him, then there is nothing to determine because there is no controversy. The only thing the appeals officer needs to decide now is whether he is going to accept Mr. Malatesta's offer or not. This is a set up for the notarial protest that ARL discovered as reported in the 2/26/02 edition of TaxTruth Newsletter.
As a brief recap, a notarial protest is a procedure where you can obtain an administrative judgment against someone if they dishonor you. This occurs if your adversary gives you argument as to why you are wrong or if they remain silent during the time that they can't be silent. The administrative judgment comes about by obtaining a certificate of notarial protest from a notary who knows how to do the procedure. The idea here is for ARL to use the notarial protest if the appeals officer issues a determination letter without accepting or rejecting the offer.
Once ARL obtains the certificate of notarial protest, that's when they will go after the appeals officer individually. In the second due process hearing that Mr. Malatesta did today, it went as expected. There was about a thirty-second pause where the appeals officer tried to digest what Mr. Malatesta said when he told him what he wanted from him. The appeals officer then spoke up and asked Mr. Malatesta to tell him exactly what he wanted. Mr. Malatesta told him he wanted a verified bill, which would be something signed under the penalties of perjury certifying that the bill was true, correct and complete. The appeals officer said he didn't think he could do that since the IRS doesn't normally sign things under penalties of perjury.
Well, the IRS always signs a proof of claim under penalties of perjury when they go into bankruptcy court. The perjury clause says that the signor can go to jail for five years and be subjected to a $500,000 fine for a false or fraudulent claim. The only way that the appeals officers can accept ARL's offer is to give the conditions that ARL asks for, which would be to produce the verified bill.
If they don't accept ARL's offer though, ARL plans to tell the IRS that the tax bill is discharged. They will be discharging it pursuant to Section 3-603(b) of the Uniform Commercial Code (UCC), which appears as follows: U.C.C. - ARTICLE 3 - NEGOTIABLE INSTRUMENTS PART 6. DISCHARGE AND PAYMENT Section 3-603.
TENDER OF PAYMENT.
(a) If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument, the effect of tender is governed by principles of law applicable to tender of payment under a simple contract.
(b) If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument and the tender is refused, there is discharge, to the extent of the amount of the tender, of the obligation of an indorser or accommodation party having a right of recourse with respect to the obligation to which the tender relates.
(c) If tender of payment of an amount due on an instrument is made to a person entitled to enforce the instrument, the obligation of the obligor to pay interest after the due date on the amount tendered is discharged.
If presentment is required with respect to an instrument and the obligor is able and ready to pay on the due date at every place of payment stated in the instrument, the obligor is deemed to have made tender of payment on the due date to the person entitled to enforce the instrument. Thus, if they refuse the offer or if they can't produce the verified bill, then the tax bill becomes void.
As far as Eddie can see, even if a tax bill is based upon a past tax court decision it doesn't matter. A person would still have the right to ask for a verified bill. The government itself cannot be a complainant; there has to be somebody who is a complainant or in this case a creditor. Somebody has to say that they have first hand knowledge that the bill is true and correct and verify it via an affidavit or oath. There is nobody in government who can do that. Therefore, when you ask for such a thing they are not going to be able to produce it.
IRS Summons Has No OMB Control Number Sometimes we overlook the remedies that are the most simple. Eddie Kahn told us about one thing that they completely overlooked involving the Paperwork Reduction Act.
That Act says you are not required to disclose anything on any federal form that does not have a valid OMB control number. The Office of Management and Budget is the one who assigns these control numbers and when they do, the number appears in the upper right-hand corner of a form. American Rights Litigators (ARL) always has clients that the IRS sends summonses to where they request books and records.
Well, guess what, both the first and third party summonses that the IRS sends out do not have any OMB control numbers on them. One of ARL's researchers brought this to Eddie's attention this week after he looked under Title 44 USC § 3512, entitled Public Protection.
Here is what it says: TITLE 44 - PUBLIC PRINTING AND DOCUMENTS CHAPTER 35 - COORDINATION OF FEDERAL INFORMATION POLICY Section 3512 - Public protection
(a) Notwithstanding any other provision of law, no person shall be subject to any penalty for failing to comply with a collection of information that is subject to this chapter if -
(1) the collection of information does not display a valid control number assigned by the Director in accordance with this chapter; or
(2) the agency fails to inform the person who is to respond to the collection of information that such person is not required to respond to the collection of information unless it displays a valid control number.
(b) The protection provided by this section may be raised in the form of a complete defense, bar, or otherwise at any time during the agency administrative process or judicial action applicable thereto.
As you can see, the Paperwork Reduction Act shows us that the IRS summons is nothing more than a bootleg request for information. Eddie talked to a fellow recently who said he raised this issue back in 1988 in an order to show cause hearing.
The judge told him that he still had to give the IRS the information they wanted even after showing him the above section, so he appealed it. When he did it though, the IRS came in and canceled their opposition to his objection. They knew the appeals court would probably overturn the verdict and they didn't want to have a precedent set, which is why they did it.
This is important to know for the summons is the IRS' key instrument that they use to gather information on us at the examination level. It has no force and effect at all if we just use the proper argument. ARL No Longer Offers Victoria Joy UCC Tapes In the 2/26/02 edition of TaxTruth Newsletter, we reported that Eddie Kahn and Associates had videotapes on Victoria Joy's recent UCC seminar available.
However, Eddie informed us this week that they are no longer dealing with Ms. Joy and are no longer selling any of her material. This came about due to her apparent inability to communicate with Eddie over compensation issues. After Eddie paid her for the seminar she did at the ARL office, the lady who works with Ms. Joy called Eddie and told him that Ms. Joy was upset; she felt he didn't pay her enough money. So, Eddie gave her an additional $500 and sent back all of her materials, but she still was not happy.
The weekend before last Eddie did a seminar in Reno, Nevada that Ms. Joy flew out to attend. Eddie wanted to try to get things straightened out so he approached her and asked what she thought he owed her. However, the only answer she would give was that she didn't know, which understandably caused much frustration on Eddie's part. She still wouldn't give a specific dollar amount.
This breakdown in communication between them in no way reflects upon the quality of her informational materials though. Eddie still spoke highly about her knowledge and so did many others who got her videotapes. She didn't want Eddie to give out her phone number, but we managed to get an e-mail address for her should you want to order her materials. Her e-mail address is email@example.com
Man Acquitted Using Conditional Acceptance
We heard about an interesting success story from a man in California who benefitted from the information in Victoria Joy's videotapes. He learned about her strategy involving the conditional acceptance and put her principles to good use. The county charged this man with interfering with the administration of government or something to that effect.
It was a misdemeanor charge that threatened him with up to six months in jail. He made up a sixty-eight point conditional acceptance and laid it on the court when he got in there. The judge immediately shut down the proceedings, took him back into his chambers and grilled the guy for three hours trying to get him to dishonor. However, the guy wouldn't budge from his offer of conditional acceptance, so the judge put a continuance on the case.
The court reconvened about ten days later and came up with an acquittal. To date, American Rights Litigators has used the conditional acceptance procedure with the IRS for about 30-40 clients. So far, they have not gone against any of them, which makes Eddie feel very good about the approach. There are many people out there doing UCC processes. Eddie feels many more people will be doing it once they understand how to use the UCC properly and how not to be greedy with it.
There have been many people who tried to buy homes and cars, etc. like the Freemen in Montana did several years ago. But that just leads to trouble. Getting greedy with the UCC process like that is not a good idea because that's when the Federal Reserve gets mad. Eddie said there's no fury like when they get upset.
Offshore Credit Cards
Someone asked Eddie Kahn about a recent Bloomberg Report that talked about how the IRS wants to gain access to offshore credit card information. The report said the IRS has been demanding information from credit card companies to track down widespread tax evasion schemes.
It said American Express agreed to give the IRS information on offshore accounts held by Americans suspected of evading taxes. It further said that MasterCard International has already turned over their accounts. Now the justice department wants VISA International to reveal offshore credit card accounts. This sounds intrusive, but the news article for the most part is probably just a propaganda used by the IRS.
Eddie said American Express probably does have their card holder's personal information since they have their own bank. However, VISA and MasterCard do not have one. The only entities that have a card holder's personal information are the offshore banks that issue the cards. He said VISA and MasterCard don't have any information other than numbers that they receive from the offshore bank.
We did hear some speculation that MasterCard changed their procedures two years ago that goes against what Eddie said. Supposedly the procedures involved the disclosing of card holder information along with numerical information from the bank back to MasterCard. Eddie said if that's true, then it would be news to him. As far as he knows, that's not the way it is though.
DOJ Seeks Injunction Against Doug Rosile
Doug Rosile is an accountant that did Section 861 income tax returns last year for clients of American Rights Litigators (ARL).
About a week ago, there was an article in the Associated Press that said the Justice Department filed a lawsuit against him. However, according to Eddie Kahn he has not been served with any such lawsuit yet. The article accused Mr. Rosile of promoting a scheme that he allegedly used to "under-report" more than thirty-six million in federal income taxes. They claimed that he filed bogus tax refund claims for about 200 clients in 32 states.
One client was actor Wesley Snipes whose refund claim amounted to over seven million dollars alone. You can read about this at CNN's website found at http://www.cnn.com/2002/LAW/03/14/tax.scheme.suit/index.html
Well, the "scheme" that Mr. Rosile used was the law codified under Section 1.861-8 of the IRS' own regulations. Those regulations show specifically what income the Secretary of the Treasury deemed to be subject to the federal income tax. The regulations show that the incomes of foreigners derived from anywhere within the U.S. are subjected to the federal income tax.
As far as U.S. Citizens and Resident Aliens are concerned though, only U.S. Possession and foreign source incomes are subjected to the tax. Incomes derived from within the 50 states are not included there as being taxable for them like it is for foreigners. Thus, the Section 861 returns that Mr. Rosile prepared for his U.S. Citizen clients showed their income derived from within the 50 states as not being taxable.
The 50 states were never included in such a manner because the federal government does not have the authority to regulate intrastate commerce. The government claims that Mr. Rosile's position is based upon on an erroneous assertion that only income from foreign sources is subject to the U.S. income tax.
The news article quoted Assistant Attorney General Eileen O'Connor as saying: "The argument that only foreign sources of income are subject to income tax has been rejected out of hand by every judge who has examined it." This may sound like a rebuttal to the Section 861 refund claims, however, the government did not rebut Section 861 here at all; they did not address Mr. Rosile's position.
Anyone who is truly familiar with Section 861 will quickly agree with what the Assistant Attorney General said. Of course the argument saying that only foreign source income being taxable is false. Section 861 shows that the U.S. source income of a foreigner is subject to the federal income tax, for example. The government cannot rebut what their own regulations say, so they cite a fictitious argument that is inherently wrong and rebut that. Then they use that rebuttal as "proof" that the Section 861 refund claims like what Mr. Rosile did are frivolous filings.
The news article said the government filed a lawsuit against Mr. Rosile, but actually it was an injunction against him to stop filing Section 861 returns. The only problem is the justice department did not exhaust all of their administrative remedies. When Mr. Rosile filed all those Section 861 returns, he asked for an administrative law judge review if they disagreed with him.
The justice department is just trying to go around all that and go straight to the judge and get the injunction. However, they can't go to court until they exhaust all of their administrative remedies. There have been several articles in TaxTruth Newsletter over the past year tracking the progress of We The People.
Bob Schultz and other members of the organization have been trying to get a redress of grievances meeting with the IRS & DOJ for some time now. However, they haven't been getting anywhere with them like that. So, if you can't go in through the front door so to speak, then you go in through the back door.
The We The People organization wants to completely handle Mr. Rosile's injunction case. They want to provide him with all the financial backing and legal help he needs so they can do discovery in court. The government won't give them the answers to their questions in a public forum, so they intend to go into court and get it.
Mr. Rosile's case is a perfect opportunity for them to ask the questions that they want them to answer. They will get the government's expert witness and do a deposition where his or her answers will be given under oath. The injunction case against Doug Rosile here is very similar to the injunction case that the government threw against David Bosset some time ago. Mr. Bosset heard about the government's injunction case in store for him on the news first and then they served him the next day.
In Mr. Rosile's case, it's been almost two weeks since that news article came out and they still have not served him yet. See the 8/14/01 edition of TaxTruth Newsletter, for Mr. Bosset's open letter on his injunction case. IRS Wants To Raise Frivolous Return Penalty Currently, Section 6702 of the tax code allows the IRS to impose a frivolous return penalty of $500 upon anyone who files a frivolous tax return. We got word recently that the IRS wants to raise this penalty to $5,000 via the Taxpayer Protection and IRS Accountability Act of 2002.
Our lawmakers expect to make this so-called Taxpayer "Protection" Act effective by this upcoming April 15. The following is an excerpt from the description of proposal of this Act. Description of Proposal "The proposal would modify this IRS-imposed penalty by increasing the amount of the penalty to up to $5,000 and by applying it to all taxpayers and to all types of Federal taxes.
The proposal would also modify present law with respect to certain submissions that raise frivolous arguments or that are intended to delay or impede tax administration. The submissions to which this provision would apply would be requests for a collection due process hearing, installment agreements, offers-in-compromise, and taxpayer assistance orders.
First, the proposal would permit the IRS to dismiss such requests. Second, the proposal would permit the IRS to impose a penalty of up to $5,000 for such requests, unless the taxpayer withdraws the request after being given an opportunity to do so. The proposal would require the IRS to publish a list of positions, arguments, requests, and proposals determined to be frivolous for purposes of these provisions."
It is so obvious to us that this drastic increase in the frivolous return penalty is nothing more than an intimidation tactic by the federal government. They particularly want to intimidate those who would dare mention 26 USC § 861 and its regulations like in Doug Rosile's case. Since they can't rebut Section 861 refund claims they intend to just silence, rob and harass people through the guise that it's a frivolous return. You can read about all the "protection" our lawmakers want to give us at http://waysandmeans.house.gov/jct/pubs02.html
Disclaimer: This newsletter exists for informational purposes only. It is authored and published independently from Eddie Kahn and American Rights Litigators. Informational content is a RESTATEMENT of verbal updates from Eddie Kahn in a more convenient written form. As such, it is possible that certain technical inaccuracies or inconsistencies may occur. The informational content of this newsletter may or may not accurately reflect the research, ideas, opinions or views of Eddie Kahn, American Rights Litigators or any other featured individual. The author/publisher must disclaim any and all claims of accuracy or validity. The purpose and intent of this newsletter is not and should not be construed as legal or tax advice. For legal or tax advice, you will need to retain the services of a licensed professional.