Anti-Tax Law Evasion Schemes - Law and Arguments (Section V)
V. Fictional Legal Bases
A. Contention: The Internal Revenue Service is not an agency of the United States.
Some argue that the Internal Revenue Service is not an agency of the United States but rather a private corporation, because it was not created by positive law (i.e., an act of Congress) and that, therefore, the IRS does not have the authority to enforce the Internal Revenue Code.
The Law: There is a host of constitutional and statutory authority establishing that the Internal Revenue Service is an agency of the United States. The U.S. Supreme Court stated in Donaldson v. United States, 400 U.S. 517, 534 (1971), "[w]e bear in mind that the Internal Revenue Service is organized to carry out the broad responsibilities of the Secretary of the Treasury under § 7801(a) of the 1954 Code for the administration and enforcement of the internal revenue laws."
Pursuant to section 7801, the Secretary of Treasury has full authority to administer and enforce the internal revenue laws and has the power to create an agency to enforce such laws. Based upon this, the Internal Revenue Service was created. Thus, the Internal Revenue Service is a body established by "positive law" because it was created through a congressionally mandated power. Moreover, section 7803(a) explicitly provides that there shall be a Commissioner of Internal Revenue who shall administer and supervise the execution and application of the internal revenue laws.
Relevant Case Law:
Salman v. Dept. of Treasury, 899 F. Supp. 471 (D. Nev. 1995) - The court described Salman's contention that the Internal Revenue Service is not a government agency of the United States as wholly frivolous and dismissed his claim with prejudice.
Young v. I.R.S., 596 F. Supp. 141 (N.D. Ind. 1984) - The court granted summary judgment in favor of the government, rejecting Young's claim that the Internal Revenue Service is a private corporation, rather than a government agency.
B. Contention: Taxpayers are not required to file a federal income tax return, because the instructions and regulations associated with the Form 1040 do not display an OMB control number as required by the Paperwork Reduction Act.
Some argue that taxpayers are not required to file tax returns because of the Paperwork Reduction Act of 1980, 44 U.S.C. § 3501, et seq. ("PRA"). The PRA was enacted to limit federal agencies' information requests that burden the public. The "public protection" provision of the PRA provides that no person shall be subject to any penalty for failing to maintain or provide information to any agency if the information collection request involved does not display a current control number assigned by the Office of Management and Budget [OMB] Director. 44 U.S.C. § 3512. Advocates of this contention claim that they cannot be penalized for failing to file Form 1040, because the instructions and regulations associated with the Form 1040 do not display any OMB control number.
The Law: The courts have uniformly rejected this argument on different grounds. Some courts have simply noted that the PRA applies to the forms themselves, not to the instruction booklets, and because the Form 1040 does have a control number, there is no PRA violation.
Other courts have held that Congress created the duty to file returns in section 6012(a) and "Congress did not enact the PRA's public protection provision to allow OMB to abrogate any duty imposed by Congress." United States v. Neff, 954 F.2d 698, 699 (11 th Cir. 1992).
Relevant Case Law:
United States v. Wunder, 919 F.2d 34 (6 th Cir. 1990) - The court rejected Wunder's claim of a PRA violation, affirming his conviction for failing to file a return.
Salberg v. United States, 969 F.2d 379 (7 th Cir. 1992) - The court affirmed Salberg's conviction for tax evasion and failing to file a return, rejecting his claims under the PRA.
United States v. Holden, 963 F.2d 1114 (8 th Cir.), cert. denied, 506 U.S. 958 (1992) - The court affirmed Holden's conviction for failing to file a return and rejected his contention that he should have been acquitted because tax instruction booklets fail to comply with the PRA.
United States v. Hicks, 947 F.2d 1356, 1359 (9 th Cir. 1991) - The court affirmed Hicks' conviction for failing to file a return, finding that the requirement to provide information is required by law, not by the IRS. "This is a legislative command, not an administrative request. The PRA was not meant to provide criminals with an all-purpose escape hatch."
Lonsdale v. United States, 919 F.2d 1440, 1445 (10 th Cir. 1990) - The court found that the PRA "is inapplicable to 'information collection request' forms issued during an investigation against an individual to determine his or her tax liability."
Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court case opinions issued after September 24, 1995, visit the Opinions Search page of the United States Tax Court.