Section 6651.—Failure — Internal Revenue Bulletin 2005-14

(Also Sections 6662, 6663, 6673, 6702, 7201, 7203, 7206, and 7408.)

Frivolous tax returns; constitution- ally based arguments. This ruling emphasizes to taxpayers and to promoters and return preparers that a taxpayer cannot avoid income tax by making frivolous constitutionally based arguments.

Rev. Rul. 2005–19

PURPOSE

The Service is aware that some taxpayers are attempting to reduce their federal tax liability by claiming that the federal income tax is unlawful because it violates one or more provisions of the United States Constitution, or that they have a constitutional right not to comply with the federal tax laws. The Service is also aware that promoters, including return preparers, are advising or recommending that taxpayers take frivolous positions based on these arguments. Some promoters market a package, kit, or other materials that claim to show taxpayers how they can avoid paying income taxes based on these and other meritless arguments.

This revenue ruling emphasizes to taxpayers and to promoters and return preparers that a taxpayer cannot avoid income tax by making frivolous constitutionally based arguments.

The Service is committed to identifying individuals who attempt to avoid

or evade their federal tax obligations by taking frivolous positions, including frivolous constitutional positions. The Service will take vigorous enforcement action against these taxpayers and against promoters and return preparers who assist taxpayers in taking these frivolous positions. Frivolous returns and other similar documents submitted to the Service are processed through its Frivolous Return Program. As part of this program, the Service confirms whether taxpayers who take frivolous positions have filed all of their required tax returns, computes the correct amount of tax and interest due, and determines whether civil and criminal penalties should apply. The Service also determines whether civil or criminal penalties should apply to return preparers, promoters, and others who assist taxpayers in taking frivolous positions, and recommends whether a court injunction should be sought to halt these activities. Other information about frivolous tax positions is available on the Service website at www.irs.gov .

ISSUES

Whether a taxpayer may refuse to file a federal income tax return, or to pay federal income tax, based on claims that the federal income tax is unconstitutional?
Whether a taxpayer may refuse to file a federal income tax return based on the claim that the requirement to do so violates the prohibition against self-incrimination contained in the Fifth Amendment to the U.S. Constitution?

FACTS

Taxpayer A is a United States citizen who resides in state X. A attended seminars on the federal tax system sponsored by S, an attorney. S made claims at these seminars that the federal income tax is unconstitutional because: (a) the Sixteenth Amendment to the U.S. Constitution, which authorizes a federal income tax, was not properly ratified by the states; (b) the federal income tax violates the due process clause of the Fifth Amendment to the U.S. Constitution; and (c) the payment of taxes is a form of involuntary servitude or slavery prohibited by the Thirteenth Amendment to the U.S. Constitution. Based on these constitu

April 4, 2005 819 2005–14 I.R.B.

taxpayer makes frivolous arguments in the United States Tax Court.

Taxpayers relying on these positions also may face criminal prosecution for: (1) attempting to evade or defeat tax under section 7201, for which the penalty is a significant fine and imprisonment for up to 5 years; (2) willful failure to make a return or pay tax under section 7203, for which the penalty is a significant fine and imprisonment of up to 1 year; or (3) making false statements on a return under section 7206, for which the penalty is a significant fine and imprisonment for up to 3 years.

Persons, including return preparers, who promote these frivolous positions and those who assist taxpayers in claiming tax benefits based on these frivolous arguments may face penalties and may be enjoined by a court pursuant to sections 7407 and 7408. Potential penalties include: (1) a $250 penalty under section 6694 for each return prepared by an income tax preparer who knew or should have known that the taxpayer’s argument was frivolous (or $1,000 for each return if the return preparer’s actions were willful, intentional or reckless); (2) a penalty under section 6700 for promoting abusive tax shelters; (3) a $1,000 penalty under section 6701 for aiding and abetting the understatement of tax; and (4) criminal prosecution under section 7206, for which the penalty is a significant fine and imprisonment for up to 3 years for assisting or advising about the preparation of a false return or other document under the internal revenue laws.

HOLDINGS

The Sixteenth Amendment to the U.S. Constitution was properly ratified and authorizes the federal income tax. Filing a federal income tax return and paying federal income tax does not constitute the taking of property without due process of law under the Fifth Amendment to the U.S. Constitution. Filing a federal income tax return, paying federal income tax, and incarceration for failure to comply with federal income tax obligations is not involuntary servitude or slavery prohibited by the Thirteenth Amendment to the U.S. Constitution. Arguments to the contrary are frivolous.

Cir. 1984) (“Every court that has considered this argument has rejected it.”). Arguments to the contrary are frivolous.

The Fifth Amendment prevents the federal government from taking property without due process of law. U.S. CONST. amend. V. Due process generally includes a right to notice and an opportunity to be heard. The Supreme Court has held that the procedures contained in the Internal Revenue Code fully satisfy the due process rights of taxpayers. See Phillips v. Commissioner, 283 U.S. 589, 595–99 (1931) (“The right of the United States to collect its internal revenue by summary administrative proceedings has long been settled. Where, as here, adequate opportunity is afforded for a later judicial determination of the legal rights, summary proceedings to secure prompt performance of pecuniary obligations to the government have been consistently sustained.”). The argument that due process requires a hearing before tax has to be paid or can be withheld from wages is frivolous.

The federal income tax only requires payment of taxes on a person’s income. It does not force a person to labor involuntarily, or to labor at all. The Thirteenth Amendment prohibits slavery and involuntary servitude, except as punishment when convicted of a crime. U.S. CONST. amend. XIII. The Thirteenth Amendment does not proscribe taxation. See Abney v. Campbell, 206 F.2d 836, 841 (5th Cir. 1953) (The specification, that the act violates the Thirteenth Amendment by imposing involuntary servitude upon an employer of domestic servants, seems to us far-fetched, indeed frivolous.”). Moreover, a prison sentence for failing to file a federal income tax return is not prohibited by the Thirteenth Amendment. See United States v. Drefke, 707 F.2d 978, 983 (8th Cir. 1983) (“The Thirteenth Amendment, however, is inapplicable where involuntary servitude is imposed as punishment for a crime.”). Failing to file a federal income tax return or to pay federal income tax based on the argument that it would constitute involuntary servitude is frivolous.

The Fifth Amendment provides that in a criminal case a person may not be compelled to be a witness against himself. U.S. CONST. amend. V. This generally means that a person cannot be forced to answer a question if the answer will be used against

that person in a criminal prosecution. Courts have routinely held, however, that the Fifth Amendment provides no basis for failing or refusing to file a tax return. United States v. Stillhammer, 706 F.2d 1072, 1076–77 (10th Cir.1983) (“[T]he Fifth Amendment does not serve as a defense for failing to make any tax return, and a return containing no information but a general objection based on the Fifth Amendment does not constitute a return as required by the Code.”). The remote possibility that a taxpayer’s statement on a tax return might be used as evidence in a future criminal prosecution will not relieve a taxpayer from the obligation to file a tax return and properly report income and pay tax due. See California v. Byers, 402 U.S. 424, 427–29 (1971) (“[T]he remote possibility of incrimination is insufficient to defeat strong policies of disclosure called for by” government regulatory scheme.). Additionally, involvement in illegal activities will not relieve a person of the duty to file a federal income tax return because income earned from illegal activities is subject to the federal income tax. United States v. Sullivan, 274 U.S. 259, 263–64 (1927) (“It would be an extreme if not an extravagant application of the Fifth Amendment to say that it authorized a man to refuse to state the amount of his income because it had been made in crime.”).

CIVIL AND CRIMINAL PENALTIES

In determining the correct amount of tax due, the Service will include income that taxpayers attempt to exclude based on frivolous constitutional arguments. In addition to liability for tax due plus statutory interest, individuals who claim tax benefits on their returns based on these and other frivolous arguments face substantial civil and criminal penalties. Potentially applicable civil penalties include: (1) the section 6651 additions to tax for failure to file a return, failure to pay the tax owed, and fraudulent failure to file a return; (2) the section 6662 accuracy-related penalty, which is equal to 20 percent of the amount of taxes the taxpayer should have paid; (3) the section 6663 penalty for civil fraud, which is equal to 75 percent of the amount of taxes the taxpayer should have paid; (4) a $500 penalty under section 6702 for filing a frivolous return; and (5) a penalty of up to $25,000 under section 6673 if the

2005–14 I.R.B. 820 April 4, 2005

the Internal Revenue Code. INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). There is no provision in the Internal Revenue Code that permits taxpayers to file returns claiming deductions or credits that reduce their taxable income by the percentage they estimate the government spends on programs or policies with which they disagree.

These frivolous positions are variations of arguments taxpayers have made about religion and taxation that have been repeatedly rejected by the courts. In United States v. Lee, 455 U.S. 252 (1982), a member of a religious denomination claimed that the payment of social security taxes violated his First Amendment right to free exercise of religion. The United States Supreme Court rejected this argument, stating that “the tax system could not function if denominations were allowed to challenge the tax system because tax payments were spent in a manner that violates their religious belief.” Id . at 260. The Court held that religious or moral beliefs that conflict with the payment of tax provide no basis for resisting the tax. Id .

Courts repeatedly have rejected these and similar arguments that a taxpayer’s religious or moral beliefs permit the avoidance of federal taxes, and have imposed penalties against taxpayers who make these arguments. See Schehl v. Commissioner, 855 F.2d 364, 367 (6 ^th

Cir. 1988) (“Alleged vocal opposition to taxes for a particular reason, and refusal to pay taxes, even if all assertions were taken as true . . . are simply not a basis to challenge an assessment of taxes.”); Nelson v. United States, 796 F.2d 164 (6 ^th

Cir. 1986) (upholding the applicability and constitutionality of a frivolous return penalty imposed against a taxpayer who claimed a deduction based on religious objection to war expenditures); Randall v. Commissioner, 733 F.2d 1565, 1567 (11th Cir. 1984) (“[A]rguments involving objections to the Government’s military expenditures as a basis for non-payment of taxes have been raised by taxpayers many times, and in each instance the courts have rejected them.”).

CIVIL AND CRIMINAL PENALTIES

The Service will disallow deductions or other claimed tax benefits, including the exclusion of income, based on frivolous ar

A taxpayer may not properly refuse to file a federal income tax return based on the claim that the requirement to do so violates the prohibition against self-incrimination of the Fifth Amendment to the U.S. Constitution. Arguments to the contrary are frivolous.

DRAFTING INFORMATION

This revenue ruling was drafted by the Office of Associate Chief Counsel (Procedure and Administration), Administrative Provisions and Judicial Practice Division. For further information regarding this revenue ruling, contact that office at (202) 622–7950 (not a toll-free call).

(Also Sections 6662–6664, 6702.)

Frivolous tax returns; protesting government programs or policies. This ruling emphasizes to taxpayers and to promoters and return preparers that liability for federal taxes does not depend on whether the taxpayer agrees with the government programs or policies that are funded with tax receipts. Any argument that taxpayers may refuse to report income or claim deductions because they oppose particular government programs or policies is frivolous and has no merit.

Rev. Rul. 2005–20

PURPOSE

The Service is aware that some taxpayers are attempting to reduce or eliminate their federal tax liability by taking the position that they are not required to pay taxes if those taxes might be used to support government programs or policies with which they disagree. Common examples include moral, ethical, or religious opposition to government spending for weapons programs, military operations, or medical research. The Service is also aware that promoters, including return preparers, are advising or recommending that taxpayers take frivolous positions based on these arguments. Some promoters market a package, kit, or other materials that claim to show taxpayers how they can avoid paying taxes based on these and other meritless arguments.

This revenue ruling emphasizes to taxpayers and to promoters and return pre

parers that liability for federal taxes does not depend on whether the taxpayer agrees with the government programs or policies that are funded with tax receipts. Any argument that taxpayers may refuse to report income or claim deductions because they oppose particular government programs or policies is frivolous and has no merit.

The Service is committed to identifying taxpayers who attempt to avoid their tax obligations by taking frivolous positions, including frivolous positions based on opposition to government programs or policies. The Service will take vigorous enforcement action against these taxpayers and against promoters and return preparers who assist taxpayers in taking these frivolous positions. Frivolous returns and other similar documents submitted to the Service are processed through its Frivolous Return Program. As part of this program, the Service confirms whether taxpayers who take frivolous positions have filed all of their required tax returns, computes the correct amount of tax and interest due, and determines whether civil and criminal penalties should apply. The Service also determines whether civil or criminal penalties should apply to return preparers, promoters, and others who assist taxpayers in taking frivolous positions, and recommends whether a court injunction should be sought to halt these activities. Other information about frivolous tax positions is available on the Service website at www.irs.gov .

ISSUE

Whether a taxpayer’s disagreement with government programs or policies on moral, ethical, religious or other grounds allows the taxpayer to refuse to file federal tax returns or to refuse to pay part or all of the taxpayer’s federal tax liability?

LAW AND ANALYSIS

Section 1 of the Internal Revenue Code imposes a tax on all taxable income. There is no authority under the Internal Revenue Code or any other applicable law that allows taxpayers to refuse to file tax returns because they do not agree with government programs or policies. Further, it is well settled that deductions and credits are a matter of legislative grace and are not allowed unless specifically provided for in

April 4, 2005 821 2005–14 I.R.B.

guments regarding opposition to government programs or expenditures. In addition to liability for tax due plus statutory interest, individuals who claim tax benefits on their returns based on these and other frivolous arguments may face substantial civil and criminal penalties. Potentially applicable civil penalties include: (1) the section 6662 accuracy-related penalty, which is equal to 20 percent of the amount of taxes the taxpayer should have paid; (2) the section 6663 penalty for civil fraud, which is equal to 75 percent of the amount of taxes the taxpayer should have paid; (3) a $500 penalty under section 6702 for filing a frivolous return; and (4) a penalty of up to $25,000 under section 6673 if the taxpayer makes frivolous arguments in the United States Tax Court.

Taxpayers relying on these frivolous positions also may face criminal prosecution for: (1) attempting to evade or defeat tax under section 7201, for which the penalty is a significant fine and imprisonment for up to 5 years; or (2) making false statements on a return under section 7206, for which the penalty is a significant fine and imprisonment for up to 3 years.

Persons who promote these frivolous positions and those who assist taxpayers in claiming tax benefits based on these positions may be enjoined by a court pursuant to sections 7407 and 7408 and also may face potential civil and criminal penalties. Potential penalties include: (1) a $250 penalty under section 6694 for each return prepared by an income tax return preparer who knew or should have known that the taxpayer’s argument was frivolous (or $1,000 for each return if the return preparer’s actions were willful, intentional, or reckless); (2) a penalty under section 6700 for promoting abusive tax shelters; (3) a $1,000 penalty under section 6701 for aiding and abetting the understatement of tax; and (4) criminal prosecution under section 7206, for which the penalty is a significant fine and imprisonment for up to 3 years, for assisting or advising about the preparation of a false return or other document under the internal revenue laws.

HOLDING

Taxpayers may not refuse to file tax returns and may not claim deductions or credits on their tax returns based on their opposition to government programs or

policies. Any claim that individuals may reduce their federal tax liability based on objections to the use of the taxes to support government programs or policies is frivolous and has no merit.

DRAFTING INFORMATION

The principal author of this revenue ruling is the Office of the Associate Chief Counsel (Procedure & Administration) Administrative Provisions and Judicial Practice Division. For further information regarding this revenue ruling, contact that office at (202) 622–7950 (not a toll-free call).