












                           Appendix H
                                
                    Analysis of U.S. vs Hicks








































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Reader's Notes:























































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                                                       Appendix H


MEMO

TO:       Interested Colleagues

FROM:     Mitch Modeleski, Founder
          Account for Better Citizenship

DATE:     October 25, 1991

SUBJECT:  9th Circuit Wrongly Decides
          U.S. vs Hicks and U.S. vs Bentson


     The Ninth  Circuit Court of Appeals has based its two recent
income tax  rulings on  blatantly wrong  premises.   In upholding
convictions for  willful failure  to file income tax returns, the
Court rejected  appeals by  both  defendants  to  the  clear  and
unambiguous provisions  of the  Paperwork Reduction Act (PRA) and
the Administrative  Procedure Act  (APA).   A simple  yet careful
analysis of  these rulings  is sufficient  to expose  the  faulty
premises upon  which both  rulings are  based.  As the Holy Bible
says, "Only  the fool  builds his  house upon  sand" (or words to
that effect).


U.S. vs Hicks

     The case  of U.S.  vs Hicks is the more important of the two
because it  was decided  first, it  contains more "analysis", and
sets a precedent to which the second case refers.  Beginning with
the PRA,  the Court  admits that the IRS must comply with the PRA
and "...  in particular,  must display OMB control numbers on its
tax return  forms and on its regulations."  Nevertheless, despite
a clear and unambiguous public protection clause, the Court ruled
that the  IRS failure to comply with the PRA does not prevent the
defendant from  being penalized  and that  the PRA constitutes no
defense to prosecution under 26 U.S.C. 7203:


     "But even  assuming without  deciding that the IRS failed to
     comply with the PRA here, its failure does not prevent Hicks
     from being penalized."


     The Court's  "analysis" justifies its ruling on the basis of
a careful  distinction it  draws between  agency regulations  and
Congressional statutes.   Specifically,  in  the  absence  of  an
"express prior  mandate" from  Congress,  a  citizen  may  escape
penalties for  failing  to  comply  with  an  agency  information
collection request  that is  issued via  regulation, but  without
displaying an  OMB control  number.   It is  the existence  of an
"explicit statutory  requirement" which makes all the difference,
according to  the 9th  Circuit.   The Court  refers  to  its  own
precedents as follows:


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     "The legislative  history of  the PRA and its structure as a
     whole lead  us to  conclude that  it was aimed at reining in
     agency activity. ... Where an agency fails to follow the PRA
     in regard  to an  information collection  request  that  the
     agency promulgates  via regulation,  at its  own discretion,
     and without  express prior  mandate from Congress, a citizen
     may indeed  escape penalties  for failing to comply with the
     agency's request.  See e.g. United States v. Hatch, 919 F.2d
     1394 (9th Cir. 1990);  United States v. Smith, 866 F.2d 1092
     (9th Cir.  1989).  But where Congress sets forth an explicit
     statutory requirement  that the citizen provide information,
     and provides  statutory criminal  penalties for  failure  to
     comply with  the request, that is another matter.  This is a
     legislative command, not an administrative request.  The PRA
     was not  meant to  provide  criminals  with  an  all-purpose
     escape hatch.  [emphasis added]


     What exactly  is this  legislative command,  this  "explicit
statutory requirement",  this "express  prior mandate" upon which
the Court  places so much emphasis?  We search in vain amidst the
Court's analysis  of the  PRA.  Instead, we are told that the tax
code predates  the PRA  by over  25 years and that Congress never
intended the PRA to create a loophole in that tax code:


     Moreover, the  provision of  the tax  code under which Hicks
     was convicted  predates the  PRA by  over 25  years.  If, in
     enacting the  PRA, Congress had intended to repeal 26 U.S.C.
     7203,  it  could  have  done  so  explicitly.    Repeals  by
     implication are not favored. ... Congress enacted the PRA to
     keep agencies,  including the  IRS, from deluging the public
     with needless  paperwork.   It did  not do  so to  create  a
     loophole in the tax code.


     We hold  that the public protection provision of the PRA, 44
     U.S.C. 3512,  constitutes no defense to prosecution under 26
     U.S.C. 7203.   To  hold otherwise   --  to interpret the PRA
     without reference  to Congress'  purpose   --   would be  to
     elevate form over substance.  [emphasis added]


     Evidently,  the  Court  is  ready  and  willing  to  elevate
legislative  commands  over  administrative  requests,  "explicit
statutory requirements"  over agency regulations.  However, it is
not willing  to be  explicit itself  about  the  exact  statutory
requirement that  is so elevated, at least not in its analysis of
the PRA.   It  is not until the Court analyzes the Administrative
Procedure Act  (APA) that we finally discover a pivotal reference
to the  exact statutory  requirement which the Court considers so
sacred.  But this pivotal reference is a foundation of sand.




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                                                       Appendix H


Administrative Procedure Act

     Having made  such an  important distinction between statutes
and regulations,  the Court  then proceeds  to reiterate the same
distinction in  rejecting a  defense based  upon the  APA.   Even
though the  IRS has  failed to  publish Form  1040 in the Federal
Register, and  even though  the IRS has failed to promulgate Form
1040 according  to the  APA notice  and comment  procedures,  the
Court maintains that the defendant still had a legal duty to file
a tax return.  According to the Court, it is entirely "meritless"
to argue  that the  IRS's failure  to publish its form eliminated
any legal  duty that  might have  required the  defendant to file
income tax returns:

     Hicks's  argument  is  meritless.    It  confuses  law  with
     regulations with  respect to  such law.   It is the tax code
     itself, without  reference to  regulations, that imposes the
     duty to  file a tax return.  ... However, even if we suppose
     that the  duty to  file tax  returns can  be understood only
     with reference  to regulations, the IRS has duly promulgated
     sufficient regulations,  e.g. 26  CFR 1.6011-1, 1.6012-1, to
     make that  duty clear.   The  meaning of "willful failure to
     make a  tax return"  is apparent  without reference  to  the
     contents of  Form 1040  or its  instructions.   Hicks cannot
     complain that  he did not know what was expected of him.  He
     had a  duty to  make a  tax return, and chose to ignore that
     duty.

     Notice,  in   particular,  that  the  Court  has  still  not
mentioned the  exact statutory  requirement which it considers so
decisive.   Instead, we  are told  that the  tax code imposes the
duty  to  file  a  tax  return,  that  the  IRS  has  promulgated
"sufficient regulations"  to make  that duty clear, and that Form
1040 and  its instructions  are not  needed to  know  that  duty.
Evidently, the  Court judges  the statute to be crystal clear and
the regulations  to be duly promulgated and "sufficient", even if
we suppose  that the  statute is not crystal clear.  What exactly
is the  controlling statutory  requirement, and  is the  "duty to
file" as  apparent in  that statute  as the  Court would  have us
believe?   In answer  to the  first question,  the Court  finally
plays its hand:

     Hicks's reliance  on United  States v.  Reinis, 794 F.2d 506
     (9th Cir.  1986) is  misplaced.  As the Fourth Circuit noted
     in Bowers,  Reinis involved unpublished rules (specifically,
     instructions for  a Currency  Transaction Report  Form) that
     imposed "substantive obligations beyond those created by the
     statute  itself."    ...  Only  by  publication  could  this
     obligation become  known.   The 1040  form, by contrast, did
     not add  to Hicks's  basic  substantive  obligation.    That
     obligation is  to comply  with the  applicable provisions of
     the Internal  Revenue Code.   The code requires that persons
     such as  Hicks make  a return.   26  U.S.C. 6012.  [emphasis
     added]


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     At long  last,  we  finally  discover  the  exact  statutory
requirement which  the Court  considers so  decisive.  But is the
"duty to  file" as "apparent", as obvious and as crystal clear in
this exact  citation as  the Court would have us believe?  Let us
now quote  the operant phrases from a subset of Title 26, Section
6012:


     (a) GENERAL  RULE:   Returns with  respect to  income  taxes
     under subtitle A shall be made by the following:

          (1)(A) Every  individual having  for the  taxable  year
          gross income  which equals  or  exceeds  the  exemption
          amount  ....   except  that   ...   nonresident   alien
          individuals subject  to the  tax imposed by section 871
          and foreign  corporations subject to the tax imposed by
          section 881  may be  exempted from  the requirement  of
          making returns under this section.  [emphasis added]


     Admittedly, Section  6012 contains a lot more verbiage which
covers a  lot more exceptions to the general rule, e.g. those not
married, heads  of households,  surviving spouses, joint returns,
estates,   trusts,   political   organizations   and   homeowners
associations, and  so on  ad nauseam.   Likewise,  the meaning of
"nonresident alien  individuals" and "foreign corporations" is an
entirely separate  and complex  subject which  will divert us too
far from  the path at hand.  The important point here is that the
general rule  specifies a  threshold, namely, the duty to file is
imposed by  law on  every individual  having "gross  income which
equals  or   exceeds  the   exemption  amount".     Is  this  law
sufficiently clear,  explicit, and  unambiguous?   Apparently the
Ninth Circuit  thinks so.  But is it really?  Let's be honest and
objective about  this, because  the issues here are important and
even crucial to the future of our country.


What is a Widget?

     In order  to answer  these questions, let us first reason by
analogy.   Because you are now reading a law which I have enacted
for you,  you are hereby informed that you have a duty to send me
a birthday  card, and a pair of free tickets to the World Series,
if and  when I  reach the  age of  50 widgets.    Your  immediate
response is  obvious:   what's a  widget?   You would be happy to
comply with  the duty  if I would only define what a "widget" is,
in terms  you understand.   Absent  such a definition, you cannot
comply because  my law  is vague,  and hence void.  Once you know
what a widget is, you are confident you will be able to determine
when my  age passes  the threshold  number of  widgets, at  which
point you  will be  happy to  satisfy your  "known  legal  duty".
Without a  doubt,  my  definition  of  "widget"  is  crucial  and
decisive for you to satisfy your duty.



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                                                       Appendix H


     This same  logic applies directly to the statutory threshold
established for  "gross income".   At  the risk  of  repeating  a
mountain of  published analysis  on this  very same issue, we are
forced once  again to  quote the  statutory definition  of "gross
income" as follows:


     SEC. 61.  GROSS INCOME DEFINED

     (a)  GENERAL DEFINITION.   Except  as otherwise  provided in
     this subtitle,  gross income  means all income from whatever
     source derived, including (but not limited to) the following
     items ... [list follows].


     Even though the statute has defined "gross income", it still
has  not  defined  "income".    What  the  statute  does  say  is
comparable to  saying, "Gross  widgets  means  all  widgets  from
whatever source  derived."   (Or, as  Godfrey Lehman says, "Gross
gobbledygook is gobbledygook from whatever source derived.")  But
we still  have not  defined "widgets"  (or gobbledygook)  and the
definition of  "gross widgets"  is  necessarily  vague  for  this
reason and  for this  reason alone.   The statutory definition of
"gross income"  is a  tautology, because  it uses  a term  it  is
defining in  the definition  of the  term defined.  From a purely
grammatical point  of view,  the only  thing accomplished by this
statutory definition  of "gross income" is to qualify the meaning
of "gross";  it accomplishes nothing else.

     Furthermore, close  examination of  Title 26,  the  Internal
Revenue Code  (IRC), reveals  that the  meaning  of  "income"  is
simply not  defined, period!  There is an important reason in law
why this  is the  case.  At a time when the Supreme Court did not
enjoy the benefit of 17,000 State-certified documents which prove
it was never ratified, that Court assumed that the 16th Amendment
was the  supreme law of the land.  In what is arguably one of the
most important rulings on the definition of "income", the Supreme
Court of  the United  States has clearly instructed Congress that
it is  essential to  distinguish between  what is and what is not
"income", and  to apply  that distinction  according to truth and
substance, without regard to form.  In that instruction, the high
Court has told Congress that it has absolutely no power to define
"income" because  that term  was considered  by the Court to be a
part of the U.S. Constitution:


     Congress cannot  by any definition it may adopt conclude the
     matter,  since   it  cannot   by   legislation   alter   the
     Constitution, from  which alone  it  derives  its  power  to
     legislate, and within whose limitations alone that power can
     be lawfully  exercised.   [Eisner vs  Macomber, 252  US 189]
     [emphasis added]




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     Clearly, the  Internal Revenue  Code has  not  distinguished
between what  is and what is not income because to do so would be
an exercise  of power  which Congress  does not  have.  This is a
Catch-22 from  which the  Congress  cannot  escape.    It  either
defines income  by statute and thereby exercises a power which it
does not  have, or  it fails  to define income, thereby rendering
whole chunks  of the  Internal Revenue  Code null  and  void  for
vagueness.


     The well  documented failure  of the  16th Amendment  to  be
ratified raises  a host  of other  issues too  complex to analyze
here.   One could  argue, for  example, that the term "income" is
really not  a part  of the  Constitution after all, because it is
found only  in the  text of  the failed amendment.  Suffice it to
say that  Congress has never had the power to lien on the private
property of  sovereign Citizens of the 50 States, with or without
the 16th  Amendment, unless  the  lien  results  from  a  statute
authorizing a  direct tax  which satisfies the apportionment rule
in the Constitution (1:2:3 and 1:9:4).


     Income is  private property.   Absent  a direct tax, or some
commercial agreement  to the  contrary, the federal government is
not empowered  to obtain  a controlling interest in, or otherwise
lien on  private property  so as  to compel  a private  Citizen's
performance to  any third-party debt or obligation.  Moreover, it
is a well established principle in law that government cannot tax
a sovereign  Citizen for  freely exercising a right guaranteed by
the U.S.  Constitution.   The acquisition and exchange of private
property is such a right.


     Numerous other rulings of the Supreme Court have all defined
"income" in the same exact terms, namely, income is a "profit" or
a "gain".   (See  attached formal  petition to Rep. Barbara Boxer
for all  relevant  citations.)    Remember,  these  are  not  the
writings of some extremist or radical constitutional libertarian.
We are  relying here  upon the  words of the Supreme Court of the
United States,  in  cases  wherein  the  official  definition  of
"income" was  decisive.   Try to  find a principle that is better
settled:


     Remember that  our source  is not  some "tax protest" group.
     Just about everything we are telling you comes from the U.S.
     Supreme  Court.     It   would  be  difficult,  and  perhaps
     impossible, in  our  system  of  jurisprudence,  to  find  a
     principle better settled than the one we have been citing.

     [from Tax  Scam by  Alan Stang,  Mt. Sinai  Press, POB 1220,
     Alta Loma, CA 91701, 1988]




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                                                       Appendix H


     Whatever arguments  one may  choose to  make from this point
forward, those arguments would certainly benefit from a knowledge
of the  relevant case law in this area.  I mean, if we're talking
gasoline taxes,  then we know the subject of the tax is gasoline;
if we're  talking tobacco  taxes, then  we know  the  subject  is
tobacco.   Why should  a tax  on "income" be any different?  Just
because the Congressional Research Service chooses to differ with
the Supreme  Court?   Just because  the IRS  uses police power to
enforce a different definition?  Just because the Federal Reserve
needs a  powerful agency  to collect  interest payments  for  its
syndicated monopoly on private credit?


Is the Code Sufficient?

     The Ninth  Circuit tips  its hand  in another, albeit subtle
way when  it  discusses  so-called  makeshift  returns.    Simply
stated, you  don't need  a Form  1040 or its instructions to make
and file a return;  the statute and the regulations are enough:


     While it  is true  that the  regulations state that filing a
     Form 1040  is the preferred manner of making a return, it is
     by no  means the  only manner  of filing.  26 C.F.R. 1.6012-
     1(a)(6).  Knowing the code and the regulations, and no more,
     is enough  to enable  Hicks to  attempt to  comply with  the
     obligation to  file a  return.  He did not need to consult a
     1040 form  or its  instructions.  See also 26 C.F.R. 1.6011-
     1(b) (taxpayer  is not  penalized  for  filing  a  makeshift
     return pending  the filing  of a proper return).  It follows
     that Form  1040 is  not a  "rule" subject to the complicated
     publication, notice, and comment requirements of the APA.

                                                 [emphasis added]


     Notice,  in  particular,  that  the  Court  has  ruled  that
"knowing the  code and  the regulations,  and no  more, is enough
...."  The Court has not ruled that "knowing the code is enough".
This is  an important,  and telling  admission on the part of the
Ninth Circuit.   By  their own  previous precedents  in Hatch and
Smith, this  Court ruled  that OMB control numbers and expiration
dates are  required to  be  displayed  in  the  Code  of  Federal
Regulations.   We already  know that  the  IRC  does  not  define
"income".  If the regulations also fail to contain a satisfactory
definition of  "income", and  if those  same regulations  fail to
display currently  valid OMB  control numbers,  the conscientious
citizen is  faced with  a double whammy.  The regulations are not
only null  and void  for vagueness,  they can  also be ignored as
"bootleg requests"  because they do not display OMB approval.  If
the Code cannot be understood without those regulations, the Code
is not  sufficient.   Last but not least, Congress' lack of power
to legislate  a statutory  definition of "income" is also equally
true of  the regulations  which promulgate  statutes.   Were  the


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regulations which  implement Section 6012 to contain a definition
of  "income",   the  very  existence  of  that  definition  in  a
regulation (which  has the  force  of  law)  would  evidence  the
exercise of  a power  which Congress  has been told, in clear and
certain terms, it simply does not have.


U.S. vs Bentson

     Having established  its precedents  in U.S.  vs  Hicks,  the
Ninth Circuit  proceeds to  make summary  hay of  similar  issues
raised by  defendant Stephen W. Bentson.  The Court observed that
Bentson's PRA  argument was  essentially the same as the argument
it rejected in Hicks, and they found no merit in it:


     Bentson points to dicta in United States v. Collins ... that
     suggest that persons charged with criminal violations of the
     Internal  Revenue   Code   might   in   some   circumstances
     legitimately raise  a PRA  defense.   For reasons  given  in
     Hicks, we  believe that  the PRA was not intended to provide
     such a  defense, and  therefore we disagree with the Collins
     court's dicta.


     The Court's  disposal of  the  APA  argument  is  even  less
enlightening:


     The district  court denied  Bentson's motion  for  dismissal
     based on  the APA  as untimely.    Whether  or  not  it  was
     untimely, the legal theory on which the motion was based has
     no merit.  Hicks, supra.


     So much  for the  APA.   Since the  Bentson case contains no
additional analysis  and relies  upon the precedent(s) set by the
Hicks case,  it would be fair to fault the Bentson ruling for the
same reasons that the Hicks ruling is faulty.


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