                           Chapter 3:
                          "The Matrix"
                                
                                
     This chapter contains an essential key with the potential to
set you  free.   One of  the biggest  obstacles to  understanding
federal tax law is that it never uses diagrams or pictures.  If a
picture is worth a thousand words, then the Internal Revenue Code
(IRC) would  certainly lose a lot of weight if it were reduced to
pictures;  but there would still be a lot of pictures!  A careful
examination of  certain key  terms like  "resident" and "citizen"
reveals  a  certain  two-dimensional  quality  to  the  statutory
relationship among  these terms.   Specifically, you are an alien
if you  are not  a citizen,  and you are a nonresident if you are
not a  resident.   This careful  examination led to the following
diagram, which  I like  to call  "The Matrix".  The Matrix is the
key that  unlocks the  whole puzzle  of federal  income taxation.
When you  understand The  Matrix, you will know exactly where you
stand with respect to the federal zone:


                    column 1:         column 2:
                +-----------------------------------+
                | United States** |                 |
                |    citizen      |     alien       |
                |-----------------+-----------------|
                |                 |                 |
                |                 |                 |
  resident      |        X        |       X         |   row 1
                |                 |                 |
                |-----------------+-----------------|
                |                 |                 |
                |                 |                 |
  nonresident   |        X        |                 |   row 2
                |                 |                 |
                +-----------------------------------+

     The validity  of The  Matrix is supported by a large body of
evidence, only  a small  part of which can be covered effectively
in a  single book.  The IRC is not a good place to begin, because
Chapter 1  of that  Code imposes  a tax  on the taxable income of
"individuals", a term which the Code simply does not define.  The
definitions that  do exist  are found  in Chapter 79 and in other
places which  are spread  around the  Code like leaves blowing in
the wind.  The Code of Federal Regulations (CFR) is a much better
place to  begin a review of the evidence.  The regulations in the
CFR are  considered to  be official  publications of  the federal
government because  they are  "judicially noticed"  (courts  must
defer to  them) and  because they  are considered  by law  to  be
official supplements  to The  Federal Register.  According to the
regulations which promulgate Title 26, the Internal Revenue Code,
the liability  for federal  income tax is imposed on all citizens
of the  United States** and all residents of the United States**,
as follows:


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     In general,  all citizens  of the  United States**, wherever
     resident, and  all resident  alien individuals are liable to
     the income  taxes imposed  by the Code whether the income is
     received from sources within or without the United States**.
     ...   As  to  tax  on  nonresident  alien  individuals,  see
     sections 871 and 877.
                                                [26 CFR 1.1-1(b)]
                                                                 
     Thus, the  regulations impose an income tax on all citizens,
whether they  are  resident  or  nonresident  (column  1  in  The
Matrix), and  on all  residents, whether  they  are  citizens  or
aliens (row  1 in  The Matrix).   These same regulations define a
United  States**  citizen  as  someone  who  is  either  born  or
naturalized in  the United  States** and  who is  subject to  the
jurisdiction of the United States**, as follows:


     Every person  born or naturalized in the United States** and
     subject to its jurisdiction is a citizen.

                                                [26 CFR 1.1-1(c)]
                                                 [emphasis added]


     The official IRS "Publications" are another excellent source
of evidence  which supports  the validity  of The  Matrix.  These
publications can  be obtained  by ordering them directly from the
Internal Revenue  Service.   For example, Publication number 519,
U.S. Tax Guide for Aliens, begins with the following statements:


     Introduction

     For tax  purposes, an  alien is  an individual  who is not a
     U.S.** citizen.  Aliens are classified as nonresident aliens
     and resident aliens.  ...
                                           [emphasis in original]


     Clearly, an  alien is  an individual  who is  not  a  U.S.**
citizen.   Aliens are  individuals who  were born  outside of the
federal zone, and who never elected to become U.S.** citizens via
naturalization.   Publication 519  then explains  the  difference
between a resident alien and a nonresident alien, as follows:


     Resident or nonresident?

     Resident aliens  generally  are  taxed  on  their  worldwide
     income, the  same as  U.S.** citizens.   Nonresident  aliens
     generally are taxed only on their income from sources within
     the United States**. ...

                                                  [continued ...]


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     Nonresident aliens  are taxed  on their U.S.** source income
     (and on  certain foreign  source income  that is effectively
     connected with a trade or business in the United States**).

                                           [emphasis in original]


     How does  one become  a "resident"  of the  United States**?
Remember, as  used in  Title 26  and its  regulations,  the  term
"United States**"  means the  area over  which Congress exercises
exclusive legislative  jurisdiction, that  is, the  federal zone.
The IRC  contains a  relatively clear  definition  of  the  terms
"resident alien" and "nonresident alien", as follows:


     Definition of Resident Alien and Nonresident Alien.  --

     (1)  In General. --  For purposes of this title (other than
          subtitle B) --


          (A)  Resident Alien.   --  An alien individual shall be
               treated as  a resident of the United States** with
               respect to any calendar year if (and only if) such
               individual meets  the requirements  of clause (i),
               (ii), or (iii):

               (i)  Lawfully Admitted  for  Permanent  Residence.
                    --   Such individual  is a  lawful  permanent
                    resident of  the United  States** at any time
                    during such calendar year.

               (ii) Substantial Presence Test.
                    --  Such   individual  makes   the   election
                    provided in paragraph (3).

               (iii) First Year Election.
                    --  Such   individual  makes   the   election
                    provided in paragraph (4).


          (B)  Nonresident  Alien.     --   An  individual  is  a
               nonresident alien  if such individual is neither a
               citizen of  the United  States** nor a resident of
               the  United   States**  (within   the  meaning  of
               subparagraph (A)).

                                 [26 USC 7701(b), emphasis added]


     Being lawfully  admitted for  permanent  residence  is  also
called "the  green card  test".  IRS Publication 519 explains the
green card test as follows:



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     You are  a resident  for tax  purposes if  you are  a lawful
     permanent resident of the United States** at any time during
     the calendar  year.   ... This  is known as the "green card"
     test.   You are  a lawful  permanent resident  of the United
     States** at  any time  if you have been given the privilege,
     according to  the immigration  laws, of residing permanently
     in the  United States** as an immigrant, and this status has
     not been  taken away  and has  not been  administratively or
     judicially determined to have been abandoned.  You have this
     status if  you have  been issued an alien registration card,
     also known  as  a  "green  card,"  by  the  Immigration  and
     Naturalization Service.
                                           [emphasis in original]

     American Citizens who were born free in one of the 50 States
of the  Union are  not required  to obtain  an alien registration
card, because  their presence  in one  of the  50 States is not a
privilege;   on the contrary, it is an unalienable right which is
guaranteed to them by the United States Constitution because they
were born  free and  Sovereign.  The Constitution refers to these
people as "natural born Citizens" (2:1:5), "free Persons" (1:2:3)
and "Citizens  of a  State" (3:2:1  and 4:2:1).   On the basis of
this criterion  alone, the  natural born  State Citizen  enjoys a
significant right which is not enjoyed by a person who must apply
for residence  as a privilege granted by government.  (Throughout
this book,  the terms  "native  American  Citizen",  "native-born
American Citizen"  and "American Citizen" will be synonymous with
"natural born Citizens" as in 2:1:5 of the Constitution, and with
"State Citizens"  as in  3:2:1 and  4:2:1 of the Constitution, to
avoid problems that do arise solely from terminology.)

     Publication 519  explains the  "substantial  presence  test"
using rules which closely parallel those which are actually found
in the Internal Revenue Code (26 USC):

     You will be considered a U.S.** resident for tax purposes if
     you meet  the substantial  presence test  for  the  calendar
     year.   To meet this test, you must be physically present in
     the United States** on at least:

          (1)  31 days during the current year, and

          (2)  183 days  during the  3-year period  that includes
               the current  year  and  the  2  years  immediately
               before, counting:

               -    all the  days you were present in the current
                    year ... , and

               -    1/3 of the days you were present in the first
                    year before the current year ... , and  

               -    1/6 of  the days  you  were  present  in  the
                    second year before the current year ...


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     Example.  You were physically present in the United States**
     on 120  days in  each of the years 1988, 1989, and 1990.  To
     determine if  you meet  the substantial  presence  test  for
     1990, count  the full  120 days of presence in 1990, 40 days
     in 1989  (1/3 of  120), and  20 days  in 1988  (1/6 of 120).
     Since the  total for  the 3-year period is 180 days, you are
     not considered  a resident  under the  substantial  presence
     test for 1990.
                                           [emphasis in original]


     An individual  may elect  to be treated as a resident of the
United States**.  The rules for making this election are found in
the statute  (26 USC 7701(b)(4)) and in the CFR regulations which
promulgate this statute (26 CFR 1.871 et seq.).  Why anyone would
want  to  do  this,  without  actually  residing  in  the  United
States**, remains  a mystery  to me.   Many  Americans have  been
duped into believing that electing to be treated as a resident is
a "beneficial" thing to do.  Subsequent chapters will discuss the
so-called "benefits"  of U.S.**  residence and U.S.** citizenship
by contrasting revocable privileges and unalienable rights.

     At last, we arrive at the definition of "nonresident alien".
We have  taken the  long way  around the  mountain, but it is the
only way  around the mountain (as it turns out) because Chapter 1
of the  Internal  Revenue  Code  imposes  the  tax  on  undefined
"individuals".   It is  in Chapter  79, near the end of the Code,
where it states that an individual is a nonresident alien if such
individual is  neither a  citizen of  the United  States** nor  a
resident of  the United  States**.   If you were born outside the
federal zone,  either as a Sovereign Citizen natural born free in
one of  the 50  States of  the Union, or as a native citizen of a
foreign country  like France,  then you  are not  automatically a
"citizen of  the United  States**".   You may,  of course, obtain
"U.S.** citizenship"  by applying  for this  "privilege" with the
Immigration  and  Naturalization  Service,  even  if  you  are  a
Sovereign  State   Citizen.    You  may  also  relinquish  U.S.**
citizenship at  will, through  a process known as "expatriation".
If  you   were  born  inside  the  federal  zone,  then  you  are
automatically a  "citizen of the United States**".  The rules for
residency have already been reviewed above.

     The validity  of The  Matrix is also reinforced clearly by a
man named  Roger Foster  who, in the year 1915, wrote a forgotten
treatise on  the  Act  of  1913,  the  year  the  so-called  16th
Amendment was  declared ratified.   Some  people argue that these
older materials  are not  relevant because  they do not take into
account the  changes that  have occurred  in the  statute and its
regulations.     Although  changes   have  indeed  occurred,  the
relevance of  these materials  lies in their proximity in time to
the origins  of income  taxation in America, and to the intent of
the original  statutes.  It is a principle of law that the intent
of a  statute is always decisive.  The following excerpt is taken
from A  Treatise on the Federal Income Tax under the Act of 1913,


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by Roger  Foster of  the New  York Bar,  published by The Lawyers
Co-operative Publishing Company, Rochester, New York, in 1915:

     Section 35: Incidence of the tax with respect to persons.

          Under [the statute] four possible cases arise.  Two are
     of  citizens,   with  reference   to  their   residence   or
     nonresidence, and two are of aliens, with reference likewise
     to their residence or nonresidence.  There is no question as
     to the  first two,  that the  whole income  of every citizen
     whether residing  at home  or abroad  is taxed;   it  is  so
     specifically  provided   in  the  act.    Similarly,  it  is
     expressly provided  in the act that every person residing in
     the United  States** shall  pay a  tax upon  all his income,
     from  whatever   source  derived,   which  without  question
     includes all  resident aliens.    Whatever,  therefore,  the
     power of  Congress may be, its intent is clear, that in case
     of non-resident aliens the only measure of the tax is income
     derived within the United States**.

          With  reference   to  aliens,  therefore,  it  must  be
     determined whether they are resident in which case they must
     pay the  tax on  their whole  income;   or if  not  resident
     whether they  own property  or carry on a business, trade or
     profession in the United States**.

          In  the   latter  case,  they  are  taxable  only  with
     reference to income earned or paid in this country.  If they
     are non-resident and do not derive an income from any source
     within our territory of course they are not taxable at all.

                                               [pages 153 to 155]
                                                 [emphasis added]
                                                                 
     Note, in  particular, that Foster makes reference to "income
earned or  paid in this country".  You might be sorely tempted to
conclude, therefore,  that he meant to define the "United States"
to mean  the several States of the Union (then 48) in addition to
the federal zone.  He did not.  This question is squarely settled
in another  section of  his treatise,  in which  he considers the
incidence of the tax with respect to territory:

     Section 34:   Incidence of the tax with respect to territory
     and places exempted from the same.

     The tax  ... is  levied in Alaska, the District of Columbia,
     Porto Rico  [sic] and  the Philippine  Islands.  ... The Act
     expressly directs:

          "That the  word 'State'  or 'United States**' when used
          in this  section shall  be  construed  to  include  any
          Territory, Alaska,  the  District  of  Columbia,  Porto
          Rico,   and   the   Philippine   Islands,   when   such
          construction is necessary to carry out its provisions."


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     Although there  might be ground for argument that the phrase
     "any Territory"  applies to the Hawaiian Islands, it was the
     evident intention  of Congress that the residents of Hawaii,
     at least  when not  citizens of  the  United  States**,  are
     exempt from  the tax, for the reason that the Legislature of
     Hawaii has  imposed an Income Tax upon all residents of that
     territory.
                                               [pages 152 to 153]
                                                 [emphasis added]

     There you  have it!   Four possible cases arise.  Go back to
The Matrix and to the cover of this book.  Focus carefully on the
lonely cell  found at  row 2,  column 2.   You  are a nonresident
alien if you are not a citizen of the United States** and you are
not a resident of the United States**:


     The term  "nonresident alien individual" means an individual
     whose residence  is not  within the United States**, and who
     is not a citizen of the United States**.

                                                 [26 CFR 1.871-2]


     At this  point, you  may still  be wondering if it is indeed
correct to use the term "nonresident alien" to describe Sovereign
State Citizens  who were born free in one of the 50 States of the
Union, and  who also live and work in one of the 50 States of the
Union.   All that  remains to  prove it  correct is to verify the
legal meaning  of the  term "United  States**" in  Title 26,  the
Internal Revenue  Code (IRC).  This proof requires an overview of
the several  meanings of the terms "United States" and "State" as
they are  defined in  the statute  itself, in  the case  law, and
elsewhere.

     An exhaustive  proof is  not necessary  here  because  other
capable authors  have already  completed a massive amount of work
on this subject.  Interested readers are encouraged to review the
Bibliography, found  in Appendix  N, and  to obtain copies of the
key publications  entitled Good-Bye  April  15th!  by  Boston  T.
Party, Which  One Are You? by The Informer, United States Citizen
versus National of the United States and A Ticket to Liberty both
by Lori Jacques, The Omnibus by Ralph F. Whittington, and Free At
Last --  From the  IRS by  N. A.  "Doc" Scott.  Taken as a group,
these  authors   have   published   a   wealth   of   irrefutable
documentation which proves, beyond any doubt, the true meaning of
"nonresident alien"  in the  federal income tax statutes.  Author
Ralph Whittington's  book is  particularly valuable  because  its
appendices contain  true and correct copies of key documents like
Roger Foster's treatise and selected Acts of Congress.


     The following  anecdote summarizes  nicely many  of the  key
points which we have covered thus far:


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          Several years ago in a coffee shop while talking with a
     friend about  "tax matters,"  a man  in the  adjacent  booth
     overheard our  conversation and  asked  to  join  us.    The
     conversation continued,  and centered  mainly on IRS abuses.
     This gentleman  seemed particularly  knowledgeable about the
     subject and  we asked him what he did for a living.  He told
     us his  name and  that he  was  an  attorney  with  the  Tax
     Division  of   the  Department  of  Justice  in  Washington.
     Naturally, this  put us  on guard,  but he quickly put us at
     ease by  agreeing in  large part  with the conclusion we had
     drawn.

          Reluctantly,  I  asked  him  this  question,  "Why  are
     defendants in  federal district  court always  asked if they
     are 'citizens  of the  United States'?"   He replied without
     hesitation, "So  we can  determine jurisdiction.    In  many
     cases the  federal court  does not  have jurisdiction over a
     citizen unless they testify they are a citizen of the United
     States  --   meaning  a   federal  citizen  under  the  14th
     Amendment."

          My friend innocently asked, "What's a federal citizen?"
     The attorney replied, "That's a person who receives benefits
     or privileges  or is  an alien  that has  been admitted as a
     citizen of the United States."

          I quickly  interjected, "What  if the individual denied
     being a  citizen of  the United  States and  claimed to be a
     sovereign citizen of Oklahoma?"  The attorney bowled me over
     with, "We don't get jurisdiction."
     
          He had to catch a plane.

             [Freeman Letter, March 1989, page 6, emphasis added]
          [as quoted in "Brief of Law for Zip Code Implications"]
                 [by Walter C. Updegrave, revised March 28, 1992]
                                                                 
     The implications  of the  14th Amendment  are considered  in
some detail in Chapter 11 and in Appendix Y.  For now, it is best
to remember  that we  have in  America a government of the United
States**  and  a  government  of  each  of  the  several  States;
moreover, each  has citizens  of its  own.   In parallel with the
federal and  State governments,  there are  federal citizens  and
there are  State Citizens.   Federal  citizens are  the  same  as
"U.S.** citizens"  and "citizens of the United States**".  If you
are not  a federal  citizen, then you are an "alien" with respect
to the  federal government.  If you get confused, just recall the
familiar distinction  between State  and federal governments, and
then remember that each has citizens of its own.  For consistency
throughout this  book, federal  citizens will  be spelled  with a
lower-case "c"  and  State  Citizens  will  be  spelled  with  an
UPPER-CASE "C".   This  convention is  strictly obeyed throughout
the Internal  Revenue Code  (IRC)  and  throughout  the  Code  of
Federal Regulations (CFR) which promulgate the IRC.


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Summary

     The citizen/alien  distinction explains  the two  columns of
The Matrix.   By definition, you are an alien with respect to the
United States**  if you are not a citizen of the United States**.
The happy  result of The Matrix is the legal and logical equation
which exists  between most State Citizens and nonresident aliens.
A citizen  of the  United States** is the same thing as a federal
citizen.   A State  Citizen is not necessarily a federal citizen.
Anyone who is not a federal citizen is an "alien" with respect to
the United States**.  Therefore, a State Citizen is an "alien" as
that term  is defined  in the  IRC.   State Citizens  are free to
reside wherever  they choose, because their right to travel is an
unalienable right.   However,  the term  "resident"  has  a  very
specific meaning  in the  IRC, whether it is used as an adjective
or a noun.

     The resident/nonresident  distinction explains  the two rows
of The  Matrix.   An alien  can be  either a resident alien, or a
nonresident alien.   Three  criteria distinguish  resident aliens
from nonresident  aliens:   (1) lawful  admission  for  permanent
residence   (2) substantial presence test and  (3) election to be
treated as  a resident.  All 3 of these criteria depend for their
legal meaning  upon the  statutory definition of "United States".
Therefore, if  State  Citizens  are  "residents"  of  the  United
States** according  to these  criteria, then  they  are  resident
aliens, by  definition.  If State Citizens are not "residents" of
the United  States** according  to these  criteria, then they are
nonresident aliens,  by definition.    A  deliberately  confusing
statute is  clarified considerably by understanding the legal and
logical  equation   which  exists   between  State  Citizens  and
nonresident aliens.   They  are one  and the  same thing,  to the
extent that State Citizens do not reside in the United States**.























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Reader's Notes:























































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