January 30, 2005 Contact: Bob Schulz
For Immediate Release (518) 656-3578
U.S. Court of Appeals Rules IRS Cannot Apply Force
Against a Tax Payer Without A Court Order
Taxpayers Free To Ignore An IRS Summons
Queensbury, NY – On January 25, 2005, the U.S. Court of Appeals for the Second Circuit held that taxpayers cannot be compelled by the IRS to turn over personal and private property to the IRS, absent a federal court order.
Quoting from the decision (Schulz v. IRS, case number 04-0196-cv), “...absent an effort to seek enforcement through a federal court, IRS summonses apply no force to taxpayers, and no consequence whatever can befall a taxpayer who refuses, ignores, or otherwise does not comply with an IRS summons until that summons is backed by a federal court order…[a taxpayer] cannot be held in contempt, arrested, detained, or otherwise punished for refusing to comply with the original IRS summons, no matter the taxpayer's reasons, or lack of reasons for so refusing.”
Without declaring those provisions of the Code unconstitutional on their face, the court, in effect, nullified key enforcement provisions of the Internal Revenue Code, stripping the IRS of much of its power to compel compliance with its administrative demands for personal and private property. The court characterized IRS summonses issued under Section 7602 as mere “requests.”
The court went on to say that the federal courts are there to protect taxpayers from an “overreaching” IRS, and that the IRS must go through the federal courts before force can be applied on anyone by the IRS to turn over personal and private property to the IRS.
In addition, the Court held, in effect, that the enforcement language of Section 7604 of the Internal Revenue Code is unconstitutional. In plain language, Section 7604 directs federal District Court judges to issue orders, merely upon a request by the IRS, for the immediate arrest and incarceration of a tax payer “for contempt” for not complying with the demands of an IRS administrative summons/request.
Prior to the 2nd Circuit’s recent landmark decision, the common practice of compliant federal judges was to issue such orders, often without an evidentiary hearing or allowing the taxpayer, in an Article III Federal Court, to challenge IRS claims before being subjected to formal enforcement proceedings (liens, levies, wage garnishments, searches, property seizures, etc.). The result has been widespread and egregious abuse of its lawful authority by the IRS, and substantial injury to millions of tax payers.
“Does the Court’s decision mean that companies do not have to turn over a worker’s paycheck to the IRS simply because the IRS demanded it, and banks do not have to turn over to the IRS the contents of someone’s bank account merely because the IRS requested it?,” asked Bob Schulz, the plaintiff in the case, and the Chairman of the We The People Foundation for Constitutional Education, Inc.
Schulz asked, “Does this mean that at least in the 2nd Circuit, no individual, no third party (such as an employer or a bank) need worry about being threatened and intimidated by the IRS for refusing to comply with an IRS demand for personal and private property? Isn’t the 2nd Circuit Court of Appeals stating, in clear language, that without an Article III Federal Court order, the IRS cannot apply force against a tax payer?
“We would agree, the use of force by the IRS against the person or property of any tax payer without an evidentiary hearing and formal order issued by an Article III Federal Court, is a direct violation of the Privacy and Due Process clauses of the United States Constitution. It appears that the IRS has now been put on notice – they are not above the law.”
In 2003, Schulz, was served several IRS summonses ordering him to produce his books and records. Schulz, as plaintiff, immediately challenged the IRS in District Court on constitutional grounds, claiming that the summonses were issued without any bona fide authority in law and with the sole, deliberate intent to harass and intimidate as a result of the Foundation's high-profile activism questioning the lawful authority of the IRS to impose a direct, un-apportioned tax on labor.
Despite the clear language of an IRS summons which states, “You are hereby summoned and required...” and the threatening language of the federal tax statute at 26 USC 7604 (which governs enforcement of IRS summons), the 2nd Circuit Court of Appeals has effectively ruled that the language of the Internal Revenue Code, and the administrative and enforcement practices of the IRS and DOJ, must comply with the strict Due Process requirements of the United States Constitution, and that the IRS will not be allowed to continue its practice of serving summonses upon average tax payers with the intent of intimidating them into compliance.
Naturally, this Appellate decision directly leads to further questions regarding IRS's other day-to-day administrative practices where substantial constitutional “injuries” are, in fact, inflicted routinely upon citizens and businesses in the form of liens, levies, salary garnishments, property seizures, etc. -- all of which are administrative, agency actions taken without any judicial review or court order.
The 2nd Circuit’s decision also carries profound implications regarding the Foundation’s historic Right-to-Petition Lawsuit now underway in the D.C. Federal District. (We The People, et al v. The United States, et al., Civ. No. 04-0211)
The IRS and DOJ, as defendants in the RTP lawsuit, have recently filed motions asserting that the government has “no obligation” to “listen to” or “respond to” the People’s First Amendment Petitions regarding the unlawful administrative and enforcement practices and the systemic abuse of power by the IRS and DOJ.
The 2nd Circuit’s recent decision could potentially have a powerful positive effect on the RTP lawsuit, and the People’s historic struggle to hold the IRS and our government leaders at every level, accountable to the law.
The Court’s decision in the Schulz case is an historic and courageous first step in restoring constitutional order to the administration and enforcement of our nation’s tax laws, and effectively puts the IRS and DOJ on notice that violations of tax payer’s Due Process rights will no longer be tolerated.
To read the Second Circuit’s decision, go to
To learn about the Right-to-Petition lawsuit and read the RTP legal research, go to:
The Foundation’s website is : www.GiveMeLiberty.org
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:
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.
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.
absent an effort to seek enforcement through a federal court, IRS summonses apply no force to taxpayers, and no consequence whatever can befall a taxpayer who refuses, ignores, or otherwise does not comply with an IRS summons until that summons is backed by a federal court order.So there you have it. The summons you get from the IRS does not have the force of law. Bob Schultz the defendant in this case is losing his point in court. He wishes to be protected from IRS enforcement efforts. The court will not grant him such protection based on the Government's own case. Bob is losing - he is happy. The IRS is winning - they are not happy campers at all. Go figure.
The IRS chastised the Court for “creating a false impression,” and “misapprehending” and “misunderstanding” and “misstating” and being “inaccurate,” regarding the “consequences that flow from the issuance of an IRS summons.”There are some folks who call themselves 861evidence.com who think the Constitution does not allow for a tax on incomes and that the 16th Amendment does not mean what most people think it means. Suprisingly a number of Supreme Court rulings on the subject agree with the 861 folks and not with the govrernment.
Schulz, however, was able to establish that the Court’s opinion is not only true to the related due process rulings of the U.S. Supreme Court, but is entirely consistent with the government’s written and oral arguments before the Court in this instant case.
In other words, the Court hung the IRS on its own petard.
The federal income tax statutes and regulations were designed to be confusing and deceptive. Due to the intentionally complex web woven by the architects of this deception, even after the "legalese" had been fully deciphered (which occurred only a few short years ago), it was still a challenge to make the truth widely accessible and understandable.Well do some research of your own and then decide. If the folks saying this stuff are right I'd expect a financial panic of huge proportions as the money flows get realigned. Now if we could only get the drug war straightened out as well I'd be one very happy camper.
Getting the public to pay attention to a message this unconventional is nearly impossible if it cannot be explained—and proven—in a short "sound bite." So even after proof and extensive supporting evidence were publicly available (for example, in Larken Rose’s "Taxable Income" report, which can be downloaded here), the truth was still in a form that took significant time and effort to digest and comprehend. Because of that, until now only a very small percentage of the population has had a glimpse at the truth.
At last the truth has been put into a form that is not only thoroughly documented and solidly reasoned, but is also readily understandable to the average citizen. Using the medium of video, concepts can be explained in a way that is far more understandable than is possible using the written word alone.