Appendix P: Miscellaneous Letters
MEMO
TO: Trusted Colleagues
FROM: Mitch Modeleski, Founder
Account for Better Citizenship
DATE: November 4, 1992
SUBJECT: Trusts, Foreign and Domestic
I have recently taken a keen interest in practical
applications of The Federal Zone to trust creation and
administration. In particular, I now believe I have enough
evidence to prove that the correct distinction between foreign
and domestic corporations is equally applicable to trusts. The
purpose of this memo is to share some of this evidence with you,
in order to challenge your thinking on this subject and possibly
to open new possibilities for trust creation and administration.
Black's Law Dictionary, Sixth Edition, is a good place to
begin. In this dictionary, we find the following important
definitions:
Foreign situs trust. A trust which owes its existence to
foreign law. It is treated for tax purposes as a
non-resident alien individual.
[emphasis added]
Foreign trust. A trust created and administered under
foreign law.
Black's Law Dictionary, Sixth Edition, defines "foreign state"
very clearly, as follows:
The several United States*** are considered "foreign" to
each other except as regards their relations as common
members of the Union.
[emphasis added]
I have added three asterisks ("***") after "United States" in
order to emphasize that the "United States" in this context
refers to the 50 States of the Union.
Now examine the definition of "foreign estate or trust" in
the definitions section of the Internal Revenue Code, as follows:
Foreign Estate or Trust. -- The terms "foreign estate" and
"foreign trust" mean an estate or trust, as the case may be,
the income of which, from sources without the United States
which is not effectively connected with the conduct of a
trade or business within the United States, is not
includible in gross income under subtitle A.
[26 U.S.C. 7701(a)(31)]
Do a bit of grammatical reconstruction, so as to eliminate the
references to "foreign estate", and you get the following:
The term "foreign trust" means a trust, the income of which
is not includible in gross income under subtitle A. The
income of a foreign trust is not includible in gross income
when it derives from sources which are without the "United
States" and which are not effectively connected with the
conduct of a trade or business within the "United States".
Recall the definition of "foreign situs trust" from Black's
supra. Now compare the IRC definition of "foreign trust" with
the IRC definition of "gross income" for nonresident alien
individuals. Notice the component criteria of gross income for a
nonresident alien individual, and their close similarity to the
same criteria for foreign trusts:
In the case of a nonresident alien individual, except where
the context clearly indicates otherwise, gross income
includes only --
(1) gross income which is derived from sources within the
United States and which is not effectively connected
with the conduct of a trade or business within the
United States, and
(2) gross income which is effectively connected with the
conduct of a trade or business within the United
States.
[26 U.S.C. 872(a), emphasis added]
It is crucial to remember that the term "United States", as used
in these sections of the IRC, means the federal zone, i.e., the
territory over which Congress has exclusive legislative
authority. Income which is derived from sources without the
"United States" is not included in gross income for nonresident
aliens. Likewise, income which is effectively connected with the
conduct of a trade or business without the "United States" is not
included in gross income for nonresident aliens. Therefore, I
have proven that the following rule has identical application to
nonresident aliens and foreign trusts:
Income is excludible from the computation of "gross income"
if it derives from sources which are without the "United
States" and which are not effectively connected with the
conduct of a trade or business within the "United States".
Now, let's dig a little deeper in order to determine if this
finding is supported by other sections of the IRC. Find the
heading "foreign trusts" in the Topical Index of the IRC as
published by Commerce Clearing House. There you will find
references to "situs" at 402(c) and 404(a)(4). Read these
sections carefully:
Taxability of Beneficiary of Certain Foreign Situs Trusts.
-- For purposes of subsections (a) and (b), a stock bonus,
pension, or profit-sharing trust which would qualify for
exemption from tax under section 501(a) except for the fact
that it is a trust created or organized outside the United
States shall be treated as if it were a trust exempt from
tax under section 501(a).
[26 U.S.C. 402(c), emphasis added]
Trusts Created or Organized Outside the United States. --
If a stock bonus, pension, or profit-sharing trust would
qualify for exemption under section 501(a) except for the
fact that it is a trust created or organized outside the
United States, contributions to such a trust by an employer
which is a resident, or corporation, or other entity of the
United States, shall be deductible under the preceding
paragraphs.
[26 U.S.C. 404(a)(4), emphasis added]
It is a well established principle of law that the 50 States are
"foreign" with respect to each other, just as the federal zone is
"foreign" with respect to each of them (In re Merriam's Estate,
36 NE 505 (1894)). The status of being foreign is the same as
"belonging to" or being "attached to" another state or another
jurisdiction. The proper legal distinction between the terms
"foreign" and "domestic" is best seen in Black's definitions of
foreign and domestic corporations, as follows:
Foreign corporation. A corporation doing business in one
state though chartered or incorporated in another state is a
foreign corporation as to the first state, and, as such, is
required to consent to certain conditions and restrictions
in order to do business in such first state.
Domestic corporation. When a corporation is organized and
chartered in a particular state, it is considered a domestic
corporation of that state.
[emphasis added]
In light of all the above, I now contend that untold numbers
of trusts have been created on the basis of a belief that they
are domestic trusts when, in fact, they are foreign trusts, as
the terms "domestic" and "foreign" are defined in the IRC and in
the law dictionaries. The Internal Revenue Code was written
under authority granted to Congress for the exercise of exclusive
legislative jurisdiction over the federal zone. Accordingly, the
50 States and their respective laws are actually foreign with
respect to the federal zone. The 10th Amendment makes it very
clear that powers not specifically delegated to the United States
by the Constitution, nor prohibited to the States by the
Constitution, are reserved to the States or to the people. A
common-law trust situated in California exercises rights which
are reserved to the people, because California is a common-law
State and because the U.S. Constitution specifically reserves
such rights to the people.
c/o P. O. Box 6189
San Rafael
California Republic
Postal Code 94903-0189/TDC
February 15, 1993
Dagny Sharon
Attorney-at-Law
c/o 17332 Irvine Boulevard, #230
Tustin, California Republic
Postal Code 92680/tdc
Dear Dagny:
I appreciated the opportunity to make your acquaintance at
the Libertarian Party Convention in Sunnyvale this past weekend.
I also regret that we didn't have a chance to spend more time
together. Your videotape is quite original and light-hearted; I
hope it brings you much success.
Had we found a way to spend more time talking with each
other, there is one important matter which I would definitely
have wanted you to consider more carefully. During our
conversation in the bar, while I was eating lunch, you implied
that one of your goals is to work towards a "democracy" for
America. Whether you intended it this way or not, such a goal
directly contradicts Article 4, Section 4 of the Constitution for
the United States of America, to wit:
Section 4. The United States shall guarantee to every State
in this Union a Republican Form of Government ....
What exactly is a "Republican Form" of government? It is
one in which the powers of sovereignty are vested in the people
and exercised by the people. Black's Law Dictionary, Sixth
Edition, makes this very clear:
Republican government. One in which the powers of
sovereignty are vested in the people and are exercised by
the people, either directly, or through representatives
chosen by the people, to whom those powers are specially
delegated. In re Duncan, 139 U.S. 449, 11 S.Ct. 573, 35
L.Ed. 219; Minor v. Happersett, 88 U.S. (21 Wall.) 162, 22
L.Ed. 627.
Both the California State Constitution and the U.S.
Constitution state that the latter shall be the supreme Law of
the land. In the U.S. Constitution, Article 6, Clause 2 states:
This Constitution, and the Laws of the United States which
shall be made in Pursuance thereof; and all Treaties made,
or which shall be made, under the Authority of the United
States, shall be the supreme Law of the Land; and the
Judges in every State shall be bound thereby, any Thing in
the Constitution or Laws of any State to the Contrary
notwithstanding.
At the turn of the century, the U.S. Supreme Court issued a
series of controversial cases now known as The Insular Cases.
These cases were predicated, in part, on the principle that the
Constitution for the United States as such does not extend beyond
the boundaries of the States which are united by and under it.
Accordingly, this principle set a crucial precedent whereby
Congress was free to establish a legislative democracy within the
federal zone, instead of a constitutional republic.
The federal zone is the area over which Congress exercises
exclusive legislative jurisdiction; it encompasses the District
of Columbia and such areas as Guam and the Virgin Islands. Even
more important is the fact that this exclusive legislative
jurisdiction extends to all persons who are subject to it,
regardless of where they may reside. As such, the status of
"citizen of the United States" (also known as "U.S. citizen")
causes one to be subject to the letter of all municipal statutes,
rules and regulations which Congress enacts under this exclusive
legislative authority. The constitutional definition of this
second class of citizens is alleged to be the so-called 14th
Amendment. However, two standing decisions of the Utah Supreme
Court have struck down the ratification of this amendment.
Coupled with all the evidence which that Court utilized to arrive
at these decisions, we have therein good cause to conclude that
the so-called 14th Amendment is null and void for fraud and
duress. My book The Federal Zone discusses the so-called 14th
Amendment as follows:
Not only did this so-called "amendment" fail to specify
which meaning of the term "United States" was being used;
like the 16th Amendment, it also failed to be ratified, this
time by 15 of the 37 States which existed in 1868. The
House Congressional Record for June 13, 1967, contains all
the documentation you need to prove that the so-called 14th
Amendment was never ratified into law (see page 15641 et
seq.). For example, it itemizes all States which voted
against the proposed amendment, and the precise dates when
their Legislatures did so. "I cannot believe that any
court, in full possession of its faculties, could honestly
hold that the amendment was properly approved and adopted."
State vs Phillips, 540 P.2d. 936, 941 (1975). The Utah
Supreme Court has detailed the shocking and sordid history
of the 14th Amendment's "adoption" in the case of Dyett vs
Turner, 439 P.2d 266, 272 (1968).
With this background knowledge firmly in hand, it is easy to
explain why the federal government would reiterate the theme of
"democracy" and "democratic institutions" over and over in its
media propaganda. It is now obvious that such programming has
been entirely successful; witness the large percentage of
"Libertarians" who make repeated reference to their political
goal of "democracy" for America. Perhaps without knowing it,
they are participating in the slow but steady demise of the
nation symbolized by the Stars and Stripes, "the Republic for
which it stands, one Nation, under God, indivisible, with liberty
and justice for all." The Insular Cases made it possible for
America to become divisible into a constitutional republic and a
legislative democracy. It is the strategy of "divide and
conquer", being applied once again with much success, this time
to our very own homeland.
I hope I have given you a few things to think about.
Sincerely yours,
/s/ Mitch Modeleski, Founder
Account for Better Citizenship
enclosures: People vs Boxer pleadings
"Citizen is a Term of Municipal Law"
copy: Jerry Collette
c/o P. O. Box 6189
San Rafael
California Republic
Postal Code 94903-0189/TDC
February 7, 1993
John Voss, Director
N.C.B.A.
c/o P.O. Box 2255
Longmont, Colorado
Postal Code 80502/tdc
Dear John:
Thanks so much for all the materials which you recently
sent, with a copy of your letter to Mitch Beals. Time
permitting, I do intend to do a thorough analysis of the written
opinions. I am very disappointed, but not surprised, that the
appellate decisions were "not for publication". I took all the
decisions to the law library yesterday, but simply ran out of
time. Enclosed are the preliminary results of that one afternoon
at the library. Nevertheless, a distinct pattern is emerging
already.
Item #1: 28 U.S.C. 297. Assignment of judges to courts of the
freely associated compact states
This statute was part of the comprehensive "Judicial
Improvements Act" submitted to Congress by Peter F. Rodino, Jr.,
Chairman, Committee on the Judiciary, House of Representatives.
It went into law on November 19, 1988 (P.L. 100-702, copy
attached). Notice that subsection (a) refers to "the freely
associated compact states" and to "the laws of the respective
compact state". In and of themselves, these references are
significant because I was unable to find any discussion of the
legislative history for this specific statute; the material
cited in U.S. Code Cong. and Adm. News skipped any mention of it.
The statute is also too recent for any case law to have
developed, and much too recent for the term "freely associated
compact states" to appear in Words and Phrases, C.J.S., or Am
Jur, although "compact" has several meanings in Black's Law
Dictionary.
What makes this term even more significant is the reference
to it that is found in subsection (b), to wit:
The Congress consents the acceptance and retention by any
judge so authorized of reimbursement from the countries
referred to in subsection (a) ....
[emphasis added]
I am going on memory now, but I do seem to recall a key exception
to the definition of "state" once found in Title 28. The
exception was to another provision of Title 28 which utilized the
term "State court". I think this exception has since been
removed by subsequent amendment, but the pre-amendment version
clearly implied that the meaning of "state" as found in the
standard definition was different from the meaning of "state" as
intended by the term "State court" (hence the need for the
"exception" clause). Therefore, the standard definition implied
a federal state, not a Union State.
In section 297 supra, we are faced with a choice between two
conflicting and mutually incompatible interpretations of the term
"freely associated compact states". If these states are Union
States, then the "compact" may well be the U.S. Constitution and
Congress has admitted openly that Union States are the "countries
referred to in subsection (a)". If these states are other
nations in the family of nations (e.g. China, Japan), then the
"countries" referred to in subsection (a) are these other
nations, and I can only speculate about the "compact" to which
Section 297 refers. Could it be the U.N. charter? If not, what
else could it be? some international treaty? I wonder if there
is a way to inquire of the House Judiciary Committee without
tipping our own hands and giving the Committee a reason to
obfuscate the real answer. Or, what about the Library of
Congress, or Congressional Research Service? I wouldn't put too
much faith into the CRS, in light of the hack job they continue
to do on "Frequently Asked Questions about Federal Income Taxes".
This little tidbit is highly significant when placed in the
larger context of all the research now assembled into the
electronic version of The Federal Zone, third edition (disk
enclosed). In particular, my interpretation of the distinction
between "foreign" and "domestic" is amply supported by the
definitions in Black's Sixth Edition, and especially by the
Supreme Court decision to uphold the New York Court's decision of
In re Merriam's Estate, 36 NE 505 (1894). Black's definitions of
foreign and domestic corporations, in my opinion, leave little
room for doubt about the correct distinction here. Black's
defines "foreign state" very clearly, as follows:
The several United States*** are considered "foreign" to
each other except as regards their relations as common
members of the Union. ... [O]ne state of the Union is
foreign to another.
[emphasis added]
Item #2: U.S. Code Service, Lawyers Edition, Interpretive Notes
In light of the pivotal importance of this distinction
between "foreign" and "domestic", it was revealing to discover
the nearly total absence of case law on this question in the
U.S.C.S. Lawyers Edition (where you would expect a plethora of
citations). In the main body of U.S.C.S. dealing with the IRC
definitions in 7701, there is only one reference to "foreign
estate" (a revenue ruling) and there are only two references to
"domestic building and loan association" (a revenue ruling and a
district court ruling). What is even more revealing is the case
of U.S. vs Bardina, the one and only citation to the IRC
definition of "United States", to wit:
Even though 26 USCS 7701(a)(9) defines "United States" as
including only United States and District of Columbia,
Puerto Rico is considered as being within United States for
purposes of 6-year statute of limitations on tax crimes;
....
[emphasis added]
Notice the blatant tautology (again). Notice also that this
interpretation flatly contradicts the actual IRC definition:
(9) United States. -- The term "United States" when used in
a geographical sense includes only the States and the
District of Columbia.
[26 U.S.C. 7701(a)(9), emphasis added]
The term "States" is very different from the term "United
States". And, of course, the corresponding definition of "State"
makes absolutely no mention of any Union States:
(10) State. -- The term "State" shall be construed to
include the District of Columbia, where such construction is
necessary to carry out provisions of this title.
[26 U.S.C. 7701(a)(10)]
Moving on to the Cumulative Supplement for the U.S.C.S.
Lawyers Edition, we find a similar pattern. Here, we find one
revenue ruling concerning a "foreign estate", and four citations
to "resident and nonresident alien", two of which are "TC Memos",
one of which is a "Private Letter Ruling", and one of which is a
"Revenue Ruling". These are not exactly sterling authorities!
One of these citations concerned a former official of a foreign
government that was overthrown while he was in the "United
States" under diplomatic passport. Another concerned a "US
citizen who obtained a US passport before moving to a foreign
country". Another concerned a spouse's election to be treated as
a resident alien under IRC 7701(b). The last citation is worth
investigating:
Status of trust as foreign trust turns upon whether trust is
comparable to nonresident alien individual; trust
established and administered under laws of foreign country
whose trustee is a foreign entity and whose corpus is
located in a foreign country is nonforeign trust even though
trust is grantor trust and its income is taxable to grantor
who is United States citizen. Rev Rul 87-61, 1987-2 CB 219.
[emphasis added]
It would be revealing to examine the details about the trust
in question, i.e., what was the "foreign country" under the laws
of which the trust was established and administered. If it was a
Union State, we have a bingo. Who or what was the "foreign
entity" trustee? Where exactly was the "corpus" located? Notice
the term "nonforeign"; I presume this means "domestic", based on
the IRC definition of "foreign" at 7701(a)(5) (i.e., not
domestic). Finally, notice that there is a "grantor" who is a
"United States citizen"; this status appears to be the only
mention of any nexus with the federal zone (if any).
Item #3: United States Code Annotated (U.S.C.A.)
Again, an identical pattern is found in the annotated
version of the United States Codes. Here, we do find an
interesting exception to the general rule for the federal zone,
i.e., a Guam corporation is "foreign" for federal income tax
purposes:
Guam is not a "territory" within meaning of this section
defining domestic corporation as one created or organized in
United States or under laws of United States or of any state
or territory, and Guam is considered a possession so that
its corporations are foreign for federal income tax
purposes. Sayre & Co. vs Riddell, C.A. Guam, 1968, 395 F.2d
407.
Notice how carefully they skirt the general issue of
exclusive legislative jurisdiction by ruling that Guam is a
"possession", and "possessions" were not mentioned in the IRC's
definition of "domestic" at that time ("or Territory" was deleted
in 1977). In other words, in 1968 the definition of "domestic"
mentioned "United States", and "any State or Territory". Since
Guam was found to be a "possession" and not the "United States",
not a "State" and not a "Territory", it was not domestic and
therefore foreign. This is a fascinating little intricacy in
this semantic jungle.
The only other citation of any interest is the 1944 case
which interpreted the meaning of "includes". I consider this
decision to be erroneous, for reasons which I explain in detail
in Chapter 12 of The Federal Zone, third edition. Specifically,
in formal English, a noun is either a person, a place, or a
thing. The IRC specifically defines a trust to be a "person" as
opposed to a "place" or a "thing" (see IRC 7701(a)(1)). The
clarification of "includes" at IRC 7701(c) specifically states
that this term shall not be deemed to exclude other things
otherwise within the meaning of term defined; notice that
"persons" and "places" are conspicuously absent from this
clarification of "includes". Therefore, a "trust" cannot be a
thing otherwise within the definition of "transferee" because a
trust is a person, by definition, and a "transferee" is not a
person because it is not mentioned in the IRC definition of
"person". I know this may sound strained, but the IRC definition
of "person" clearly embraces only an individual, a trust, estate,
partnership, association, company or corporation; moreover,
there is ample evidence that the IRC does obey strictly the rules
of formal English grammar.
That's it! Now, don't you get the feeling, as I do, that
they are trying their best to avoid these crucial distinctions
between "foreign" and "domestic"? In light of the clarity which
is found in Black's definitions of foreign and domestic
corporations, I would be hard pressed to demonstrate a clear and
consistent pattern among these sparse authorities, many of which
are not even courts. John, I am forced to conclude that some (if
not all) of these cases were contrived, and that a thorough set
of consistent Court authorities is very conspicuous for its
absence.
Item #4: McKinley vs United States of America, S.D. Ohio, 1992
Time permitting, I will try my best to analyze the
unpublished cases which you generously provided to me. For now,
I will take a brief look at McKinley because it will be
published, and because there is so little in this decision which
is relevant to The Federal Zone, i.e.:
The Court takes judicial notice that while Ohio is a
sovereign state, it is nevertheless part of the United
States and Ohio residents are also residents of the United
States and are subject to taxation. The Court finds the
plaintiffs to be residents of the United States and not non-
resident aliens.
[emphasis added]
I guess this Court failed to read Hooven or the
corresponding definitions of "United States" in Black's. More
importantly, this decision flatly contradicts the definition of
"United States" at IRC 7701(a)(9). Sure, Ohio is part of the
"United States" if "United States" means the several States of
the Union. However, the IRC says that "United States" (when used
in a geographical sense) includes only the District of Columbia
and the States, and "State" shall be construed to include the
District of Columbia (and nothing else)! Since singular and
plural are interchangeable (per Title 1), since "include" is not
found in the clarification of "includes" and "including" at
7701(c), and since 7701(c) mentions only "things" and not
"persons" or "places", we are entirely justified in arguing that
the term "United States" at 7701(a)(9) omits any mention of the
Union States because they were intended to be omitted. The rules
of statutory construction support this inference, as do the
changes to 7701(a)(9) & (10) that resulted from the Alaska and
Hawaii Omnibus Acts: Alaska and Hawaii were removed from the IRC
definition of "State" when they joined the Union (of freely
associated compact states). So, as pro bono judge of the
Sovereign Electrical Circuit of Justice, I hereby reverse the
holding in McKinley vs United States of America and remand with
instructions to take explicit judicial notice of the legislative
history of IRC 7701(a)(9), in addition to the well established
rules of statutory construction (see Sutherland, for example).
Item #5: Notes on Decisions re: 1:6:2 and Null and Void Lloyd
These cases are either favorable or neutral. Lloyd, you are
a sitting duck. Notice also the careful IRC distinction between
"Secretary of the Treasury" and "Secretary" at 7701(a)(11). At
first glance, this is bad news for our 7401 challenge, but closer
examination reveals the following:
(A) In General. -- The term "or his delegate" --
(i) when used with reference to the Secretary of the
Treasury, means any officer, employee, or agency of the
Treasury Department duly authorized by the Secretary of
the Treasury directly, or indirectly by one or more
redelegations of authority, to perform the function
mentioned or described in the context;
Even though IRC 7401 utilizes the term "Secretary", which
means the Secretary of the Treasury or his delegate, the term "or
his delegate" means an officer, employee or agency duly
authorized by the Secretary of the Treasury either directly, or
indirectly by one or more redelegations of authority. In other
words, Lloyd Bentsen must be in the loop, either directly, or
indirectly by one or more redelegations of authority. So, it
looks as if Null and Void Lloyd remains in a heap'a trouble; his
colorable acts will spread through the Treasury Department like a
computer virus, infecting everything they touch. We should get
an expert on delegation of authority to see what, if any,
redelegations originated from Nicholas Brady and whether they
remain valid and in force after Bentsen's reign began.
Enough for now. I know you have nothing else to do but read
these technicalities. The devil is always in the details.
Sincerely yours,
/s/ Mitch Modeleski, Founder
Account for Better Citizenship
enclosures
copy: Mitchell Beals
(great first name)
c/o P. O. Box 6189
San Rafael
California Republic
Postal Code 94903-0189/TDC
February 8, 1993
John Voss, Director
N.C.B.A.
c/o P.O. Box 2255
Longmont, Colorado
Postal Code 80502/tdc
Dear John:
In my letter to you of February 7, my memory failed me when
I referred to Title 28; the correct reference was Title 8 (I got
one number right). I tracked it down today for you, because I am
convinced that one of the "unpublished" cases which you recently
sent to me is completely wrong for ruling that Union States are
not "foreign countries" for purposes of the IRC. Enclosed is
stunning proof of my position from American Jurisprudence. I
picked up the trail in Ballentine's Law Dictionary, Third
Edition, where it defines "sovereign state" as follows:
In the United States, each state constitutes a discrete and
independent sovereignty, and consequently the laws of one
state do not operate of their own force in any other state.
16 AmJur J2d, "Conflict of Laws", Section 4.
[Ballentine's Law Dictionary, Third Edition]
I had to go hunting for the corresponding section in Am Jur,
because the reference to Section 4 is a typographical error. I
found what I was looking for at Section 2 instead. The key is to
understand that the IRC is a "municipal law" as far as income
taxation is concerned (see Conclusions in The Federal Zone):
"... [T]he several states ... are otherwise, at least so far
as private international law is concerned, in the same
relation as foreign countries13. The great majority of
questions of private international law are therefore subject
to the same rules when they arise between two states of the
Union as when they arise between two foreign countries, and
[continued ...]
____________________
Footnotes:
13. Hanley vs Donoghue, 116 U.S. 1, 29 L.Ed 535, 6 S.Ct 242
Stewart vs Thomson, 97 Ky 575
Emery vs Berry, 28 NH 473
in the ensuing pages the words "state," "nation," and
"country" are used synonymously and interchangeably, there
being no intention to distinguish between the several states
of the Union and foreign countries by the use of varying
terminology.
[16 Am Jur 2d, "Conflict of Laws", Section 2]
Notice, in particular, the comment in footnote 11:
In the sense of public international law, the several states
of the Union are neither foreign to the United States nor
are they foreign to each other, but such is not the case in
the field of private international law. Robinson vs Norato,
71 RI 256, 43 A2d 467, 162 ALR 362.
Not to be outdone, Black's Sixth Edition chimed in with the
following similar message:
The term "foreign state," as used in a statement of the rule
that the laws of foreign nations should be proved in a
certain manner, should be construed to mean all nations and
states other than that in which the action is brought; and
hence one state of the Union is foreign to another, in the
sense of that rule.
[Black's Law Dictionary, Sixth Edition]
Further stunning proof of The Federal Zone thesis is found
in the Immigration and Nationality Act (see attached), where
Congress slipped by including a key exception in its statutory
definition of "State" at 8 USC 1101(a)(36). Prior to an
amendment in 1987, this definition included the language "(except
as used in section 310(a) of title III [8 USCS Section
1421(a)])". At that time, Section 1421(a) of Title 8 referred to
courts "in any State" and "all courts of record in any State". I
failed to pull the current text of 1421(a), but the current
1101(a)(36) removed the exception clause! I would bet that
1421(a) now has a special definition for the term "State",
because 1421(a) must be talking about courts of the Union States.
For corroboration, I have enclosed a page from the California
State Constitution (1879), wherein California Superior Courts are
given clear original jurisdiction to naturalize and "to issue
papers therefor".
Sincerely yours,
/s/ Mitch Modeleski, Founder
Account for Better Citizenship
enclosures: photocopies of evidence
c/o P. O. Box 6189
San Rafael
California Republic
Postal Code 94903-0189/TDC
February 1, 1993
Rich Pralle, CFS
R D P & Associates
100 Brush Creek Road, #105
Santa Rosa, California Republic
Postal Code 95404/tdc
Dear Rich:
I may have misunderstood something which you said about the
Internal Revenue Code. Am I correct in remembering you say that
IRC 6672 concerned "withholding agents"? When I returned home, I
looked up this section:
Section 6672. Failure to Collect and Pay Over Tax,
or Attempt to Evade or Defeat Tax
(a) General Rule. -- Any person required to collect,
truthfully account for, and pay over any tax imposed by this
title who willfully fails to collect such tax, or truthfully
account for and pay over such tax, or willfully attempts in
any manner to evade or defeat any such tax or the payment
thereof, shall, in addition to other penalties provided by
law, be liable to a penalty equal to the total amount of the
tax evaded, or not collected, or not accounted for and paid
over. No penalty shall be imposed under section 6653 or
part II of subchapter A of chapter 68 for any offense to
which this section is applicable.
[26 U.S.C. 6672, emphasis added]
As you can see, there is no explicit mention of "withholding
agents" in IRC 6672. The section to which I was referring in our
conversation was IRC 7701(a)(16):
(16) Withholding Agent. -- The term "withholding agent"
means any person required to deduct and withhold any tax
under the provisions of section 1441, 1442, 1443, or 1461.
[26 U.S.C. 7701(a)(16), emphasis added]
Sections 1441, 1442 and 1443 are too long to reproduce here.
Their headings provide some indication of their contents:
Section 1441. Withholding of Tax on Nonresident Aliens
Section 1442. Withholding of Tax on Foreign Corporations
Section 1443. Foreign Tax-Exempt Organizations
The following is the entire text of IRC 1461. This section
is important because it specifically makes "withholding agents"
liable for the taxes they deduct and withhold:
Section 1461. Liability for Withheld Tax
Every person required to deduct and withhold any tax under
this chapter is hereby made liable for such tax and is
hereby indemnified against the claims and demands of any
person for the amount of any payments made in accordance
with the provisions of this chapter.
[26 U.S.C. 1461, emphasis added]
In other words, the persons from whom they withhold are not
liable for the taxes which they withhold. That is to say,
nonresident aliens are not liable for the taxes that are withheld
from the dividends they receive from stock issued by domestic
corporations (see Treasury Decision 2313).
So, we can link 1461 and 6672 because withholding agents are
liable for the taxes they deduct and withhold, i.e., they are
required to collect and pay over the tax imposed by 1461
(combining the language of 6672 and 1461); if they don't pay the
taxes they deduct and withhold, then they would be liable to the
penalty defined in 6672.
Our research indicates that "withholding agents" are the
only ones who are specifically made liable by the IRC for the
payment of income taxes. If you can find another IRC section
which specifically makes anyone else liable for the payment of
income taxes, I would appreciate getting the exact citation from
you.
On another subject, I have several serious problems with the
T.A.G. flyer entitled "Are You Really Liable?" One excerpt from
this flyer reads:
Section 7701(a)(1) defines the term person as:
"The term 'person' shall be construed to mean and
include an individual, a trust, estate, partnership,
association, company or corporation."
Well now, that certainly seems easy enough and section
7701(a)(1) makes no mention of the term "U.S. Individual".
Now, look at section 7701(a)(30):
"The term 'United States person' means -
(A) a citizen or resident of the United States,
(B) a domestic partnership,
(C) a domestic corporation, and
(D) any estate or trust ...."
There is no mention of the term "U.S. Citizen";
"Individual", or "U.S. Individual".
...
Assuming the term "U.S." means United States, then the 1040
would be for a "United States Individual", the 1120 for a
"United States Corporation".
In my opinion, this sequence of logic is misleading. The
flyer assumes that the term "U.S. means United States". Fair
enough. If it doesn't mean "United States", the flyer does not
tell us what else it might mean. So, for purposes of this
analysis, the term "U.S." means "United States".
However, the flyer also states that there is no mention of
the term "U.S. Citizen". This is technically correct, because
the IRC never utilizes a capital "C" when it refers to "citizens
of the United States" or "United States citizens" (except when a
capital "C" is required in the first word of a sentence or
heading). This is misleading, because the same flyer quotes
section 7701(a)(30) which does mention "citizen or resident of
the United States", i.e., "citizen of the United States" or
"resident of the United States".
The flyer also states that there is no mention of the term
"Individual" or "U.S. Individual". Again, this is technically
correct, because the IRC utilizes the lower-case "i" when it
refers to individuals. But, for similar reasons, the flyer is
misleading because "citizens of the United States" and "residents
of the United States" are among the "individuals" to whom the IRC
refers. This is so because "person" means and includes an
"individual"; it also means and includes a trust, estate,
partnership, association, company or corporation. Therefore, an
"individual" is a person in the same way that a horse is an
animal; moreover, using permissible substitution, the term
"United States person" means and includes a "U.S. individual".
The "U.S. individuals" to whom the IRC refers are the "citizens
of the United States" and "residents of the United States". This
can be confirmed at 26 CFR 1.1-1 et seq.
For similar reasons, I also consider the following excerpt
of the flyer to be misleading and erroneous:
At section 6011, when required by regulations prescribed by
the Secretary any person made liable for any tax imposed by
this title ... shall make a return. Did the Secretary
prescribe by regulations that a citizen of the United States
was liable for filing? No, of course not.
[emphasis added]
Here's the corresponding section of the CFR:
1.6011-1 General requirement of return, statement, or list.
(a) General rule. Every person subject to any tax, or
required to collect any tax, under Subtitle A of the Code,
shall make such returns or statements as are required by the
regulations in this chapter. The return or statement shall
include therein the information required by the applicable
regulations or forms.
Another important regulation is the following:
1.6012-1 Individuals required to make returns of income.
(a) Individual citizen or resident --
(1) In general. Except as provided in subparagraph
(2) of this paragraph, an income tax return must be
filed by every individual ... for each taxable year
beginning after December 31, 1972, during which he
received $750 or more of gross income, if such
individual is:
(i) A citizen of the United States, whether residing
at home or abroad,
(ii) A resident of the United States even though not a
citizen thereof ....
So, I think the T.A.G. flyer is entirely wrong when it
states that "of course" the Secretary has "not" prescribed by
regulations that a citizen of the United States was liable for
filing. I have just proven that the Secretary has prescribed
regulations which require a "citizen of the United States" to
make an income tax return, provided that his "gross income"
exceeds the specified dollar threshold. The computation of gross
income for nonresident aliens is defined at IRC 872(a); in most
situations, that computation results in a gross income of zero.
Frank Brushaber's "gross income" was not zero because he received
a dividend from a "U.S. corporation", namely, the Union Pacific
Railroad Company. It was a U.S. corporation because it was
incorporated by Congress.
Finally, I realize that the California voter registration
form does say "For U.S. Citizens Only" in red letters across the
top of the form. However, the affidavit on that registration
form is the statement that matters:
READ THIS STATEMENT AND WARNING PRIOR TO SIGNING
I am a citizen of the United States and will be at least 18
years of age at the time of the next election. I am not
imprisoned or on parole for the conviction of a felony. I
certify under penalty of perjury under the laws of the State
of California that the information on this affidavit is true
and correct.
WARNING
Perjury is punishable by imprisonment in state prison for
two, three or four years. Section 126 Penal Code
[emphasis in original]
I contend that the "citizen of the United States" to which
this form refers is the same "citizen of the United States" to
which the Internal Revenue Code refers, to which the Code of
Federal Regulations refers, and to which the so-called Fourteenth
Amendment refers. If you are interested, we have now located two
Utah Supreme Court cases which struck down the so-called
Fourteenth Amendment. The language of Section 1 of that
amendment is almost identical to the definition of "citizen" that
is found in 26 CFR 1.1-1(c). Given that the so-called Fourteenth
Amendment was never properly approved and adopted, the earliest
definition of "citizen of the United States" that we have been
able to find in law is found in the 1866 Civil Rights Act.
Thanks for your consideration.
Sincerely yours,
/s/ Mitch Modeleski, Founder
Account for Better Citizenship
copy: Rleen Joy
Don Fletcher
c/o P. O. Box 6189
San Rafael, California
Postal Zone 94903-0189/TDC
December 22, 1992
Andrew Melechinsky
Constitutional Revival
P. O. Box 3182
Enfield, Connecticut
Postal Zone 06083/tdc
Dear Andy:
Thanks very much for your unsigned note, postmarked December
16, 1992. In response to my previous question concerning 1:8:17
in the U.S. Constitution, you wrote the following:
Answer. It is self evident that no state or any other
governing body is authorized to make laws for the District
of Columbia or other enclaves which belong to the United
States. It should be obvious that this provision of the
Constitution was designed to make Congress the equivalent to
the Enfield Town Council or the Podunk Board of Selectmen
for the purpose of governing those areas.
[my emphasis]
I couldn't agree more with your answer. In fact, it is
uncanny how close our thinking is on this question. In my
research and writings, I often refer to Congress as "City Hall"
for the federal zone. In other words, if Congress wants to pass
a "dog leash" law for D.C., it is authorized to do so by 1:8:17
in the Constitution. This dog leash law would apply only inside
D.C., and nowhere else, right?
Now, let's use a similar example, only this time let's
incorporate a tax in our example. Let's say that Congress wants
to tax the sale of dog leashes inside D.C. This is an excise
tax, right? Congress is empowered to levy excise taxes, right?
But, here's the rub: must the tax rate be uniform throughout the
50 States?
Wait a minute, you ask, the question of uniformity only
applies to federal excises levied inside the 50 States. This tax
on the sale of dog leashes only applies inside the District of
Columbia. The 50 States are irrelevant to the application of
this tax and, therefore, the issue of uniformity is also
irrelevant, is it not? Such an excise tax need not be uniform
throughout the 50 States, because it has no application anywhere
inside the 50 States. It is a "municipal" tax. No State or any
other governing body is authorized to levy such a tax inside
D.C., just as Congress is not authorized to levy such a tax
outside D.C. and inside the 50 States.
The key court decision on this question is Downes vs
Bidwell, which is one of The Insular Cases, as they are called.
You might also read the several articles which appeared in the
Harvard Law Review on these cases. I have enclosed a memo which
I wrote some time ago on exclusive authority as applied to direct
taxes.
You also wrote that "it takes a wild imagination to
visualize the District of Columbia as a second 'United States'.
Even if it was, it would still be subject to the constraints of
the Bill of Rights." Let's postpone correspondence on the Bill
of Rights until you and I can clarify our respective positions on
federal taxing authority, OK? In this context, the key question
is this: are federal municipal taxes subject to the uniformity
and apportionment rules found in the Constitution? My answer is
this: no, because those restrictions only apply to federal laws
which are levied inside the 50 States. One of the Supreme
Court's best statements on this dual or heterogeneous attribute
of federal laws is the following excerpt from the Hooven case:
... [T]he United States** may acquire territory by conquest
or by treaty, and may govern it through the exercise of the
power of Congress conferred by Section 3 of Article IV of
the Constitution ....
In exercising this power, Congress is not subject to the
same constitutional limitations, as when it is legislating
for the United States***. ... And in general the guaranties
[sic] of the Constitution, save as they are limitations upon
the exercise of executive and legislative power when exerted
for or over our insular possessions, extend to them only as
Congress, in the exercise of its legislative power over
territory belonging to the United States**, has made those
guaranties [sic] applicable.
[Hooven & Allison Co. vs Evatt, 324 U.S. 652 (1945)]
[emphasis added]
Now, let's imagine, just for the sake of argument, that the
income tax provisions in the Internal Revenue Code are municipal
statutes, which are "not subject to the same constitutional
limitations" which apply when Congress "is legislating for the
[50] United States" of America. You will notice that the IRC's
petroleum taxes are uniform throughout the 50 States, and in
those provisions the term "State" is defined to include the 50
States. However, when it comes to the graduated income tax, the
term "State" is defined to include only the District of Columbia
(and none of the 50 States). Isn't this odd? Not really, when
you realize that the graduated income tax is, indeed, a municipal
statute which is unaffected by the uniformity and apportionment
restrictions in the Constitution, for the reasons discussed
above.
Last but not least, we have in America a government of the
"United States" and a government of each of the several States;
each has citizens of its own. Therefore, we have State Citizens,
and we have federal citizens (also known as "citizens of the
United States"). See the Cruikshank case for the seminal
authority on this dual citizenship. Now, the exercise of State
Citizenship is an unalienable right, endowed by the Creator (see
the Declaration of Independence). But, and this is important,
even crucial to the issue of taxation, federal citizenship is a
statutory privilege, the exercise of which can be taxed with an
excise tax without uniformity throughout the 50 States. The term
"citizen of the United States" was first expressed in law by the
Civil Rights Act of 1866. Some people say that it was put into
the Constitution by the so-called 14th Amendment, but we have now
located two (2) Utah Supreme Court cases which held that the
Amendment was not properly ratified. Therefore, the status of
"United States citizen" is at best the creation of Congressional
legislation -- endowed by Congress and NOT by the Creator.
So, think of federal citizens as citizens of the federal
zone. The taxation of their incomes is a municipal excise tax,
just like the tax on dog leashes discussed above. The "income"
is not the subject of the tax; the subject of the tax is the
exercise of the statutory privilege known as federal citizenship
(also known as "U.S. citizenship"). The "income" is simply the
measure of the tax.
I hope I have made some sense out of the jungle of legal
jargon and double-talk which gets in the way of clear thinking on
this subject. Admittedly, the whole situation is made immensely
complicated by the deliberate vagueness and confusion which were
incorporated into Title 26 and its regulations in the CFR. But,
I am confident we have now proven that the graduated income tax
provisions of Title 26 are municipal statutes which apply only to
the federal zone (e.g. federal employees) and to the citizens of
that zone, no matter where they might "reside". In fact, to be a
"resident" of California, strictly speaking, means that one is a
federal citizen who resides outside the federal zone and inside
California. Technically speaking, a State Citizen does not
"reside" in the State of his domicile.
I would appreciate getting your written comments on all the
above. In the meantime, thanks for your continuing work to
benefit the Freedom Movement in America today.
Sincerely yours,
/s/ Mitch Modeleski, Founder
Account for Better Citizenship
c/o P. O. Box 6189
San Rafael, California
Postal Zone 94903-0189/TDC
November 4, 1992
Karl Loren, Author
1831 North Bel Aire Drive
Burbank, California Republic
Postal Zone 91504/tdc
Dear Karl:
Thank you for the complimentary copy of Verity, Volume 2,
Number 10, dated November 1, 1992. Although I do not care to get
embroiled in the trust controversy described in this issue of
Verity, your newsletter does contain the following paragraphs
which, in my humble opinion, contain serious errors. Numbers in
[brackets] are my paragraph numbers, for ease of reference:
[1] We in the United States tax U.S. Citizens on their
income whether they live in the U.S. or in a foreign
country. We tax those U.S. Citizens, regardless of
residence, on their income whether they received it from
within the United States or from outside the United States.
[2] We even go so far as to tax aliens who reside within
the United States -- on their income from either within the
U.S. or outside the U.S.
[3] A U.S. Supreme Court case [Cook v. Tait, 265 U.S. 47
(1924)] requires the U.S. Citizen abroad to pay taxes in the
U.S.
[4] The Supreme court ruled in this case that the United
States has the power to tax its citizens on their worldwide
income solely by reason of their citizenship.
[5] "No other major country in the world taxes its
nonresident citizens on their foreign-source incomes at all"
according to Marshall J. Langer, Professor of Law, Miami
University, author of Practical International Tax Planning.
There is even a tax law that makes it illegal to change your
U.S. citizenship for the purpose of avoiding taxes! [citing
IRC Section 877(a)]
[6] We even go so far as to tax nonresident aliens who
reside outside the U.S., but who receive income FROM within
the United States. [citing IRC Sections 871(a) and 871(b)]
[7] But, the IRS certainly does not try to collect income
taxes from a nonresident alien who receives his ONLY income
from sources without the United States.
[8] It would be ludicrous to even pause to consider the
possibility of the United States claiming tax jurisdiction
over a nonresident alien earning income from a non-US
Source!
I am somewhat chagrinned to be writing this letter in the
first place, because you purchased The Federal Zone some months
ago, and your written communications to me seemed to imply that
you understood, and agreed with, the book. The above quoted
paragraphs from Verity, dated November 1, 1992, now leave me
wondering just how much of The Federal Zone you actually read and
understood. Let me proceed with an analysis of your statements,
paragraph-by-paragraph:
[1] The Internal Revenue Code (26 USC) and the regulations
which promulgate that Code (26 CFR) do not impose federal
income taxes on "U.S. Citizens". The regulations at 26 CFR
1.1-1(b) and (c) state that income tax liability is imposed
on the worldwide income of "citizens of the United States"
and "residents of the United States". In English, there is
a world of difference between a proper noun and a common
noun. Proper nouns are capitalized; common nouns are not.
If you think this distinction is irrelevant or merely
academic, then it is now incumbent upon you to carry the
burden of finding and demonstrating one single reference to
"U.S. Citizens" in the IRC and its regulations. References
to "Citizen" or "Citizens" in the first word of a sentence,
or in paragraph headings, do not count, because formal
English requires that terms in such grammatical positions be
capitalized.
Moreover, the Hooven case quoted and discussed in The
Federal Zone proves that the term "United States" has at
least three different meanings in law. This fact is
supported by the same meanings which are found in Black's
Law Dictionary, Sixth Edition. The late John Knox once
confided to me that the Solicitor General in De Lima vs
Bidwell actually argued that the term "United States" has at
least five (5) different meanings in the Constitution. I am
also told that James Madison anticipated the ambiguity found
in the term "United States", and documented this ambiguity
in his notes on the Constitutional Convention. These notes
were reportedly published in 1840, but to date I have been
unsuccessful in locating a copy of these notes. Your
paragraph [1] is ambiguous for failing to define precisely
which of these several meanings you are utilizing. This is
crucial because you make the all-important distinction
between income derived from sources within the "United
States" and income derived from sources without the "United
States". A precise definition of "United States" is
therefore pivotal to any and all discussions of federal tax
law.
Moreover, the 50 States are considered to be "foreign
countries" with respect to the "United States", for purposes
of federal taxation, because the regulations clearly define
the "United States" to be the territory over which the
federal government has exclusive rights. This is the very
same term that is found in 1:8:17 in the Constitution and
for this reason "exclusive" is also a pivotal term. The 50
States of the Union retain all rights not reserved by the
people and not explicitly enumerated for the federal
government by the Constitution (see the 9th and 10th
Amendments for proof).
[2] Again, this paragraph fails to provide a precise
definition of "United States". Moreover, it makes reference
to "aliens" who "reside within the United States". If you
study IRC 7701(b)(1)(B) very carefully, you will discover
that an "alien" is an individual who is not a "citizen of
the United States" and a "nonresident" is an individual who
is not a "resident of the United States (within the meaning
of subparagraph (A)". IRC 7701(b)(1)(A) is important
because it defines the three tests which distinguish
"resident aliens" from "nonresident aliens". These three
tests are the only ways in which an "alien" can be a
"resident alien". Therefore, these three tests define
"residence" for purposes of federal income taxation. See
also IRS Publication 519: "For tax purposes, an alien is an
individual who is not a U.S. citizen." Therefore, a State
Citizen who is not also a federal citizen is an alien for
federal tax purposes. Your paragraph [2] is vague and
therefore void.
[3] Again, you make reference to a "U.S. Citizen". See
discussion of paragraph [1] above.
[4] Now you make reference to the "United States", "its
citizens" and "their citizenship". Oddly, this paragraph is
grammatically and legally correct, because the Congress does
have exclusive legislative jurisdiction over its own federal
citizens, no matter where on planet Earth they may "reside".
The enclosed materials go into great depth to explain the
distinction between federal citizens and State Citizens, so
I won't belabor this distinction here. It is important to
realize that the distinction between these two classes of
citizenship is as important and fundamental as the
distinction between the State and federal governments. See
the Cruikshank case, K. Tashiro vs Jordan, and Ex parte
Knowles for proof. The Slaughter House Cases are the
seminal decisions in this area. If you fail to educate
yourself about this important legal history, you will
continue to propagate the kind of confusion which is evident
in Verity for November 1, 1992.
[5] Here again you are back on track, but it is not clear
whether you are back on track knowingly and intentionally,
or not. Congress has authority to tax its own federal
citizens, wherever they reside and wherever the source of
their income. Therefore, "resident citizens" and
"nonresident citizens" are treated the same in federal tax
law because the worldwide income of both groups is taxed.
Your paragraph [5] does make a grievous error, however, by
stating that the tax law makes it illegal to change your
"U.S. citizenship" for the purpose of avoiding taxes. Your
paragraph [5] then cites IRC 877(a). This is not what
Section 877(a) says, nor is expatriation made illegal by any
subparagraphs of Section 877. Read them! IRC 877 merely
discusses the rules which shall govern federal tax liability
when expatriation occurs. It does not outlaw expatriation!
[6] This paragraph is also correct on its face, but it too
suffers for lacking a precise definition of "United States"
and "U.S." Sections 871(a) and 871(b) are governed by the
statutory definition of "United States" that is found at IRC
7701(a)(9). This definition, in turn, is governed by the
statutory definition of "State" that is found at IRC
7701(a)(10). IT IS VERY IMPORTANT TO TAKE CAREFUL NOTE OF
THE EXACT WORDING OF 7701(a)(10):
The term "State" shall be construed to include the
District of Columbia, where such construction is
necessary to carry out the provisions of this title.
[emphasis added]
Now, it is true that the terms "includes" and
"including" are qualified by IRC 7701(c), but notice that
"include" is not qualified by IRC 7701(c). This may seem
like nit-picking, but the published rules of statutory
construction do apply here. Specifically, the rule of
inclusio unius est exclusio alterius (the inclusion of one
is the exclusion of others) states that an irrefutable
inference must be drawn that what is omitted or excluded
from a statutory definition was intended to be omitted or
excluded. The term "include" is excluded from 7701(c). The
term "California" is excluded from 7701(a)(10). Therefore,
all by itself, this rule of statutory construction allows us
to infer that "include" is not expansive and "California" is
excluded from the statutory definition of "State" found at
7701(a)(10).
There are other rules of statutory construction which
produce the same result, e.g., ejusdem generis (the federal
zone and the 50 States are not in the same general class of
entities because the 50 States are members of the Union,
while the areas within the federal zone are not). Now the
burden is upon you to prove otherwise. Don't forget that
any doubt must be resolved in favor of those upon whom the
tax is sought to be laid; the Supreme Court has said so,
more than once!
[7] The IRS most certainly does try to collect income taxes
from nonresident aliens who receive their ONLY income from
sources without the "United States". For purposes of income
taxation, the "United States" as defined in the IRC is no
larger than the territory over which Congress exercises
exclusive legislative authority, i.e., the federal zone. If
you study Treasury Decision 2313 carefully, you will come to
discover that Frank Brushaber was classified by the Treasury
Department as a nonresident alien. His court documents
prove that he claimed to be a State Citizen who lived and
worked in New York City. Therefore, State Citizens who are
not also federal citizens are "nonresident aliens" as far as
federal income taxes are concerned. How many millions of
Americans have been victimized by the deliberate and
criminal confusion which has been fostered by vague and
ambiguous terms in the IRC? I say at least 100 million,
counting all those who have paid income taxes and passed
away since 1913.
[8] It certainly is ludicrous for the "United States" to
claim tax jurisdiction over nonresident aliens who earn
income from "non-US" sources, but IT makes this claim all
the time. By IT I mean the authority granted to Congress by
1:8:17 and 4:3:2 in the U.S. Constitution, which authority
MUST be lawfully delegated to the Internal Revenue Service
(a private mercantile organization which collects interest
payments for the Federal Reserve banks).
The evidence is overwhelming that Congress simply does
not have exclusive legislative authority over the 50 States.
The study entitled "Jurisdiction Over Federal Areas Within
the States" makes this case over and over and over. At last
count, this study cites more than 700 federal and state
court cases which all found the same thing: Congress does
not enjoy exclusive legislative jurisdiction inside the
boundaries of the 50 States until and unless a State
Legislature cedes its sovereign jurisdiction to Congress,
and does so for a specific parcel of land (called an
"enclave").
At this point in the game, Karl, you can no longer
claim ignorance of this massive body of case law. Congress
cannot impose a direct tax on State Citizens unless that tax
is duly apportioned. The earnings of State Citizens are
exempt from taxation by the fundamental law. The
apportionment rule is found in the fundamental law, but
there are no apportionment provisions anywhere in the
Internal Revenue Code. The burden is now upon you to prove
otherwise!
A man with your intelligence should not hesitate to admit
that the ambiguities in Title 26 had to be intentional. We know
that the Treasury Department can be clear when it needs to be
clear. The most important ambiguity is found in the several
meanings of "State" and "United States" in the statute and its
regulations. There is an obvious reason why the definitions are
not crystal clear and completely unambiguous, and that reason is
MONEY. A crystal clear and completely unambiguous definition of
federal income tax jurisdiction would limit the definition of
"United States" to the federal zone and no more. There is a
massive amount of case law which proves that Congress does not
exercise exclusive legislative jurisdiction upon any of the
Citizens or the territory of the 50 States.
In support of all my observations above, I have enclosed for
your information the drafts of several chapters from the third
edition of The Federal Zone, which has not yet been published. I
strongly encourage you to devour this material, and also the
court cases and other publications cited therein. If you persist
in claiming that there is nothing to be made of difference
between "Citizens" and "citizens", particularly in the face of
all the evidence which I am now sharing with you, then I will be
forced to conclude that you and I going in opposite directions.
At the very least, I will be forced to conclude that your
understanding of federal tax law does not warrant the high costs
you are charging for your trust advisory services.
Sincerely yours,
/s/ Mitch Modeleski, Founder
Account for Better Citizenship
enclosures
c/o USPS P. O. Box 6189
San Rafael, California
Postal Code 94903-0189/TDC
October 1, 1992
Hi John,
I've continued to think about De Ganay vs Lederer, 250 U.S.
376. Here's a decision table to help us organize our thoughts.
It is not necessarily rigorous or exhaustive, but provides a
useful framework. For what it's worth, this table distinguishes
stockholder dividends from corporate profits, as follows:
Case 1:
Both stockholder and corporation are overseas.
Plaintiff Defendant 16th Result
overseas overseas yes Congress cannot tax at all because
NRA corp. both are beyond its jurisdiction.
overseas overseas no Congress cannot tax at all because
NRA corp. both are beyond its jurisdiction.
The decisive factor here is territorial jurisdiction. The 16th
Amendment is irrelevant.
Case 2:
Corporation is chartered by a Union State (a/k/a "State corp.").
The tax on stockholder dividends is a "direct" tax, per Pollock.
Plaintiff Defendant 16th Result
overseas State yes Congress can tax without apportionment
NRA corp. because stockholder is not protected by
the Constitution.
overseas State no Congress can tax without apportionment,
NRA corp. because stockholder is not protected by
the Constitution.
State State yes Congress can tax without apportionment
Citizen corp. if both are inside a Union State.
State State no Congress cannot tax without apportion,
Citizen corp. Congress can tax with apportion,
if both are inside a Union State.
The decisive factor here is the protection afforded by the
applicable Constitution(s), if any. Note that a ratified 16th
Amendment makes a difference for State Citizens, but not for
overseas NRA's.
Case 3:
Corporation is chartered by a Union State (a/k/a "State corp.").
The tax on corporate profits is always an "indirect" tax:
Plaintiff Defendant 16th Result
either State yes Congress can tax if tax is uniform and
NRA corp. corporation is inside a Union State.
either State no Congress can tax if tax is uniform and
NRA corp. corporation is inside a Union State.
The decisive factor here is that profit generation by State
corporations is a revenue-taxable activity because corporations
are privileged creations of government (they enjoy the privilege
of limited liability). The tax rates must be uniform, however.
Case 4:
Corporation is chartered inside federal zone (a/k/a "domestic").
The tax on corporate profits is always an indirect tax.
Plaintiff Defendant 16th Result
either domestic yes inside federal zone, Congress can tax
NRA corp. without uniformity or apportionment
either domestic no inside federal zone, Congress can tax
NRA corp. without uniformity or apportionment
The decisive factor here is that profit generation by "domestic"
corporations is a revenue-taxable activity because these
corporations are privileged creations of Congress. Tax rates
need not be uniform or apportioned; only majority rule needs to
be satisfied.
Summary
Thus, if my analysis of corporate profits is correct, the
16th Amendment is not relevant, even if the corporation is
chartered by a Union State. Congress is free to define a tax on
corporate profit as an excise tax, and Congress need only satisfy
the uniformity rule if the corporation is chartered by a Union
State. Congress need only satisfy majority rule if the
corporation is chartered inside the federal zone (see Chapter 13,
3rd edition).
The situation is a bit different if the subject is
dividends. The status of dividend recipients then becomes
relevant, as does the ratification of the 16th Amendment. I
distinguish dividends from profits because they can be taxed
separately. There is no compelling logical reason why dividend
payors must be held liable for the tax on dividends; dividend
recipients could be designated the liable party (if not the
withholding agent).
So, the De Ganay case does not represent a threat to the
thesis of The Federal Zone after all. This is so because the
dividend recipient was unprotected by the Constitution and the
corporation was engaged in a privileged, revenue-taxable
activity, even if it was chartered by the Commonwealth of
Pennsylvania.
If this analysis does anything, it reveals a need to
distinguish overseas NRA's (like Emily De Ganay) from State
Citizens (like Frank R. Brushaber). The current Internal Revenue
Code does not make this distinction, however.
Sincerely yours,
/s/ Mitch Modeleski, Founder
Account for Better Citizenship
Conklin Rebuttal (briefly)
by
Mitch Modeleski, Founder
Account for Better Citizenship
July 4, 1992
Liability of Individuals
Conklin is saying that nobody is made liable for income taxes.
His ad in The Connector of May 1992 stated: "My name is Bill
Conklin and I have searched the Internal Revenue code for twelve
years: it is my opinion after extensive research that there is
no statute that makes anyone liable for the income tax ..."
[emphasis added]. This statement is wrong; "withholding agents"
are specifically made liable by Sections 1441 and 1461 of the
Internal Revenue Code (IRC).
Effect of Regulations
Conklin has written privately that Congress cannot promulgate
regulations which exceed the statute and that a regulation cannot
exceed the limitations created by the statute. The preponderance
of case law proves that the regulations in 26 CFR do have the
force and effect of law. See 2 Am Jur 2d, Section 289 et seq.
See also the Federal Register Act and Administrative Procedure
Act. The regulations in 26 CFR are not so easily swept away.
In re: Becraft
This is not a good decision because Becraft's research concludes
that only "aliens here and citizens abroad" are liable for
federal income taxes. This conclusion is easily disproven by 26
CFR 1.1-1(b), one of the key regulations which define the income
tax liability of individuals:
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**.
[26 CFR 1.1-1(b), emphasis added]
Moreover, that court reduced Becraft's argument to one elemental
proposition, and rejected it for "absurdity" and "frivolity":
The Sixteenth Amendment does not authorize a direct
non-apportioned income tax on resident United States
citizens [sic] and thus such citizens are not subject to the
federal income tax laws. We hardly need comment on the
patent absurdity and frivolity of such a proposition.
Well, the Brushaber decision found otherwise. Moreover, the
Becraft court uses the term "resident United States citizen",
which manifests a lack of understanding of the relevant
regulations and their legislative history. The citizen/alien
dimension is a birth status (or naturalization status). The
resident/nonresident dimension is a location status. The term
"resident United States citizen" only makes sense if one intends
to distinguish it from "nonresident United States citizen",
"resident alien" and "nonresident alien". The Becraft court
would benefit enormously by mastering The Matrix as explained in
The Federal Zone. Their failure to define terms is a serious, if
not fatal flaw.
U.S. vs Collins
* By citing Collins as an authority for defeating The Federal
Zone thesis, Conklin confuses judicial jurisdiction with
legislative jurisdiction. The two are obviously different:
district court jurisdiction is created by statute,
legislative jurisdiction is created by the Constitution.
* Collins ruled: "The argument that the sixteenth amendment
does not authorize a direct, non-apportioned tax on United
States citizens similarly is devoid of any arguable basis in
law" [emphasis added]. This statement is demonstrably false
because the Brushaber decision supports this argument.
* Collins also ruled: "For seventy-five years, the Supreme
Court has recognized that the sixteenth amendment authorizes
a direct nonapportioned tax upon United States citizens
throughout the nation, not just in federal enclaves, see
Brushaber ...." Brushaber is NOT an authority for this
statement; Brushaber ruled that income taxes are indirect
taxes and the only effect of the 16th Amendment was to
overturn the Pollock principle. Read it!
The existence of one or more apparently unfavorable cases does
not invalidate The Federal Zone (see Unfavorable Case Law below).
Sixteenth Amendment
Most federal courts refuse to recognize the mountain of material
evidence which impugns the ratification of the so-called 16th
Amendment. However, the judge in U.S. vs Benson admitted, on the
record, that there is no law if Bill Benson is correct. By
citing Collins, Conklin is siding with irresponsible judges who
label the evidence a "political" question. Well, it wasn't a
"political" question in the years immediately after the amendment
was "declared" ratified. Both the Collins and Becraft decisions
are badly defective because they attempt to sustain the obvious
fiction that there is no material evidence against the 16th
Amendment. Mr. Conklin needs to choose between fact and fiction.
(Racing firemen don't stop for curb dogs.)
Treasury Decision 2313
This Treasury Decision is crucial evidence that The Federal
Zone's status and jurisdiction arguments are valid. Frank
Brushaber declared himself to be a citizen of the State of New
York, and a resident of the Borough of Brooklyn, in the City of
New York. Both the federal courts and the Treasury Department
found that Frank Brushaber was a NONRESIDENT ALIEN, according to
their own rules! The Secretary of the Treasury had no basis for
extending T.D. 2313 to those who were not parties to the
Brushaber case. Frank Brushaber did err in assuming that his
defendant was a foreign corporation; the Union Pacific Railroad
Company was a domestic corporation, because it was originally
created by an Act of Congress. Conklin has neglected to mention
T.D. 2313 anywhere in his published and private communications.
The Three United States
The Hooven case is standing authority for the fact that the term
"United States" has three separate meanings, all different from
each other. Federal courts had an excuse before this decision;
but after Hooven, courts have no excuse for failing to specify
which of these three meanings they intend, with each and every
use of the term. This lack of specificity leads to uncertainty,
which leads in turn to court decisions which are also void for
vagueness. The 6th Amendment guarantees our right to ignore
vague and ambiguous laws, and this must be extended to vague and
ambiguous case law. Moreover, Hooven is also standing authority
for the principle of territorial heterogeneity, an important
theme in The Federal Zone which Conklin ignores almost
completely. Similarly, Conklin has failed even to mention "The
Insular Cases" or to deal with the obvious relevance of Downes vs
Bidwell, namely, excise uniformity doesn't rule inside the
federal zone; the majority rules inside the federal zone.
Knowledge of the Book
Conklin has not purchased The Federal Zone, and has yet to admit
that he has even read the book. The failed ratification of the
Sixteenth Amendment figures prominently in the book's main logic.
Territorial heterogeneity is a theme which Conklin ignores almost
completely. The "void for vagueness" doctrine affords all of us
an opportunity to agree, on the vagueness at least. If the
statute is clear, then why did Conklin fail to find the sections
that make withholding agents liable? He had 12 years, and he
still missed them. The Spreckels case ruled that "doubt is to be
resolved in favor of those upon whom the tax is sought to be
laid." Wigglesworth ruled that, in case of doubt, statutes
levying taxes "are construed most strongly against the
Government, and in favor of the citizen". The continuing debate
on all sides is important empirical proof that the IRC should be
nullified for vagueness. If the Supreme Court cannot be clear,
then nobody can; and their titles are Justice.
Unfavorable Case Law
The existence of one or more apparently unfavorable cases does
not invalidate The Federal Zone, particularly when those cases
are predicated on rebuttable assumptions (like the 16th
Amendment, or "clarity" in the statute, or arbitrary definitions
of "income"). The book proves that chaos exists in the relevant
federal cases: the Supreme Court has clearly contradicted itself
when defining the effects of a ratified 16th Amendment. "The
devil can quote scripture for his purpose," wrote William
Shakespeare. With courts in conflict, one can cite authorities
for either side of any such unresolved debates. The Prince of
Darkness is also the Prince of Lies.
Private Law
There are many mysteries which are amazingly clarified by The
Federal Zone, including the "private law" nature of the IRC. The
IRC is a municipal statute for the federal zone. Congress is the
sovereign municipal authority for the federal zone. If Congress
had intended the IRC to apply to all 50 States, Title 26 would
have need to be enacted into positive, "public" law. It was not.
(For details, see Super Gun by Lori Jacques, pages 74-81.)
Uniform Commercial Code
The UCC is precisely on point, because federal tax returns are
"foreign bills of exchange" which are subject to rules,
regulations and case law which have built up around the UCC. The
50 States are "foreign" to each other, just as each is foreign to
the federal zone (see In re Merriam). The UCC has explicit
provisions for reserving the unalienable rights of those who
enter such contracts, including but not limited to the right to
due process and the immunity against self-incrimination.
Moreover, the UCC has a guarantee that statutes must be construed
in harmony with the Common Law. The U.S. Constitution is the
last vestige of the Common Law at the federal level.
The Smoking Gun
The Federal Zone documents the "smoking gun" -- awesome proof
that the vagueness, deception, confusion and jurisdictional
ambiguities in Title 26 were intentional.
MEMO
TO: John Voss, Director, N.C.B.A.
other interested parties
FROM: Mitch Modeleski, Founder
Account for Better Citizenship
DATE: June 9, 1992
SUBJECT: Do the regulations in 26 C.F.R.
have the force and effect of law?
The debate fostered by the claims on N.C.B.A.'s $50,000 Reward
appears to have reached the following point of departure:
Mr. Conklin has argued that Title 26 makes nobody liable for
federal income taxes.
This argument was defeated by reference to clear sections of
Title 26 which make "withholding agents" liable for federal
income taxes.
I do not as yet know if Mr. Conklin is a withholding agent.
In a private communication, Mr. Conklin has also argued that
the regulations in 26 C.F.R. create no liability because "a
regulation cannot exceed the limitations created by the
statute."
The purpose of the remainder of this memo is to cite some of the
case law which is relevant to the questions of validity, and of
the legal force and effect, of regulations promulgated by the
Secretary of the Treasury. The attached abstracts from American
Jurisprudence reveal a substantial body of case law which is not
always entirely consistent on this question. For example:
A regulation cannot supply omissions of the statute.
[2 Am Jur 2d, Section 289]
-but-
A regulation which fulfills the purpose of the law cannot be
said to be an addition to the law.
[ibid., Section 300]
The following are notable excerpts from the attached Am Jur
sections that deal with the effect and validity of rules:
Rules, regulations, and general orders enacted by
administrative agencies pursuant to the powers delegated to
them have the force and effect of law. [page 119]
There have been applied to administrative regulations the
principles that everyone is presumed to know the law or that
ignorance of the law is no excuse, and the courts will take
judicial notice of them. [page 120]
... [T]here is no violation of the Federal Constitution in
an act of Congress which provides for a defense to an action
under the statute based on good faith reliance upon any
administrative regulation .... [page 120]
Administrative regulations are held to be "laws" for various
purposes, including jurisdiction of courts and criminal
liability. If Congress imposes criminal sanctions for
disobedience of regulations, it can hardly be contended that
such regulations are not a "law" for the purposes of the
Criminal Code. [page 121]
Compliance with valid administrative regulations is
compliance with law, as has been held where it was sought to
induce actions contrary to the regulations or to impose
liability for actions which accorded with regulations.
[page 122]
Valid administrative rules or regulations are generally
regarded as legislative enactments, and have the same effect
as if enacted by the legislature. They have the force of a
statute and the same effect as if part of the original
statute. They become integral parts of the statutes,
particularly where they are legislative in nature -- that
is, are called for by the statute itself. [page 122]
While in the strict sense of the term an administrative
regulation is not actually a "statute" but is at most an
offspring of a statute, a regulation may be deemed to come
within the term "statute." [page 123]
...[R]ules and regulations will be upheld where they are
within the statutory authority of the agency and reasonable,
... they must be sustained unless unreasonable and plainly
inconsistent with the statute. [page 123]
Only when discretion has been arbitrarily exercised,
resulting in injustice or unfairness, do the courts
intervene to strike down a rule promulgated by the proper
agency designed to give appropriate effect to the provisions
of the act involved. [page 124]
Administrative regulations which go beyond what the
legislature can authorize are void and may be disregarded.
[page 124]
Regulations which are legislative in character should not be
overruled by the courts unless clearly contrary to the will
of the legislature. [page 124]
Thus there are applicable the rules in regard to presumption
of validity and partial or entire invalidity; and, just as
in individual cases hardship and loss may flow from
legislative acts which are nevertheless valid, so
administrative regulations may also operate. [page 125]
Administrative rules and regulations, to be valid, must be
within the authority conferred upon the administrative
agency. A rule or regulation which is broader than the
statute empowering the making of rules, or which oversteps
the boundaries of interpretation of a statute by extending
or restricting the statute contrary to its meaning, cannot
be sustained. [page 127]
They are valid and binding only when they are in furtherance
of the intention of the legislature as evidenced by its
acts, and a regulation, valid when promulgated, becomes
invalid upon the enactment of a statute in conflict with the
regulation. However, an administrative regulation will not
be considered as having been impliedly annulled by a
subsequent act of the legislature unless the two are
irreconcilable, clearly repugnant, and so inconsistent that
they cannot have concurrent operation. [page 127]
Administrative regulations which go beyond what the
legislature has authorized, which violate the statute, or
which are inconsistent or out of harmony with the statute
conferring the power, have been said to be void. [page 128]
... [A]dministrative regulations, to be valid, are required
to be appropriate, reasonable, or not inconsistent with law.
A rule or regulation which is within the broad rulemaking
powers commonly conferred on administrative agencies will be
sustained by the courts. [page 128]
... [A] regulation which fulfills the purpose of the law
cannot be said to be an addition to the law. Before a rule
or regulation may be declared void it must be definitely in
excess of the scope of authority, or plainly or palpably
inconsistent with law. [page 129]
... [A]n administrative agency may not create a criminal
offense or any liability not sanctioned by the lawmaking
authority, especially a liability for a tax or inspection
fee. [page 129]
... [I]ssuance of regulations is in effect exercise of
delegated legislative power. [page 770]
Administrative Procedure Act ... and Federal Register Act
... set up procedure which must be followed in order for
agency rulings to be given force of law. [page 770]
Contents of Federal Register are judicially noticed and may
be cited by volume and page number. [page 772]
... [F]ederal courts are required to take judicial notice of
contents of Federal Register. [page 772]
Code of Federal Regulations being nothing more than
supplemental edition of Federal Register, court is entitled
to take judicial notice of cited regulation in brief of
prosecution[,] and conviction of defendant thereon is not
precluded by government's failure to introduce such
applicable section in evidence. [page 772]
Court was required to take judicial notice of the Federal
Register and the Code of Federal Regulations. [page 772]
In closing, the following excerpt from an unpublished treatise by
attorney Lowell Becraft is extremely relevant to the force and
effect of regulations:
CONSTRUCTION OF REGULATIONS
In 5 U.S.C., section 301, heads of Executive
departments are given authority to make and publish
regulations. It has been previously demonstrated how the
current federal income tax laws in question today relate
back to the 1916 income tax act. Section 15 of that act
defined the terms "State" and "United States" in clear
jurisdictional terms. All income tax acts passed by
Congress have authorized the Secretary of the Treasury to
promulgate regulations, which he has done since the first
income tax act in 1913. All of the income tax regulations
published since January 28, 1921, have defined the people
subject to the tax as "citizens of the United States subject
to its jurisdiction." Thus, this phrase has been a part of
the regulations for some 67 years, and applied to the 1918,
1921, 1924, 1926, 1928, 1932, 1934, 1936 and 1938 acts, as
well as the 1939 and 1954 Codes.
The Secretary of the Treasury and the United States are
firmly bound by these prior regulations as well as the
current Treasury Regulation 1.1-1(c), which defined the
subject of the current tax as a "citizen subject to its
jurisdiction." A long line of Supreme Court cases holds
that an executive department head such as the Secretary of
the Treasury is bound by the regulations he so promulgates
and publishes ....
And the Supreme Court has found that regulations
consistently promulgated in the same language for repeatedly
re-enacted laws are very significant. In Old Colony R. Co.
v. Commission of Internal Revenue, 284 U.S. 552, 52 S.Ct.
211 (1932), the Supreme Court held that such regulations are
given an implied legislative approval:
"The repeated re-enactment of a statute without
substantial change may amount to an implied legislative
approval of a construction placed upon it by executive
officers," 284 U.S., at 557
[emphasis added]
This brings us to the following regulation; it mentions liability
explicitly:
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.
[26 C.F.R. 1.1-1(b)]
MEMO
TO: John Voss, Director
National Commodity and Barter Association
FROM: Mitch Modeleski, Founder
Account for Better Citizenship
DATE: June 7, 1992
SUBJECT: Federal Income Tax Liability
As distinct from the regulations published in 26 C.F.R.,
does the Internal Revenue Code itself specifically make anybody
liable for federal income taxes? Answer: a "withholding agent"
is specifically named as a "person" who is made liable for such a
tax. The proof is found in the combination of Sections 1441 and
1461 of the IRC, as follows:
Section 1441. Withholding of Tax on Nonresident Aliens.
(a) General Rule. -- Except as otherwise provided in
subsection (c), all persons, in whatever capacity acting ...
having the control, receipt, custody, disposal, or payment
of any of the items of income specified in subsection (b)
(to the extent that any of such items constitutes gross
income from sources within the United States), of any
nonresident alien individual or of any foreign partnership
shall ... deduct and withhold from such items a tax equal to
30 percent thereof, except that in the case of any item of
income specified in the second sentence of subsection (b),
the tax shall be equal to 14 percent of such item.
Section 1461. Liability for Withheld Tax.
Every person required to deduct and withhold any tax under
this chapter is hereby made liable for such tax and is
hereby indemnified against the claims and demands of any
person for the amount of any payments made in accordance
with the provisions of this chapter.
[emphasis added]
Therefore, if Bill Conklin is a withholding agent, then he is
liable for the federal income tax on the amount he withholds.
The question now becomes: Is Bill Conklin a withholding agent?
Yes or No? It is impossible to answer this question from your
$50,000 Reward advertisement, and I cannot tell from any of the
written communications I have received from him to date.
Now, permit me to specify the conditions under which Bill
Conklin would actually be liable for such a tax, by using a
practical and realistic example. Let us say that Bill Conklin
has a good friend named Sam who is an Air Force budget analyst.
This friend is responsible for a government research budget,
which provides grants for research in various areas of human
resources. Sam is impressed with Bill Conklin's knowledge of the
IRC. With Bill's consent, Sam agrees to hire Bill under contract
to the Air Force to provide tax consulting to other Air Force
budget analysts like Sam. When Bill gets this money, he calls
his colleague Mitch to help him work on this project, and agrees
to pay Mitch a flat rate of $60 per hour from the research grant.
Mitch, by the way, is a nonresident alien, as confirmed by a
recent formal affidavit served on the Secretary of the Treasury.
Having accepted funds from the Air Force, Bill is thereby
receiving money from a source that is "inside the United States".
Rather than paying Mitch the full $60 per hour, the statute
requires Bill to withhold 30 percent from Mitch's wages, per
Section 1441 of the IRC. Moreover, Bill Conklin is the "person"
who is liable for this tax, not Mitch. However, Mitch would be
required to file a "return" on Form 1040NR, because he had "gross
income" as defined in Section 872(a), to show that the tax had
already been withheld and therefore paid. The tax is actually
paid by the "person made liable", that is, Bill Conklin.
Now, to elaborate this example just a little more, Bill
hires two more people, both of whom declare themselves to be
"United States citizens" and both of whom complete and sign a
valid W-4 certificate. By law, Bill is also required to act as
their "withholding agent", albeit at rates that are different
from the flat 30 percent levied against the gross income of
nonresident aliens. Graduated tax rates are applied to their
taxable income. Once again, as their withholding agent, Bill is
also liable for the amounts which he withheld from their pay, as
authorized by W-4 certificates that were lawfully and validly
executed. The tax is actually paid by the "person made liable",
that is, Bill Conklin.
Incidentally, the above Sections are listed in the IRC
definition of "withholding agent", as follows:
(16) Withholding Agent. -- The term "withholding agent"
means any person required to deduct and withhold any tax
under the provisions of section 1441, 1442, 1443, or 1461.
[26 U.S.C. 7701(a)(16)]
[emphasis added]
John, maybe I should withdraw my original claim and submit
another one for the full $50,000 amount. This is my formal
notice to you that I have reserved my right to do so, even though
and regardless of the fact that I have already filed one claim
for $1 of this reward.
As I write this, I must add that my colleague John C. Alden
just now informed me that recent N.C.B.A. literature admits that
withholding agents are specifically defined by statute to be
liable for federal income taxes. For the record, I have not yet
read your literature on this subject, and honestly heard about
the literature for the first time from John C. Alden.
Thank you very much for your consideration.
Sincerely yours,
/s/ Mitch Modeleski, Founder
Account for Better Citizenship
copies: John Pleasant
Brett Brough
other interested parties
MEMO
TO: John C. Alden, M.D.
FROM: Mitch Modeleski, Founder
Account for Better Citizenship
DATE: June 7, 1992
Let's combine two recent analyses into one: the "liability"
question and The Matrix "chain" of logic.
It is interesting that the only "person" actually made liable by
the statute is a withholding agent.
When you go to the sections listed in the definition of
"withholding agent", the term "nonresident alien" is mentioned.
When you go to the definition of "nonresident alien", the term is
defined as "not a citizen" and "not a resident".
The terms "citizen" and "resident" are entirely dependent on the
meaning of "United States".
The definition of "United States" is dependent on the meaning of
"District of Columbia" and the "States".
The definition of "States" is dependent on the meaning of the
"District of Columbia" and "include". And so on.
Notice how the thread from "liability" takes you right back down
the same path already traversed in my original claim to the
$50,000 reward. It's like a pile of spaghetti, only the strands
merge.
That is, "include" may be expansive, but it can only encompass
territory over which the "United States" is sovereign.
For purposes of acquiring citizenship at birth, a person is born
subject to the jurisdiction of the "United States" if his birth
occurs in territory over which the "United States" is sovereign
(from Am Jur).
We end up at the same place -- sovereignty -- which vaults us
into the domain of the study entitled Jurisdiction over Federal
Areas within the States (see Chapter 11 and also Becraft's
excellent brief on jurisdiction).
As you may already know, there is a large number of cases which
define the res judicata of sovereignty. We are right where we
want to be!
MEMO
TO: John C. Alden, M.D.
FROM: Mitch Modeleski, Founder
Account for Better Citizenship
DATE: May 28, 1992
SUBJECT: Sovereignty and The Matrix
I want to try some logic on you; it's an extension of the
matrix logic discussed in The Federal Zone. Let's use the
following schema, in order to develop a "chain" of logic:
c a
+---------+
R | Rc | Ra | R
|----+----|
N | Nc | Na | N
+---------+
c a
Use capital letters to identify one matrix dimension, and small
letters to identify the other matrix dimension.
Now, take an index card and cover up row 1 (the "Resident"
row). This leaves only row 2 (the "Nonresident" row), columns 1
and 2. If you are a "Nonresident", then it is important to know
whether you are a "citizen" or not. If you are a "citizen", then
you are an "Nc" and you pay tax on your worldwide "income". If
you are not a "citizen", then you are an "alien" and you are an
"Na". The definition of "citizen" is therefore pivotal.
Now, move the index card so it covers only column 2 (the
"alien" column). Whether you are a "Resident" citizen ("Rc") or
a "Nonresident" citizen ("Nc"), you are still a "citizen" and you
pay tax on your worldwide "income" regardless of where you
"Reside". The definition of "citizen" is again pivotal.