Chapter 3:
"The Matrix"
This chapter
contains an essential key with the potential to set you free. One of the biggest obstacles to understanding
federal tax law is that it never uses diagrams or pictures. If a picture is worth a thousand words, then the
Internal Revenue Code ("IRC") would certainly lose a lot of weight if
it were reduced to pictures;
but there would still be a lot of pictures! A careful examination of certain key terms
like "resident" and "citizen" reveals a certain
two-dimensional quality to the statutory relationship among these terms. Specifically, you are an alien if you
are not a citizen, and you are a nonresident if you are not a
resident. This careful examination
led to the following diagram, which we like to call "The Matrix". The Matrix is the key that unlocks the
whole puzzle of federal income taxation.
When you understand The Matrix,
you will know exactly where you stand with respect to the federal zone:
column 1: column 2:
┌-----------------┬-----------------┐
│ citizen of the │ │
│ United States** │
alien │
├-----------------┼-----------------┤
│ │ │
│ │ │
resident │ X
│ X │ row 1
│ │ │
├-----------------┼-----------------┤
│ │ │
│ │ │
nonresident │ X
│ │ row 2
│ │ │
└-----------------┴-----------------┘
The validity
of The Matrix is supported by a large
body of evidence, only a small part of which can be covered effectively in a
single book. The IRC is not a good place
to begin, because Chapter 1 of that Code imposes a tax on the taxable income of
"individuals", a term which the Code simply does not define. The definitions that do exist are found in
Chapter 79, and in other places which are spread around the Code like leaves
blowing in the wind.
The Code of Federal Regulations
("CFR") is a much better place to begin a review of the
evidence. The regulations in the CFR are
considered to be official publications of the federal government because they
are "judicially noticed" (courts must defer to them) and because they are considered by law to be
official supplements to the Federal Register. According to the federal regulations which
promulgate the Internal Revenue Code, the liability for federal income tax is
imposed on all citizens of the
United States** and on all residents
of the United States**, as follows:
In general, all citizens of the United
States**, wherever resident, and all resident alien individuals are liable to
the income taxes imposed by the Code whether the income is received from
sources within or without the United States**. ... As to tax on nonresident alien individuals,
see sections 871 and 877.
[26 CFR 1.1-1(b)]
Thus, the
regulations impose an income tax on all citizens, whether they are resident or
nonresident (column 1 in The Matrix),
and on all residents, whether they are citizens or aliens (row 1 in The Matrix). These same regulations define a United
States** citizen as someone who is either born or naturalized in the United
States** and who is subject to the
jurisdiction of the United States**, as follows:
Every person born or naturalized in the
United States** and subject to its jurisdiction is a citizen.
[26 CFR 1.1-1(c)]
[emphasis
added]
The official
IRS "Publications" are another excellent source of evidence which
supports the validity of The Matrix. These publications can be obtained by
ordering them directly from the Internal Revenue Service. For example, Publication number 519, U.S.
Tax Guide for Aliens, begins with the following statements:
Introduction
For tax purposes, an alien is an individual who is not a U.S.**
citizen. Aliens are classified as nonresident aliens and resident aliens. ....
[emphasis in original]
Clearly, an
alien is an individual who is not a U.S.**
citizen. Aliens are individuals who were
born outside of the federal zone, and who never elected to become U.S.** citizens via naturalization. Publication 519 then explains the difference
between a resident alien and a nonresident alien, as follows:
Resident or nonresident?
Resident aliens generally are taxed on
their worldwide income, the same as U.S.**
citizens. Nonresident aliens generally
are taxed only on their income from sources within the United States**. ...
Nonresident aliens are taxed on their U.S.** source income (and on certain foreign source income that
is effectively connected with a trade or business in the United States**).
[emphasis in original]
How does one
become a "resident" of the United States**? Remember, as used in the Internal Revenue
Code and its regulations, the term "United States**" means the area
over which Congress exercises exclusive legislative jurisdiction, i.e. the federal zone. The IRC contains a relatively clear
definition of the terms "resident alien" and "nonresident
alien", as follows:
Definition of Resident Alien
and Nonresident Alien. ‑‑
(1) In General. ‑‑ For purposes of this title (other than subtitle B) ‑‑
(A)
Resident Alien. ‑‑ An alien individual shall be treated as a
resident of the United States** with respect to any calendar year if (and only
if) such individual meets the requirements of clause (i), (ii), or (iii):
(i) Lawfully
Admitted for Permanent Residence. ‑‑ Such
individual is a lawful permanent resident of the United States** at any time
during such calendar year.
(ii) Substantial
Presence Test. ‑‑ Such individual
makes the election provided in paragraph (3).
(iii) First Year
Election. ‑‑ Such individual makes the
election provided in paragraph (4).
(B) Nonresident
Alien. ‑‑ An individual is a
nonresident alien if such individual is neither a citizen of the United
States** nor a resident of the United States** (within the meaning of
subparagraph (A)).
[IRC 7701(b), emphasis added]
Being lawfully admitted for permanent residence is also called "the green card test". IRS Publication 519 explains the green card test as follows:
You are a resident for tax purposes if you
are a lawful permanent resident of the United States** at any time during the calendar year. ...
This is known as the "green card" test. You are a lawful permanent resident of the
United States** at any time if you have been given the privilege, according to
the immigration laws, of residing permanently in the United States** as an
immigrant, and this status has not been taken away and has not been
administratively or judicially determined to have been abandoned. You have this status if you have been issued
an alien registration card, also known as a "green card," by the
Immigration and Naturalization Service.
[emphasis in original]
American
Citizens who were born free in one of the 50 States of the Union are not
required to obtain an alien registration card, because their presence in one of
the 50 States is not a privilege; on the contrary, it
is an unalienable Right which is
guaranteed to them by the United States Constitution because they were born
free and Sovereign. The Constitution
refers to these people as "natural born Citizens" (2:1:5),
"free Persons" (1:2:3) and "Citizens of a
State" (3:2:1 and 4:2:1). On the
basis of this criterion alone, the natural born State Citizen enjoys a
significant Right which is not
enjoyed by a person who must apply for residence as a privilege granted by government.
(Throughout this book, the terms
"native American Citizen", "native-born American Citizen"
and "American Citizen" will be synonymous with "natural born Citizens" as
in 2:1:5 of the Constitution, and with "State Citizens" as in 3:2:1 and 4:2:1 of the
Constitution, to avoid problems that do arise solely from terminology. See also 1:2:2 and 1:3:3.)
Publication
519 explains the "substantial presence test" using rules which
closely parallel those which are actually found in the Internal Revenue Code:
You will be considered a U.S.** resident for tax purposes if you meet the substantial
presence test for the calendar year. To
meet this test, you must be physically present in the United States** on at
least:
(1) 31 days during the current year, and
(2) 183 days during the 3-year period that
includes the current year and the 2 years immediately before, counting:
- all the days you
were present in the current year ... , and
- 1/3 of the days you were present in the
first year before the current year ... , and
- 1/6 of the days you were present in the second year before the current year ...
Example. You were
physically present in the United States** on 120 days in each of the years
1988, 1989, and 1990. To determine if
you meet the substantial presence test for 1990, count the full 120 days of
presence in 1990, 40 days in 1989 (1/3 of 120), and 20 days in 1988 (1/6 of
120). Since the total for the 3-year
period is 180 days, you are not considered a resident under the substantial
presence test for 1990.
[emphasis in original]
An individual
may elect to be treated as a resident
of the United States**. The rules for
making this election are found in the Code (IRC Section 7701(b)(4)) and in the regulations which promulgate this Code (26
CFR 1.871 et seq.). Why anyone would want to do this, without
actually residing in the United
States**, remains a mystery to us. Many
Americans have been duped into believing that electing to be treated as a resident is a "beneficial"
thing to do. Subsequent chapters will
discuss the so-called "benefits" of U.S.**
residence and U.S.** citizenship by contrasting revocable privileges and
unalienable rights.
At last, we
arrive at the definition of "nonresident alien". We have taken the long way around the
mountain, but it is the only way
around the mountain (as it turns out) because Chapter 1 of the Internal Revenue
Code imposes the tax on undefined "individuals". It is in Chapter 79, near the end of the Code, where it states that an individual is a nonresident alien if
such individual is neither a citizen of the United States** nor a resident of
the United States**.
If you were born outside the federal
zone, either as a Sovereign Citizen natural born free in one of the 50 States
of the Union, or as a native citizen of a foreign country like France, then you
are not automatically a
"citizen of the United States**". You may, of course, obtain "U.S.** citizenship" by applying for this
"privilege" with the Immigration and Naturalization Service, even if you are a Sovereign State
Citizen. You may also relinquish U.S.** citizenship at will, through a process known as "expatriation". If you were born inside the federal zone, then you are automatically a "citizen of the United
States**". The rules for residency
have already been reviewed above.
The validity
of The Matrix is also reinforced
clearly by a man named Roger Foster who, in the year 1915, wrote a forgotten
treatise on the Act of 1913, the year the so-called 16th Amendment was declared
ratified. Some people argue that these
older materials are not relevant because they do not take into account all the
changes that have occurred in the Code and its regulations. Although changes have indeed occurred, the
relevance of these materials lies in their proximity in time to the origins of
income taxation in America, and to the intent of the original statutes. It is a principle of law that the intent of a
statute is always decisive. The
following excerpt is taken from A Treatise on the Federal Income Tax under
the Act of 1913, 2nd edition, by Roger Foster of the New York Bar,
published by The Lawyers Co‑operative Publishing Company, Rochester, New
York, in 1915:
Section 35:
Incidence of the tax with respect to persons.
Under [the statute] four possible cases arise. Two
are of citizens, with reference to their residence or nonresidence, and two
are of aliens, with reference likewise to their residence or nonresidence.
There is no question as to the first two, that the whole income of every
citizen whether residing at home or abroad is taxed; it is so specifically provided in the
act. Similarly, it is expressly provided
in the act that every person residing in
the United States** shall pay a
tax upon all his income, from whatever source derived, which without question includes all resident aliens. Whatever, therefore, the power of Congress
may be, its intent is clear, that in
case of non-resident aliens the only measure of the tax is income derived within the United States**.
With reference to aliens, therefore,
it must be determined whether they are resident
in which case they must pay the tax on
their whole income; or if not resident whether they own property or carry on a business, trade
or profession in the United States**.
In the latter case, they are taxable only with reference to income earned or paid in this country. If they are non-resident and do not
derive an income from any source within our territory of course they are not
taxable at all.
[pages 153 to 155, emphasis
added]
Note, in
particular, that Foster makes reference to "income earned or paid in this country". You might be sorely tempted to conclude,
therefore, that he meant to define the "United States" to mean the
several States of the Union (then 48), in
addition to the federal zone. He did
not. This question is squarely settled
in another section of his treatise, in which he considers the incidence of the
tax with respect to territory:
Section 34: Incidence of the tax with respect to
territory and places exempted from the same.
The tax ... is levied in Alaska, the District of Columbia, Porto
Rico [sic] and the Philippine
Islands. ... The Act expressly directs:
"That the word 'State' or
'United States**' when used in this section shall be construed to include any Territory, Alaska, the District of
Columbia, Porto Rico, and the Philippine Islands, when such construction is
necessary to carry out its provisions."
Although there might be ground for
argument that the phrase "any Territory" applies to the Hawaiian
Islands, it was the evident intention of Congress that the residents of Hawaii,
at least when not citizens of the United States**, are exempt from the tax, for
the reason that the Legislature of Hawaii has imposed an Income Tax upon all
residents of that territory.
[pages 152 to 153, emphasis
added]
It is important to appreciate that
Roger Foster was considered by many to be a recognized authority on federal
law. In addition to his treatise on the
Federal Income Tax Act of 1913, he wrote numerous other treatises and articles,
including (but not limited to) "Commentaries on the Constitution of the
United States", "Federal Judiciary Acts", and "The Federal
Income Tax of 1894". In the
published opinion of author John L. Sasscer, Sr., any doubts about Foster's
intentions are completely dissolved by his choice of words for the heading to
Section 34: incidence of the tax with
respect to territory and places exempted
from the same:
If the income tax were levied within the states of the union there is
no doubt that he would have so stated.
The absence of any mention of the states of the union as being
"territory" where the tax is imposed, shows
that Mr. Foster recognized the income tax was imposed in those mentioned areas only, all of which were federal
territories in 1913.
["Deciphering the Internal Revenue Code: The Keys Revealed"]
[by John L. Sasscer, Sr., in Economic
Survival, page 27]
[emphasis in original]
In subsequent
chapters, a principle of statutory construction is applied to the IRC to show
that the inclusion of one thing is equivalent to the exclusion of all
other things not explicitly mentioned. This
principle also applies to persons and to places. Laws are constructed in strict obedience to
the rules of formal English;
one of these rules is that a "noun" is either a person,
a place, or a thing. Both Sasscer and
Foster evidence their keen awareness of these rules. Notice how Foster mentions the incidence of
the tax with respect to persons and
to places. The
States of the Union are not mentioned anywhere among the places where the tax
is imposed. In and of itself, this documentary evidence from Foster's
second edition is stunning proof of the territorial extent of the 1913 federal
income tax.
What is even
more stunning is the comparable section from the first edition of Foster's treatise.
In this section, he rambles on about the lack of any court precedents
authorizing Congress to tax bond interest that is payable to nonresident aliens
by domestic corporations. Because he
makes repeated use of the term "United States", a term which we now
know to have multiple different
meanings in law, this section is almost always vague about the exact
territorial extent of the 1913 Act.
There is, however, one place where he tips his hand by utilizing the
term "Union" in a
territorial sense. In
other words, the first edition of
Foster's treatise considers the "Union of several States" to be the
territorial reach of the 1913 Act, but in his second edition this whole section is replaced with a much smaller section which limits that
reach to Alaska, the District of Columbia, Puerto Rico and the Philippine Islands. Therefore, Foster has as much admitted, in
writing, that his first edition was in error about the territorial
extent of the 1913 federal income tax.
There you
have it! Four possible cases arise for
natural born persons like you and me. Go
back to The Matrix and the original
cover of this book. Focus carefully on
the lonely cell found at row 2, column 2.
You are a nonresident alien if you are not a citizen of the United States** and you are not a resident of the United States**:
The term "nonresident alien
individual" means an individual whose residence is not within the United
States**, and who is not a citizen of the United States**.
[26 CFR 1.871-2]
At this
point, you may still be wondering if it is indeed correct to use the term
"nonresident alien" to describe Sovereign State Citizens who were
born free in one of the 50 States of the Union, and who also live and work in
one of the 50 States of the Union. All that remains to prove it correct is to
verify the correct legal meaning of the term "United States**" in the
IRC. This proof requires an overview
of the several meanings of the terms "United States" and
"State" as they are defined in the Code itself, in the case law, and
elsewhere.
An exhaustive
proof is not necessary here because other capable authors have already
completed a massive amount of work on this subject. Interested readers are encouraged to review
the Bibliography, found in Appendix N, and to obtain
copies of the key publications entitled Good-Bye April 15th! by Boston T. Party, Which One Are You? by The
Informer, United States Citizen versus National of the United States and
A Ticket to Liberty both by Lori Jacques, The Omnibus by Ralph F.
Whittington, and Free At Last -- From the IRS by N. A. "Doc"
Scott. Taken as a group, these authors
have published a wealth of irrefutable documentation which proves, beyond any
doubt, the true meaning of "nonresident alien" in the federal income
tax statutes. Author Ralph Whittington's
book is particularly valuable because its appendices contain true and correct
copies of key documents like Roger Foster's treatise and selected Acts of
Congress.
The following
anecdote summarizes nicely many of the key points which we have covered thus
far:
Several years ago in a coffee shop
while talking with a friend about "tax matters," a man in the
adjacent booth overheard our conversation and asked to join us. The conversation continued, and centered
mainly on IRS abuses.
This gentleman seemed
particularly knowledgeable about the subject and we asked him what he did for a
living. He told us his name and that he
was an attorney with the Tax Division of the Department of Justice in
Washington. Naturally, this put us on
guard, but he quickly put us at ease by agreeing in large part with the
conclusion we had drawn.
Reluctantly, I asked him this
question, "Why are defendants in federal district court
always asked if they are 'citizens of the United States'?" He replied without hesitation, "So we
can determine jurisdiction. In many cases the federal court does not
have jurisdiction over a citizen unless they testify they are a citizen of the
United States -- meaning a federal citizen under the 14th Amendment."
My friend innocently asked,
"What's a federal citizen?" The attorney replied, "That's a person who receives benefits or
privileges or is an alien that has been admitted [naturalized] as a citizen of
the United States."
I quickly interjected, "What if the individual denied being a
citizen of the United States and claimed
to be a sovereign citizen of Oklahoma?" The attorney bowled me over with, "We don't get jurisdiction."
He had to catch a plane.
[Freeman Letter, March 1989, page 6, emphasis
added]
[as quoted in
"Brief of Law for Zip Code Implications"]
[by Walter C.
Updegrave, revised March 28, 1992]
The
implications of the 14th Amendment are considered in some detail in Chapter 11 and in Appendix Y. For now, it is best to remember that we have
in America a government of the United States** and a government of each of the
several States;
moreover, each of these governments is distinct from the others,
and each has citizens of its own. In parallel with the federal and State
governments, there are federal citizens and there are State Citizens.
Federal citizens are the same as
"U.S.** citizens" and "citizens of the
United States**". If you are not a
federal citizen, then you are an "alien" with respect to the federal government. If you get confused, just recall the familiar
distinction between State and federal governments, and then remember that each has citizens of its own. For consistency throughout this book, federal
citizens will be spelled with a lower-case "c" and State Citizens
will be spelled with an UPPER‑CASE "C". Happily for us, this convention is strictly
obeyed throughout the Internal
Revenue Code ("IRC") and throughout
the Code of Federal Regulations ("CFR") which promulgates the IRC.
Summary
The
citizen/alien distinction explains the two columns of The Matrix. By definition, you are an alien with respect to the United States** if
you are not a citizen of the United States**. The happy result of The Matrix is the legal
and logical equation which exists between most State Citizens and
nonresident aliens. A citizen of
the United States** is the same thing as a federal citizen. Anyone who is not a federal citizen is
an "alien" with respect to
the United States**. Therefore, as long
as a State Citizen is not also
a federal citizen, then such a State Citizen is an
"alien" as that term is defined in the IRC. State Citizens are free to reside wherever they choose, because
their right to travel is an unalienable right.
However, the term "resident" has a very specific meaning in
the IRC, whether it is used as an adjective or as a noun.
The
resident/nonresident distinction explains the two rows of The Matrix. An alien can be either a resident alien, or a nonresident
alien. There are three and only three criteria to distinguish
resident aliens from nonresident aliens:
(1) lawful admission for permanent residence, (2) substantial presence test, and (3)
election to be treated as a resident.
All three of these criteria depend for their legal meaning upon the
statutory definition of "United States".
Therefore, if
State Citizens are "residents" of the United States**
according to these criteria, then they are resident
aliens, by definition. If State Citizens
are not "residents" of the United States** according to these legal
criteria, then they are nonresident
aliens, by definition. A deliberately
confusing Code is clarified considerably by understanding the legal and logical
equation which exists between State Citizens and nonresident aliens
(like Frank R. Brushaber). They are one
and the same thing, to the extent that State Citizens do not reside in the United States** and to the
extent that they are not also federal citizens.
The
issue of citizenship in America has been complicated a great deal because the
federal government recognizes the legal possibility that one can be a federal
citizen and a State citizen at
the same time. This possibility exists
primarily because of Section 1 of the so-called 14th amendment. This amendment was carefully worded to
recognize a dual citizenship, federal and State, but the State citizenship
which it recognized was still a second
class of citizenship. That is the reason why the term
"citizens" in the 14th amendment is spelled with a small "c". It is a municipal franchise.
The
mountain of litigation that resulted from this amendment is proof that the
issue of citizenship has become unnecessarily complicated in America. There is a logical path through this
complexity, however, and a subsequent chapter will delineate this path as
clearly and as simply as possible (see Chapter 11:
Sovereignty). The main obstacles
standing in the way of greater clarity are removed entirely by the all
important finding that the 14th amendment was never properly approved and
adopted, just like the 16th amendment.
#
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Reader's Notes: