Tax Protesters / Resisters “Read Here” – Wesley Snipes and T. Milton Street are NOT EXAMPLES!

While I fully expect to get comments about how dumb I am and what I don’t know (feel free to post comments if you feel they are relevant), the fact is – you don’t file or pay because you don’t think you have to – dumb move. You will pay and you will file or you will go to prison. Oh, an if you go to prison, as part of the requirement to get that “get out of jail (it ain’t free) card” you’ll file and pay!

Just in case you think I do not know what I am talking about read below:

CHEEK v. UNITED STATES, 498 U.S. 192 (1991)

498 U.S. 192

CHEEK v. UNITED STATES
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH
CIRCUIT
No. 89-658

Argued October 3, 1990
Decided January 8, 1991

Petitioner Cheek was charged with six counts of willfully failing to file a federal income tax return in violation of 7203 of the Internal Revenue Code (Code) and three counts of willfully attempting to evade his income taxes in violation of 7201. Although admitting that he had not filed his returns, he testified that he had not acted willfully because he sincerely believed, based on his indoctrination by a group believing that the federal tax system is unconstitutional and his own study, that the tax laws were being unconstitutionally enforced and that his actions were lawful. In instructing the jury, the court stated that an honest but unreasonable belief is not a defense, and does not negate willfulness, and that Cheek’s beliefs that wages are not income and that he was not a taxpayer within the meaning of the Code were not objectively reasonable. It also instructed the jury that a person’s opinion that the tax laws violate his constitutional rights does not constitute a good-faith misunderstanding of the law. Cheek was convicted, and the Court of Appeals affirmed.

Held:

1. A good-faith misunderstanding of the law or a good-faith belief that one is not violating the law negates willfulness, whether or not the claimed belief or misunderstanding is objectively reasonable. Statutory willfulness, which protects the average citizen from prosecution for innocent mistakes made due to the complexity of the tax laws, United States v. Murdock, 290 U.S. 389 , is the voluntary, intentional violation of a known legal duty. United States v. Pomponio, 429 U.S. 10 . Thus, if the jury credited Cheek’s assertion that he truly believed that the Code did not treat wages as income, the Government would not have carried its burden to prove willfulness, however unreasonable a court might deem such a belief. Characterizing a belief as objectively unreasonable transforms what is normally a factual inquiry into a legal one, thus preventing a jury from considering it. And forbidding a jury to consider evidence that might negate willfulness would raise a serious question under the Sixth Amendment’s jury trial provision, which this interpretation of the statute avoids. Of course, in deciding whether to credit Cheek’s claim, the jury is free to consider any admissible evidence showing that he had knowledge of his legal duties. Pp. 199-204. [498 U.S. 192, 193]

2. It was proper for the trial court to instruct the jury not to consider Cheek’s claim that the tax laws are unconstitutional, since a defendant’s views about the tax statutes’ validity are irrelevant to the issue of willfulness, and should not be heard by a jury. Unlike the claims in the Murdock-Pomponio line of cases, claims that Code provisions are unconstitutional do not arise from innocent mistakes caused by the Code’s complexity. Rather, they reveal full knowledge of the provisions at issue and a studied conclusion that those provisions are invalid and unenforceable. Congress could not have contemplated that a taxpayer, without risking criminal prosecution, could ignore his duties under the Code and refuse to utilize the mechanisms Congress provided to present his invalidity claims to the courts and to abide by their decisions. Cheek was free to pay the tax, file for a refund, and, if denied, present his claims to the courts. Also, without paying the tax, he could have challenged claims of tax deficiencies in the Tax Court. Pp. 204-207.

JUSTICE WHITE delivered the opinion of the Court.

Title 26, 7201 of the United States Code provides that any person “who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof” shall be guilty of a felony. Under 26 U.S.C. 7203, “[a]ny person required under this title . . . or by regulations made under authority thereof to make a return . . . who willfully fails to . . . make such return” shall be guilty of a misdemeanor. [498 U.S. 192, 194] This case turns on the meaning of the word “willfully” as used in 7201 and 7203.

Comments: As a white collar crime and business ethics speaker (www.chuckgallagher.com) I have to wonder just how many people are going to get caught up in the illusion that somehow paying taxes will disappear – that somehow their feeble attempt at this worn out old argument will be decided differently. Give it up and file and pay your taxes. Trust me on one thing – time in federal prison isn’t fun and not worth it for the statement you’re making.

Business ethics speaker – Chuck Gallagher – off for now.

 

 

Tax Resister – T. Milton Street – This Guy Must Want Prison – Comments by White Collar Crime Speaker Chuck Gallagher

Ever since the Wesley Snipes trial it has been interesting to see what turns up from under the woodwork when it comes to tax protesters or “resisters” as T. Milton Street, Sr. calls himself. Frankly, I just call him a “cook!” While I am in no way proud of my background (spent time in federal prison for white collar crime in the mid ’90’s), I do know something about the tax law, as I was formerly a tax partner in a CPA firm. And, Mr. Street, is a died in the wool – dummy – who must have a desire to spend time in federal prison – cause that is exactly where he is headed.

According to the Philadelphia Inquirer, “T. Milton Street Sr. took the witness stand in his own defense this past Thursday, telling a federal jury he paid his taxes until he became convinced the tax code is unconstitutional.” Now the question is: how many times are people going to argue this point and lose, before they figure out it is a one-way ticket to jail. (Keep in mind, while Wesley Snipes did not get convicted of fraud, he was found guilty on not filing and facing sentencing soon).

A portion of the article (the link here) is reprinted:

Street, 68, of Moorestown, testified for almost two hours, mostly being interrogated by Assistant U.S. Attorney Jennifer Arbittier Williams.

Questioned by Williams about why he did not file federal income-tax returns in 2002, 2003 and 2004, Street testified that he relied on his accountant.

He said he gave his accountant power of attorney, left the tax returns for him to figure out, and never bothered reading or signing them.

Then, Street said, he stopped even worrying about the accountant. He launched into a long digression about the U.S. Tax Code, its legislative history, and its interpretation by the Supreme Court. Street’s conclusion was that it was unconstitutional.

“If you find it” – referring to a statutory basis for the tax code – “look it up for me and I’ll plead guilty to all these charges,” an animated Street challenged Williams.

When Williams persisted, Street talked about the tax loophole he said he found, known as the “missing OMB control number.” It’s a defense that has been tried by tax resisters – periodically and unsuccessfully – at least since the 1980s.

Basically, the theory goes that, because some IRS forms and instruction booklets do not carry a control number from the Office of Management Budget as required by the Paperwork Reduction Act, a citizen may ignore the rule that requires filing a federal tax return.

Let’s see, he’s using a 20+ year old argument that has been struck down. People have lost using this, yet, Street uses it. Oh, I know, he should use the “insanity” argument – as he fits the classic definition – continuing to do the same thing and expect a different result.

Now the fed’s have said that Street earned hundreds of thousands of dollars doing nothing more than selling his name and perceived influence with the administration of his brother, the mayor.

Street insisted he did work for the money, but he candidly admitted he had told associates that his brother’s election was a windfall but that “I have a very small window in which to make real money.”

“This is just business,” Street repeated to Williams’ questions.

The indictment against Street alleges that he failed to pay taxes on $2 million in consulting fees and income not derived from his $30,000-a-year food-vending business between 2000 and 2004, and that he failed to even file a tax return in 2002, 2003 and 2004.

In addition to the tax charges, Street and Velardi, 54, of Media, are charged with wire and mail fraud in what prosecutors say was a 2003 scheme to defraud a Vietnamese businessman of $80,000 by selling him the rights to a $3.2 million airport maintenance subcontract that Street and Velardi knew did not exist.

Now, just in case, as you read this, you think that Street has a screw loose – you might be right. Street, however, honed his approach with over 30 years of street theater. Likewise, he had a stint in the state legislature (don’t know what that says about Pennsylvania).

Here’s a bit of a reality check – since Snipes didn’t get convicted of fraud, there are folks who think that not filing and not paying taxes might be worth a roll of the dice. Of course, as mentioned above, we’re waiting on the sentence in the Snipes case. But, what if Street is only convicted of a misdemeanor (like Snipes) – well, the IRS is in for a rash of tax resistors. My bet – Street doesn’t have a chance. Unlike Snipes, who was smart enough not to testify, Street’s ego is too big and testifying in his own defense will be his undoing.

As a business ethics and white collar crime speaker (www.chuckgallagher.com) I will be following this closely. Expect to see a verdict this week. As soon as it is reported, you’ll see it here – so stay tuned.