Update from Schulz on his civil suit

[Demosthenes]

July 19, 2007

Withholding On The Ropes?
U.S. Unable To Prove It’s Not Voluntary


The United States appears to have bitten off more than it can chew when it sued Bob Schulz and the We The People organizations earlier this year in an effort to shut down "Operation Stop Withholding."

In the lawsuit, the Government accused WTP of operating an unlawful "abusive tax shelter" in violation of IRC Sections 6700 and 6701, citing the organization's efforts to urge individuals to terminate their W-4 wage and salary withholding agreements.

In response to the lawsuit served on Schulz on May 3, 2007, Schulz filed a motion to have the case dismissed on the ground that Operation Stop Withholding is not only fully protected by the First Amendment (including the Petition clause), it is protected because We The People organization is educating People about the withholding laws as they are currently written and which expressly provide that such agreements are voluntary.

The Government's lawsuit has asked the District Court to issue an injunction prohibiting WTP’s efforts to educate Americans about the legal termination of private withholding agreements. WTP's efforts rely on "black letter" law which clearly establishes that Withholding Agreements (W-4s) are voluntary and that a worker can -- at any time -- terminate his W-4 by simply notifying the company that he no longer gives his permission to the company to withhold from his pay.

The Government finds itself in a very tough spot.

On one hand, it is asking the Court to shut the WTP program down, but on the other hand, neither the IRS nor the attorneys at the Department of Justice have been able to dispute or refute the simple truth that the law itself plainly establishes that withholding is voluntary and permission to withhold can be easily withdrawn by workers at their sole discretion.

What follows are a just a few of the legal citations that the Government has been confronted with and has failed to rebut:
26 CFR § 31.3402 (p)-1 "Voluntary Withholding Agreements". (a) An employee who desires to enter into an agreement for withholding.....shall furnish his employer with Form W -4 (or equivalent) for withholding.
Read it for yourself.


Pursuant to 26 CFR § 31.3402(p)-1(b)(2), either a company or a worker may terminate the withholding agreement (or its equivalent) at any time, by furnishing a signed, written notice to the other. Read it for yourself.


Pursuant to 26 USC § 3402(p)(3)(A), 5 USC §5517 and 31 CFR §215.2(n)(1), all ordinary American workers have the right to refuse to consent to enter into a voluntary withholding agreement and can voluntarily refuse to have amounts taken from his/her pay for federal and/or state taxes, social security, other governmental insurance programs or welfare programs.

“Protected Individuals” as per 8 USC §1324a cannot be compelled to submit any specific government documents or to disclose a social security number as a condition of being hired by or maintaining their status as a worker. Most American workers qualify as "Protected Individuals" under the law.

The landmark decision of EEOC v. Information Systems Consulting CA3-92-0169T U.S.D.C. Northern District of Texas Dallas Division, held that companies cannot discriminate against applicants or workers for failure to obtain or disclose a social security number.


No law requires a worker to file a Form W-4 (or its equivalent). In U.S. v. Mobil Oil Co., 82-1 USTC para. 9242, U.S.D.C. ND Tex. Dallas 1981 CA. 3-80-0438-G, the court ruled that an Entity does not even have to send a W-4 Form or other employment forms to the Internal Revenue Service unless served with a judicial court-ordered summons to do so.


Pursuant to IRC §6041(c), a worker is only required to furnish a name and address upon demand of a company for whom he seeks to work. No social security number is required by statute.


Building upon a plethora of false statements, pitiful hyperbole, factual omissions and defective (and vindictive) claims of lawful authority, the Government has attempted to paint WTP as a "promoter" of an illegal tax fraud "scheme" without ever specifically identifying any false speech made by WTP, and without addressing the very laws WTP has relied upon -- and which irrefutably establish that wage and salary withholding is voluntary.
Nowhere in its pleadings does the Government directly confront the voluntary nature of the withholding laws cited by WTP even though withholding is the central issue before the court.

Indeed, beyond the compelling judicial and constitutional drama unfolding as the landmark Right to Petition lawsuit continues its certain path to the Supreme Court, the Government may have done itself great harm by pursing a "6700" lawsuit against WTP.

As a result of accusing WTP of activity expressly protected by the Constitution and the lesser laws of the nation, it has risked widespread exposure in the public domain of the very information it seeks to censor.

It is no miracle that the United States cannot -- by any law -- force average workers to submit to mandatory withholding. To do so would be to require them to withhold monies for taxes, which by the Constitution and U.S. law, CANNOT BE IMPOSED UPON ORDINARY AMERICANS.

The fact that one's signature is required to execute a W-4 withholding agreement is simple evidence of this truth that, until recently, has remained well-obscured within the complexity of the tax code.

It is beyond time that our government confront a difficult political question that our organization has asked repeatedly over numerous years:

Do our elected leaders and guardians of the Rule of Law move with deliberation toward an orderly transition of a replacement for our Constitutionally-abusive tax system, or do they risk a chaotic, systemic collapse of the government funding mechanism (or even worse) because of the growing, yet unstoppable, awakening of the public consciousness regarding the truth about our nation's tax laws?

It is indeed not ironic that such a possibility awaits our nation, and may one day come to pass, inadvertently perhaps, because of one IRS prosecution too many.

The truth is out there and it's not going away.


History of the "6700" Lawsuit:

The United States served its Complaint on May 3, 2007, charging Schulz with promoting an abusive tax shelter in violation of Section 6700 of the Internal Revenue Code.

On May 23rd, Schulz and WTP filed a Motion to Dismiss for failure to state a claim for which relief can be granted under 6700 and under the First Amendment’s Petition for Redress and Free Speech clauses. Also filed were three Declarations by Schulz.

On June 18th, the United States filed its Response and its Statement of Material Facts.

On July 16th, Schulz and WTP filed their Reply, including six more Declarations by Schulz.

For those not familiar with WTP’s Operation Stop Withholding here are the highlights:

On March 15, 2003, by letter, Schulz Petitioned the Government for a Redress of Grievances relating to the forced withholding and diversion of workers’ pay. The theme of the Petition for Redress was the black letter law showing that withholding was voluntary, that any worker could legally terminate an existing withholding certificate (W-4) by simply notifying the company, in writing, that the worker did not want to continue having his pay withheld, and that a worker did not have to provide the company with a Social Security number.

Enclosed with Schulz’s March 15, 2003 letter was a Blue Folder with documentation supporting the Petition for Redress, and Forms for workers to use to legally terminate withholding.

In the March 15 letter, Schulz notified the United States that he would begin to instruct workers on how to legally terminate withholding unless the United States were to tell him his interpretation of the law was wrong.

Hearing no objection, Schulz embarked on his schedule of 37 meetings around the country, handing out 3500 copies of the Blue Folders (at no cost) to people in attendance at those meetings. The materials comprising the Operation Stop Withholding "Blue Folder" are still available (for free) on the WTP website.

The day before he left on his trip, the IRS sent Schulz a letter saying, in effect, “We have reviewed certain materials and have decided to investigate you for promoting an abusive tax shelter, in violation of Section 6700 of the Internal Revenue Code. You are asked to meet with us and to bring your books and records.”

Thus, under color of an “official” 6700 investigation of Schulz and the WTP organization, the IRS could now get away with almost anything, including harassing Schulz and the organization to death, or at least to the point where we could not continue with our process of Petitioning the Government for Redress of Grievances relating to withholding or anything else.

Schulz told the IRS, in effect, “No answers, No records.” The IRS then served a Summons on Schulz for the books and records. Schulz sued the IRS. The U.S. Court of Appeals for the Second Circuit held in Schulz I, that Schulz did not have to respond to the Summons without a court order and if the IRS wanted the information it would have to bring Schulz to court to get it.

The IRS and DOJ then filed a subsequent motion asking the U.S.Court of Appeals to modify its decision claiming it would make it harder for the Government to collect taxes. In Schulz II, the Court sternly denied the motion again holding that taxpayers enjoy the protection of broad Due Process Rights with regard to all forms of IRS administrative actions.

Within weeks of the decision in Schulz II, the IRS began serving a series of third-party summonses against Schulz, rather than bring Schulz to Court to enforce the original Summons. Each third-party summons has resulted in a new lawsuit by Schulz against the IRS.

In November, 2006 the IRS felt the teeth of the Second Circuit Court of Appeal's decision in Schulz II when it served an administrative Summons on a New York bank demanding Schulz's personal bank records. Read our 11/8/06 web article.

After Schulz filed a lawsuit against the IRS to quash the Summons, on November 6th a federal judge issued an injunctive order enjoining and prohibiting the IRS from enforcing the bank Summons. During pre-trial pleadings, the primary investigator for the IRS was caught perjuring herself to the District Court regarding the alleged basis for issuing the Summons. This case is currently awaiting the disposition of that Court.

Immediately following the March 30, 2007 “V” demonstration outside the White House (video) and its coverage by the Washington Post, the United States filed the "6700" civil injunction lawsuit against Schulz and the WTP organizations.


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Update Related Links

Read the Government's June 18th Response to WTP's Motion to Dismiss, its Statement of Material Facts. and several supporting IRS Declarations.

Read the July 16th Schulz and WTP Reply brief and Schulz's Declarations.

Download the contents of the Operation Stop Withholding "Blue Folder" for FREE


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[Imalawman]

Wow, that is one positive spin on things. He should be Bush's press secretary.

[jg]

Nowhere in its pleadings does the Government directly confront the voluntary nature of the withholding laws cited by WTP even though withholding is the central issue before the court.

This seems to be more of the "you did not say it the way you must" garbage.
From http://www.wethepeoplefoundation.org/PR ... TP-MTD.pdf
UNITED STATES’ RESPONSE IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS AND CROSS-MOTION FOR SUMMARY JUDGMENT

According to defendants, the Internal Revenue Code (which defendants claim is unconstitutional) does not apply to an individual that has unilaterally revoked their consent to pay taxes. In that regard, defendants contend that customers participating in their program can withhold taxes and stop filing tax returns until defendants’ questions regarding the legality of the income tax have been answered. Furthermore, they tell their customers that federal taxes only apply to persons earning foreign source income — the § 861 Argument. Along those same lines, defendants advise customers that they can opt-out of paying taxes, including Social Security contributions, if they simply stop volunteering to pay taxes. These are tired tax protest arguments that have been repeatedly rejected by courts as false.11
Defendants’ contention that their materials do not relate to tax benefits ignores the substance of everything they filed. Defendants’ statements made in connection with their
scheme include that customers can “minimize company income tax reporting requirements to almost nothing,” “eliminate payment of [] FICA taxes,” and “stop issuing W-2 and 1099
forms.”12 Put simply, defendants’ twisted misrepresentation that their program deals with “wage withholding” — as if that is somehow different from tax withholding — is unavailing.
In that respect, defendants misrepresent the tax benefits of their tax termination program.
Defendants’ claim that an individual can revoke his or her requirement to pay taxes or file returns is unfounded. There are numerous court cases in which individuals have attempted to
stop paying taxes through a unilateral act of withdrawal like the one urged here. None of them has been successful.13 Courts have similarly rejected the same proposition with regard to paying Social Security taxes.14

========================================
11See, e.g., United States v. Gerads, 999 F.2d 1255 (8th Cir. 1993); Lonsdale v. United States, 919 F.2d 1440 (10th Cir. 1990) (rejecting a host of tax protester arguments); In re Becraft, 885 F.2d 547; Betz v. United States, 40 Fed. Cl. 286 (Fed. Cl. 1998).

12Indeed, their tax evasions materials, entitled “Legal Termination of Tax Withholding,” makes no mention of any “Right to Redress” as they contend. In fact, these documents deal exclusively with tax withholding, nothing more. It is evident that defendants are trying interject irrelevant issues into this matter in order to further their campaign against the income tax. Their efforts to create a sideshow out of the issues of this case should not be indulged.

13E.g., United States v. Ferguson, 793 F.2d 828, 830–31 (7th Cir. 1986) (upholding conviction of taxpayer who submitted Affidavits of Revocation in lieu of tax returns); United States v. Luman, 95 A.F.T.R.2d 2414 (N.D. Ga. 2005) (“one may not remove oneself from the jurisdiction of the federal tax laws by filing a ‘Notice of Rescission’”); United States v. Sasscer, 86 A.F.T.R.2d 6174 (D. Md. 2000) (“a person may not elect to opt out of the federal tax laws by a unilateral act of revocation and rescission”); Damron v. Yellow Freight Sys., 18 F. Supp. 2d 812, 818–19 (E.D. Tenn. 1998) (federal tax obligations cannot be “unilaterally revoked”); Alaska Computer Brokers v. Morton, 76 A.F.T.R.2d 6458 (D. Alaska 1995) (same).

14E.g., United States v. Sasscer, 86 A.F.T.R.2d 6174 (D. Md. 2000) (“a person may not elect to opt out of the federal tax laws by a unilateral act of revocation and rescission”); Damron v. Yellow Freight Sys., 18 F. Supp. 2d 812, 818–19 (E.D. Tenn. 1998) (federal tax obligations cannot be “unilaterally revoked”; Alaska Computer Brokers, 76 A.F.T.R.2d 6458 (same); Lonsdale, 919 F.2d 1440.

Looks like a direct confrontation to "the voluntary nature of the withholding laws."

There may be other examples, as well; but to assert there is no direct confrontation is simply a lie.

[Demosthenes]

I've updated the docket here:

http://quatloos.com/Q-Forum/viewtopic.php?t=709