Another TP Who Doesn't Understand IRC Section 1

[The Observer]

JOHN H. NIX, III,
Petitioner-Appellant,
v.
COMMISSIONER OF IRS,
Respondent-Appellee.

Release Date: FEBRUARY 04, 2014

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT

Non-Argument Calendar

Agency No. 7392-09
Agency No. 24620-09

Petitions for Review of a Decision of the
U.S. Tax Court

(February 4, 2014)

Before PRYOR, MARTIN, and JORDAN, Circuit Judges.

PER CURIAM:

John H. Nix, III, appeals from the U.S. Tax Court's denial of his pro se petitions for redetermination of his tax deficiency for 2003 and 2004. 1 At trial, Mr. Nix admitted that he worked for T-Mobile USA in 2003 and 2004 and that he received compensation for his work during those years, but he argued that he was exempt from federal income taxes. The Tax Court determined that Mr. Nix was liable for federal income tax deficiencies, as well as various penalties, for 2003 and 2004. On appeal, Mr. Nix does not contest the Tax Court's computation of the deficiencies or the penalties. Instead, he argues that he was not required to pay federal income taxes for the years in question because the plain language of relevant statutes and substantive regulations excluded him from any such legal duty. 2 Specifically, he argues that his employer had no authority to withhold taxes as a "withholding agent" and was not an "employer" as defined by the Internal Revenue Code. He argues that the statutes of the Code cited by the Internal Revenue Service were without the force of law because they lacked implementing regulations, and states that the IRS did not disclose its "power to act."

We review decisions of the Tax Court "in the same manner and to the same extent as decisions of the district courts in civil actions tried without a jury." Comm'r v. Neal, 557 F.3d 1262, 1268-69 (11th Cir. 2009). We review de novo the Tax Court's interpretation and application of the tax laws and we review factual findings for clear error. Estate of Jelke v. Comm'r, 507 F.3d 1317, 1321 (11th Cir. 2007). When interpreting statutes, we look only to the plain language of the statutes, unless the statute is ambiguous. Shockley v. Comm'r, 686 F.3d 1228, 1235 (11th Cir. 2012).

Subtitle A of the Internal Revenue Code sets forth the statutes governing the federal income tax. See generally 26 U.S.C. section 1-1563. In relevant part, section 1 of the Code provides for the imposition of an income tax on all "taxable income," 26 U.S.C. section 1, which is defined as "gross income" minus the deductions that the chapter allows. See 26 U.S.C. section 63(a). In turn, "gross income" is defined in section 61(a)(1) as "all income from whatever source derived, including (but not limited to) . . . (1) Compensation for services[.]" 26 U.S.C. section 61(a)(1).

According to section 3402(a)(1) of the Code, "every employer making payment of wages shall deduct and withhold upon such wages a tax determined in accordance with tables and computational procedures prescribed by the Secretary." 26 U.S.C. section 3402(a)(1). The Code defines "wages" for purposes of section 3402(a)(1) as "all remuneration . . . for services performed by an employee for his employer[.]" 26 U.S.C. section 3401(a). It defines an employer as "the person for whom an individual performs or performed any service, of whatever nature, as the employee of such person." 26 U.S.C. section 3401(d).

The term "withholding agent" is used in the Code only in the context of foreign accounts, nonresident aliens, and foreign corporations. See, e.g., 26 U.S.C. section 1473 (defining "withholding agent" in the context of foreign accounts receiving payments or proceeds from sales from sources within the United States); 26 U.S.C. section 7701(a)(16) (defining "withholding agent" as "any person required to deduct and withhold any tax" under provisions relating to the tax liability of nonresident aliens and foreign corporations).

In this case, Mr. Nix was not excluded from federal income tax liability. He admitted that he was paid for his services by T-Mobile USA, and, therefore, he received "taxable income" and was responsible for federal income taxes under section 1 of the Code. Mr. Nix's statutory interpretation arguments to the contrary are unavailing.

Upon review of the entire record on appeal, and after consideration of the parties' appellate briefs, we affirm.

AFFIRMED.

FOOTNOTES:

/1/ Mr. Nix's notice of appeal, which stated that it broadly appealed "all of the decisions" of the Tax Court, was also timely as to the Tax Court's denial of his motions for reconsideration. However, because Mr. Nix did not address the denial of those motions in his initial brief, we do not reach that issue. APA Excelsior III L.P. v. Premiere Techs., Inc., 476 F.3d 1261, 1269 (11th Cir. 2007) (refusing to consider claims not raised in a party's initial brief).

/2/ Mr. Nix raises several additional arguments for the first time on appeal, including contentions regarding the proper definition of "taxable year" and arguments regarding tax liens. Because these arguments were not raised below, we need not and do not address them. See Kartrude v. Comm'r, 925 F.2d 1379, 1383 n.8 (11th Cir. 1991) (determining that we need not address issues on appeal that were not presented in the Tax Court). Mr. Nix also raises arguments for the first time on appeal in his reply brief, and, as a result, those arguments are not properly before us. See Hall v. Coram Healthcare Corp., 157 F.3d 1286, 1290 (11th Cir. 1998) (stating that "[a]rguments raised for the first time in a reply brief are not properly before this court").

[Famspear]

One wonders how people like Nix manage to tie their shoes without being totally confused.

As I have probably said before, the old "no implementing regulations" argument is particularly silly - the idea that there is some sort of general rule of law that statutes have to have "implementing regulations" to have the force of law. It's like saying that the statutes making murder a crime lack the force of law, because there are no "implementing regulations" for the murder statutes. (And, I wonder what the "implementing regulations" for a murder statute would look like.....) This goofy nonsense is based on willful misreading of a few old court cases.

You would think that if people like Mr. Nix would just step back for a moment, and take a deeeeeeep breath, and THINK, they might be able to get a grasp on reality.

[operabuff]

That being said, there are some statutory provisions that require regulations in order to be effective. See, for example, IRC 1502, which gives the Treasury the power to prescribe consolidated return regulations.

Of course, such statutes are explicit about the need for regulations.

[AndyK]

JOHN H. NIX, III,
Petitioner-Appellant,
v.
COMMISSIONER OF IRS,
Respondent-Appellee.

Release Date: FEBRUARY 04, 2014

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT

Just another attempt by the crooked courts to keep WeThePeople in the dark

[Famspear]

That being said, there are some statutory provisions that require regulations in order to be effective. See, for example, IRC 1502, which gives the Treasury the power to prescribe consolidated return regulations.

Of course, such statutes are explicit about the need for regulations.

Yes, section 1502 does not "require" the existence of regulations in order for that section to be "effective" in a narrow, technical legal sense. That is, section 1502 would be a legally effective statute, even if there were no implementing regulations. But regulations were needed under section 1502 in order for it to be "effective" in a practical sense. That's because section 1502 itself does not contain the kind of detail needed.

Here's the text of section 1502:

The Secretary shall prescribe such regulations as he may deem necessary in order that the tax liability of any affiliated group of corporations making a consolidated return and of each corporation in the group, both during and after the period of affiliation, may be returned, determined, computed, assessed, collected, and adjusted, in such manner as clearly to reflect the income-tax liability and the various factors necessary for the determination of such liability, and in order to prevent avoidance of such tax liability. In carrying out the preceding sentence, the Secretary may prescribe rules that are different from the provisions of chapter 1 that would apply if such corporations filed separate returns.

--26 USC section 1502 (font emphasis added).

If there were absolutely no regulations issued under section 1502, it would be just about impossible for the IRS to administer that code section as a practical matter -- since section 1502 itself does not contain detailed rules.

The tax protester-tax denier wackadoosters have a different idea, though. They labor under the delusion that there is some general, magical, mystical rule of law that says that a statute itself has no legal effect at all unless the statute has a regulation to "implement" it.

Background.....

The general authority to promulgate Treasury regulations is as follows:

(a) ... Except where such authority is expressly given by this title to any person other than an officer or employee of the Treasury Department, the Secretary [of the Treasury or his delegate] shall prescribe all needful rules and regulations for the enforcement of this title [the Internal Revenue Title], including all rules and regulations as may be necessary by reason of any alteration of law in relation to internal revenue.

--from 26 USC section 7805(a).

Regulations issued under section 7805 are sometimes called "interpretive" regulations.

Regulations issued under other specific Internal Revenue Code sections are sometimes called "legislative" regulations. The regulations under section 1502 fall into this category.

A good reference guide about U.S. Treasury regulations, IRS Revenue Rulings, Revenue Procedures, and other pronouncements is:

Mitchell Rogovin & Donald L. Korb, "The Four R's Revisited: Regulations, Rulings, Reliance, and Retroactivity in the 21st Century: A View From Within", 46 Duquesne Law Review 323 (2008), reprinted in Taxes - The Tax Magazine, August 2009 (CCH).

[Burnaby49]

The Canadian Income Tax Act has somewhat similar position in respect to regulations. There are a whole range of things that the government wants the flexibility to change without going through the tedious business of putting the changes in through legislation. A prime example is capital cost allowance rates (Americans may call it depreciation rates, I don't know your terminology). The deduction of capital cost allowance (CCA) is in the Income Tax Act itself but the rates that can be deducted are in the regulations. The income Tax Act can only be changed by a vote in Parliament but the regulations, not being part of a statutory act, can be changed whenever the government wants.

The CCA rates are often used by the government to stimulate whatever industry or economic activity the government thinks needs a hand. As an example make it solar panel manufacturing. If the government thinks that this is the new nirvana for Canadian manufacturing but we don't have an industrial base producing them the government may change the deductable depreciation rates of plant and equipment used in solar panel manufacturing from say 10% a year to 40% in the hope that the high deductions will tempt manufacturers to invest in the necessary high-cost facilities.

So, in the case of CCA, the actual legislation allowing its deductability is meaningless by itself because it doesn't tell you how much you can deduct.

Overall the Regulations to the Income Tax Act allow the government flexibility over a very wide range of items and issues that would otherwise be legislatively locked up.

[operabuff]

There are a whole range of things that the government wants the flexibility to change without going through the tedious business of putting the changes in through legislation.

In America, the only thing that could be said for the regulatory process is that it is very slightly less tedious than the process of putting changes through legislation. In general, the regulatory process works on a time frame that can best be described as geologic. Of course, at the moment, the legislative process is entirely nonfunctional, so the reg process is somewhat faster.

[The Observer]

In general, the regulatory process works on a time frame that can best be described as geologic.

Which is when we got a copy of the regs in our office, we drill a core sample and do carbon-14 testing to get an idea when these things were originally proposed.

[Lambkin]

Nix's nattering, nixed. Next!