Walter C. Lange -- CtC Argument Results in $8K Sanction on Appeal

[Cpt Banjo]

The 5th Circuit has affirmed $12,500 in penalties imposed by the Tax Court on Walter C. Lange, who received pension distributions in 2009 and 2012 but claimed they weren't taxable because he had no "federal connection". The 5th Circuit added an $8K penalty for Lange's making the same frivolous arguments on appeal.

According to a report on Law 360 Lange argued that “The requirement of a federal connection is based on the nature of the ‘income’ tax as an excise tax on privilege under the indirect taxation powers of the Constitution” and that “Any remuneration received without a federal connection as an exercise of that privilege is beyond taxing authority.” Aside from the idiocy of the CtC-like argument, this bozo apparently overlooked the fact that his pension plan was in all likelihood governed by ERISA.

The Tax Court's order imposing the penalties is here: https://www.ustaxcourt.gov/UstcDockInq/ ... ID=7346776 and the 5th Circuit's opinion is here: https://law.justia.com/cases/federal/ap ... 01-24.html

[AndyK]

See also www.ustaxcourt.gov/UstcDockInq/Document ... ID=7346773

Judge's bench opinion on the case.

Looks like another Pete success story.

[noblepa]

It sounds as if he, like many tax protesters and freeman-on-the-land types, seemed to think that the appeals court is just another chance to argue your case on its merits. A second bite of the apple, as it were.

IANAL, but it is my understanding that you generally can't do that. Appeals are based on allegations of court error; the judge allowed evidence he shouldn't have; he didn't allow evidence he should have; the judge erred in jury instructions, etc. That's why appeals courts do not have juries.

[Burnaby49]

It sounds as if he, like many tax protesters and freeman-on-the-land types, seemed to think that the appeals court is just another chance to argue your case on its merits. A second bite of the apple, as it were.

IANAL, but it is my understanding that you generally can't do that. Appeals are based on allegations of court error; the judge allowed evidence he shouldn't have; he didn't allow evidence he should have; the judge erred in jury instructions, etc. That's why appeals courts do not have juries.

Apart from its frivolous nature this appears to be a valid basis of appeal to me, at least it would be in Canada. He appealed on the basis that he considered the judge to have made an error in law. Lange is saying that he's not taxable based on his understanding of tax law. The Tax Court judge decided otherwise. The standard for an appeal based on a judge's error regarding the interpretation of the law is correctness, did the judge correctly understand the law or not? Lange has appealed on the basis that the judge is not correct in his application of the law and that his (Lange) interpretation is the correct one. The appeals court felt otherwise.

[notorial dissent]

It sounds as if he, like many tax protesters and freeman-on-the-land types, seemed to think that the appeals court is just another chance to argue your case on its merits. A second bite of the apple, as it were.

IANAL, but it is my understanding that you generally can't do that. Appeals are based on allegations of court error; the judge allowed evidence he shouldn't have; he didn't allow evidence he should have; the judge erred in jury instructions, etc. That's why appeals courts do not have juries.

Apart from its frivolous nature this appears to be a valid basis of appeal to me, at least it would be in Canada. He appealed on the basis that he considered the judge to have made an error in law. Lange is saying that he's not taxable based on his understanding of tax law. The Tax Court judge decided otherwise. The standard for an appeal based on a judge's error regarding the interpretation of the law is correctness, did the judge correctly understand the law or not? Lange has appealed on the basis that the judge is not correct in his application of the law and that his (Lange) interpretation is the correct one. The appeals court felt otherwise.

Burnaby, I think you are right on both counts here, although as usual the appellee was appealing the wrong thing and in the wrong way. Most if not all the TP cases I've seen boil down to them spouting some variant of the usual TP jargon and theory, trying to re-try the case, and eventually coming down to "you're not the boss of me" in almost all cases. Once in a great while one of them will come up with a real cause of action, almost always purely by accident, and will still manage to lose.

[KickahaOta]

Yes, this was a frivolous argument; but yes, the fact that the argument was repeated on appeal wasn't in and of itself abusive.

Suppose that you want to deduct the costs of food and medicine for your pet ferret because it's an emotional support animal. And suppose that you live in Texas, meaning that you are in the region covered by the Fifth Circuit. And suppose the Fifth Circuit has already issued a precedential opinion, Dooker v. Commissioner, holding that pet ferrets are not emotional support animals. And suppose that for some reason you feel so strongly about this issue that you are willing to spend a great deal of money to contest it.

You file your taxes and claim the ferret costs as deductions anyway. The IRS rejects your deductions and ultimately issues a notice of deficiency saying that you owe the tax.

You now go to Tax Court. Your argument is that Dooker was wrongly decided -- that the taxpayer in Dooker made terrible arguments, and the court viewed the issue in the wrong legal light as a result. You present your arguments in your brief to the Tax Court.

You do this -- and you need to do this -- in spite of the fact that you know full well that there is zero chance that you will win in Tax Court. In fact, your brief is likely to prominently acknowledge this -- 'Petitioner is aware that these arguments are foreclosed by Dooker, and respectfully presents them in preparation for appellate review.' And even if the Tax Court judge completely agrees with you, the result is still preordained; the best you can hope to get is sympathetic remarks -- 'Petitioner's arguments, while presented cogently and with considerable legal justification, are nonetheless foreclosed by Dooker. Decision will be entered for respondent.'

Now you appeal the Tax Court's decision to the Fifth Circuit. And you basically present the same arguments again, despite the fact that again you know that you have zero chance of winning. At this point your case is being heard by a three-judge panel of appellate judges; and in most circuits, a three-judge panel simply isn't allowed to say that a previous published opinion from that circuit is wrong (unless an intervening Supreme Court opinion has come along and altered the legal landscape). So again, the best you can hope for is sympathetic remarks -- 'If we were writing on a blank slate, we would agree with appellant. But the slate is not blank; Dooker controls. Affirmed.'

Now, after presenting your arguments twice with no hope of success, you finally reach the point at which you have at least a theoretical chance. You file a request for rehearing en banc, repeating your arguments once again, and pointing out any encouragement you may have gotten from the judges below. Rehearing en banc -- in which all the appellate judges in the circuit, or at least a much larger panel, review and rehear the case -- is typically the only way in which a circuit can overrule its own prior opinions in the absence of an intervening Supreme Court case. So if you are very lucky, and there are some passionate ferret fans among the ranks of Fifth Circuit appellate judges, this is your first chance to actually win.

And, if the en banc request is denied, you file a petition for certiorari with the Supreme Court, and try to explain why support ferrets are an issue of national importance.

But -- and here's the crucial part -- you still needed to hopelessly present those same arguments twice, at the Tax Court level (or in the district court if you went that route) and in the initial appeal, to have any hope of winning at this point. Because if you hadn't done that, you would be considered to have forfeited or waived the arguments.

So no, repeating yourself a second or even a third time isn't considered trying for 'a second bite at the apple'. That particular barb is usually reserved for the opposite approach -- when someone argues their case at the district court or Tax Court level using arguments A and B, then does an about-face on appeal and argues that they should win under argument C instead.

So Mr. Lange was justifiably sanctioned, but the problem wasn't that he was making an argument repetitively; it's that he was (repetitively) making a really bad argument.

[wserra]

So Mr. Lange was justifiably sanctioned, but the problem wasn't that he was making an argument repetitively; it's that he was (repetitively) making a really bad argument.

That is indisputably right, and the whole post is also very well put.

If anyone wishes to see how really bad Lange's arguments were, take a look at his brief. On second thought, just his "STATEMENT OF ISSUES PRESENTED FOR REVIEW" - what most people not named "Lange" would call "Questions Presented" - should be enough.

1. Did the 5th Circuit panel in 1984 make the extreme error of creating an impossible character of taxation called direct tax without apportionment in violation of the Brushaber case?

2. Since Brushaber characterized the income tax as indirect, does it further classify it as an excise tax?

3. An excise tax is a privilege tax. Is the privilege that triggers the tax the activity of doing business with the federal government? Can a tax return negate the presumption of doing business with the federal government?

4. By removing Alaska from the definition of the United States in 1959 did legislature signal that residents of the Several States (and not of the Federal States) were not automatically doing business with the federal government and must do something to trigger the federal privilege such as enter into contract?

5. Can the assessment of penalties claiming Argument 44 violations which were abandoned during litigation be revived, reassessed and ruled an Argument 46 violation without further violation of Due Process?

6. Is Argument 46 an impermissibly vague addition to the list or contrary to congressional intent?

7. Was the information on the returns sufficient to support the self-assessment, did the numbers add correctly and was it consistent?

8. If the self assessment was not valid, why were the §6203 records of assessment prepared by the Service not timely sent upon request?

9. Can the Parker decision be reversed by only a panel?

Actually, you need not go past (1). It is usually considered a bad strategy to tell the court that will decide your case that they are a bunch of idiots.

[notorial dissent]

Those who re-litigate past, already long dead and settled law are doomed to repeat it, the failure.

[Hyrion]

4. By removing Alaska from the definition of the United States in 1959 [snip]

Not surprisingly the OPCA crowd appears to have their "facts" completely backwards. Even a cursory Google about Alaska's history shows Alaska became a member of the Union on Jan 3, 1959.

As I'm not a Judge required to actually review the rest of the appellants' "facts" I choose to discard everything else on the reasonable conclusion that any conclusions the individual may have formed from completely invalid facts will be completely invalid itself.

[notorial dissent]

4. By removing Alaska from the definition of the United States in 1959 [snip]

I'll go out on a limb and say it was left out of the definition in question because AK became a state that you and no longer needed to be included" in that definition???? Maybe, perhaps, kinda sorta.....

[Hyrion]

I'll go out on a limb and say it was left out of the definition in question because AK became a state ... and no longer needed to be included"

That raises a good point. I don't refer to the subtle point you make of AK begin implicitly included instead of explicitly included which is also true.

I refer to:

What definition of "United States" is he using. I assumed the definition that would fit is along the lines "the 50 states that constitute the United States". But given OPCA's preference to invent their own definitions....

[grixit]

My guess is that for some time there were documents that referred to "the several states, plus the territories of Alaska and Hawaii" which were changed to just "the several states" after those two were admitted.

[Famspear]

[ . . . ] If anyone wishes to see how really bad Lange's arguments were, take a look at his brief.[ . . . ]

What a mess. In Mr. Lange, we have another clueless crank in the long history of the series of clueless cranks who cannot comprehend (or do not really want to comprehend) the holdings and the dicta in Brushaber or Parker.

And, the Doctrine of Clean Hands? The status of Alaska?

These are his arguments? Really?

Arrogance is one thing. Arrogance coupled with a level of self-delusion indicating a severe case of the Dunning-Kruger effect is quite entertaining.

[Duke2Earl]

I do find it interesting that Walter Lange is also the name of a very famous German watchmaker who died recently and made luxury wristwatches of extremely high quality....with a price to match.

[notorial dissent]

Lange and his wife started down this path over 10 years ago, with massive fail at that time and have continued on since them. He is a for real sovcit of long standing and no learning from past fails. He has to be in his mid-70's now with no enlightenment in sight. FWIW he's still making the mostly the same arguments.

[KickahaOta]

By the way, if you want a really good, clearly-written example of what happens when you tell an appeals court "Well, yes, the Supreme Court said in X v. Y that we should lose, but they're wrong," and the appeals panel says "Well, yes, you're probably right, and they may agree with you, but for now, you still lose," have a look at Price v. Chicago, just out from the Seventh Circuit.

Extremely quick summary of the issues of the case:

• Supreme Court rules in previous cases that "buffer zones" preventing people from approaching patients near abortion clinics don't have to meet the usual strict scrutiny for content-based restrictions, because the law doesn't favor either side of the contentious abortion debate -- it just prevents anyone from discussing it there
• In later cases, Supreme Court rejects this notion, saying that a law targeting discussion of a particular issue is content-based (and gets strict scrutiny) even if it doesn't favor either side of the issue
• Price challenges a buffer zone law, pointing out that the logic of the buffer-zone cases is completely undermined by the later cases
• Appeals panel agrees that the logic is no longer sound, but since the Supreme Court has never overruled those earlier buffer-zone cases, and since the current case is basically factually identical to those cases, Price loses

[jcolvin2]

The 5th Circuit has affirmed $12,500 in penalties imposed by the Tax Court on Walter C. Lange, who received pension distributions in 2009 and 2012 but claimed they weren't taxable because he had no "federal connection". The 5th Circuit added an $8K penalty for Lange's making the same frivolous arguments on appeal.

According to a report on Law 360 Lange argued that “The requirement of a federal connection is based on the nature of the ‘income’ tax as an excise tax on privilege under the indirect taxation powers of the Constitution” and that “Any remuneration received without a federal connection as an exercise of that privilege is beyond taxing authority.” Aside from the idiocy of the CtC-like argument, this bozo apparently overlooked the fact that his pension plan was in all likelihood governed by ERISA.

The Tax Court's order imposing the penalties is here: https://www.ustaxcourt.gov/UstcDockInq/ ... ID=7346776 and the 5th Circuit's opinion is here: https://law.justia.com/cases/federal/ap ... 01-24.html

Certiorari denied.

https://www.supremecourt.gov/search.asp ... 9-366.html