We the People Foundation - Tax Court Warns re 6673 Penalty

[LPC]

Back in March, Bob Schulz reported that, "On January 27, 2010, the IRS served Notice upon WTP Foundation that it had retroactively revoked, back to 2003, its corporate 501(c)3 “tax-exempt” status." He said he " is now going to challenge the revocation and is preparing to file the legal papers which will begin that process," and that "Before this week is up, WTP’s response to the IRS’s revocation will be filed in District Court in Washington, D.C."

I can't find any record that any such action was filed in the DC district court (or the Tax Court, for that matter). (He might have filed in the Federal Court of Claims, but I don't have access to that docket system.)

And I haven't been able to find any IRS announcement of the revocation.

Anyone have any idea about what might have happened? By this time, either an action should have been filed, or the revocation should have become final, but I can't find any evidence of either thing happening.

[Evil Squirrel Overlord]

Probably a misreading of a census letter.

[Arthur Rubin]

Remember this thread in Tax Practices?

viewtopic.php?f=12&t=5869

That would only be retroactive to 2006, not to 2003.

[Dezcad]

Want to bet that is what he is going on about?

Sure, how much? And I'll lay very favorable odds. I'm taking the side that the article you quoted has nothing to do with it.

[Imalawman]

Want to bet that is what he is going on about?

Sure, how much? And I'll lay very favorable odds. I'm taking the side that the article you quoted has nothing to do with it.

Sorry, Cap'n, but you're all wet on this one. No chance that's what he was talking about. But he could have mis-read something. My recollection was that the IRS actually made a determination, not just sent a warning letter.

[LPC]

Want to bet that is what he is going on about?

Sure, how much? And I'll lay very favorable odds. I'm taking the side that the article you quoted has nothing to do with it.

Sorry, Cap'n, but you're all wet on this one. No chance that's what he was talking about. But he could have mis-read something. My recollection was that the IRS actually made a determination, not just sent a warning letter.

Trying to clear things up:

1. We the People Foundation (WTPF) has been filing Forms 990, because Demo has been getting copies of them. So Schulz did get a notice about revocation of exempt status for failing to file.

2. My recollection is that the IRS has been issuing summonses to WTPF, so there has been an ongoing investigation.

3. I was searching recent private letter rulings on revoked exempt status, and it looks as though the IRS sends a notice of "final determination" which explains that the organization can challenge the determination by filing a petition with the Tax Court, the District Court for the District of Columbia, or the federal Court of Claims, within 91 days. (See IRC section 7428) So the notice of determination serves the same sort of function as a notice of deficiency, and the IRS determination becomes final if no challenge is filed within 91 days.

4. It looks like a revocation of exempt status is sometimes (but not always) accompanied by a private ruling (really a technical advice memorandum) that supports the revocation. I believe that PLRs and TAMs are usually made public 60-90 days after they are issued, because I found TAMs on revocations of exempt status that were dated in February and released in May. But I haven't found any PLR or TAM that looks like it could have been issued to WTPF in January.

[VanMeters Revenge]

According to Bob at Saturdays function in Lansing, Michigan, that they are refiling for such status, even though some of us there in attendance were vocal against this decision.

[VanMeters Revenge]

Well for those whom speak about the legalities and/or illegalities of taxation, why should they be tax exempted? I have never been to particularly fond of the whole 501(c)3 thing. To donate money to a cause or an organization one supports, to write it off as a tax deduction isn't really contributing your financial support.

To me its like saying there is no law but here write this donation off on the taxes anyways, not to mention its like attending what I call a Romans 13 church, they get the tax breaks in exchange of the suppression of their political opinions, while subduing their congregations in being submissive to the Government even if the Government is in the wrong, furthering the conditioning that such leadership and authority has been sanctioned by God. Not that I am one of those Bible thumper types, but you can not serve two masters, which is within their sacred texts and teachings.

In other words, I find it to be somewhat hypocritical.

[Imalawman]

Well for those whom speak about the legalities and/or illegalities of taxation, why should they be tax exempted? I have never been to particularly fond of the whole 501(c)3 thing. To donate money to a cause or an organization one supports, to write it off as a tax deduction isn't really contributing your financial support.

To me its like saying there is no law but here write this donation off on the taxes anyways, not to mention its like attending what I call a Romans 13 church, they get the tax breaks in exchange of the suppression of their political opinions, while subduing their congregations in being submissive to the Government even if the Government is in the wrong, furthering the conditioning that such leadership and authority has been sanctioned by God. Not that I am one of those Bible thumper types, but you can not serve two masters, which is within their sacred texts and teachings.

In other words, I find it to be somewhat hypocritical.

Wow, I've got this very strange feeling...what is it...oh, I think its because I actually agree with VanMeter here, to a certain degree. I've always felt that it was ingenuous to deny taxation is unjust and then comply with the tax law and promote it that way.

I won't go into the Church issue - that's a topic for ranting and raving.

[LPC]

The petitions challenging the revocations of exempt status were finally filed in September 2010, and they were filed in Tax Court and not District Court. Nos. 020998-10L and 020999-10L. A trial date of 12/5/2011 has been set.

Both cases list counsel as "pro se," which isn't going to work.

[LPC]

The Tax Court docket numbers end with "L," which I believe designates an appeal from a collection due process hearing.

That, together with the fact that the notice of revocation of exempt status was sent out in February of 2010 but the Tax Court petitions were not filed until September, lead me to believe that the petitions were filed in response to notices of intent to levy to collect corporate taxes (and an unsuccessful CDP hearing), and not in response to the notices of revocation.

Although I still can't find any notice of revocation of exempt status in any IRS bulletin, which is where it should have been published.

Anyway, if the Tax Court petitions are CDP appeals, and if no action was ever taken to challenge the revocation of exempt status, has Schulz forever lost the right to challenge the revocation?

Is Schulz now in the position of a tax denier who receives a notice of deficiency, ignores it, and then tries to challenge the tax liability in a CDP hearing? Is Schulz's only remedy to pay the corporate taxes and then sue for a refund?

[Nikki]

If anyone's interested in wasting a day or two, the two WTP Tax Court cases are set for trial in New York City on 12/5/11.

Note:
The two WTP cases are appeals from determinations that the IRS may proceed with collection actions and that the NFTLs would not be released. Also note that both WTP entities are corporations, yet are proceeding pro se. Any bets whether the cases will be dismissed for lack of proper representation, on the issues, or due to the fact that Bob doesn't have a clue?

5. Explain why you disagree with the IRS determination in this case (please list each point separately):

1. The Notice of Deficiency, mailed 12/30/08, was time-barred. The Statute of Limitations expired on 11/15/07.

2. The Notice of Deficiency was invalid, ab initio, lacking "sufficient information from which to compute the taxpayer's liability" [Reg. 301.620-IT(2)].

3. The Notice of Deficiency was invalid, ab initio, failing to "purport to be a return." [Reg. 301.620-IT(3)].

4. No person was in position to claim the Notice of Deficiency allegedly mailed 12/30/08.

5. The Revocation of WTPF's 501(c) 3 exempt status, retroactive to 2003, was arbitrary and capricious. See Better Business Bureau v. United States, 326 U.S. 279, 283. WTPF's primary activities fully met the requirements of all relevant Treasury Regulations.

6. State the facts upon which you rely (please list each point separately):

1. A signed Form 872, "Consent to Extend Time to Assess Tax" was not mailed to the Foundation until 8/26/10.

2. There was no Form 4549-E,"Income Tax Examination Changes" attached to the Notice of Deficiency.

3. There was no Form 13496, "lRC Section 6020(b) Certification" attached to the Notice of Deficiency.

4. The office was closed from 12/24/08 to 2/1/09. The mail was held by elderly neighbors. There was no sign of any trouble with the IRS. The 2006-2007 Audit went well. The Foundation had not received from the IRS a signed copy of Form 872, which WTPF had signed in July of 2007.Up to 2009, all extensions to file were accepted.

5. By any criteria, the alleged "non-exempt activity" was an insubstantial part of WTPF's overall activity.[see Better Business Bureau v. United States, 326 U.S. 279, 283.]

[Famspear]

From above:

.......2. The Notice of Deficiency was invalid, ab initio, lacking "sufficient information from which to compute the taxpayer's liability" [Reg. 301.620-IT(2)].

3. The Notice of Deficiency was invalid, ab initio, failing to "purport to be a return." [Reg. 301.620-IT(3)].

In the U.S. Treasury regulations, there is (as far as I know) no such thing as "Reg. 301.620-IT(2)" or "Reg. 301.620-IT(3)", so these citations appear to be typos at best.

A notice of deficiency does not have to include "sufficient information from which to compute the taxpayer's liability" to be valid. That requirement applies to tax returns, not to notices of deficiency.

A notice of deficiency is not a tax return. The argument that a notice of deficiency is invalid if it fails to "purport to be a return" is not only incorrect, it's nonsensical.

[Nikki]

Looks like the first vote for option "C", above. But

§ 301.6020–1 Returns prepared or executed by the Commissioner or other Internal Revenue Officers.

(a) Preparation of returns—(1) In general.
If any person required by the Internal Revenue Code or by the regulations to make a return fails to make such return, it may be prepared by the Commissioner or other authorized Internal
Revenue Officer or employee provided such person consents to disclose all information necessary for the preparation of such return. The return upon being signed by the person required to make it shall be received by the Commissioner as the return of such person.

(2) Responsibility of person for whom return is prepared.
A person for whom a return is prepared in accordance with paragraph (a)(1) of this section shall for all legal purposes remain responsible for the correctness of the return to the same extent as if the return had been prepared by him.

(b) Execution of returns—(1) In general.

If any person required by the Internal Revenue Code or by the regulations to make a return (other than a declaration of estimated tax required under section 6654 or 6655) fails to make such return at the time prescribed therefore, or makes, willfully or otherwise, a false, fraudulent or frivolous return, the Commissioner or other authorized Internal Revenue Officer or employee shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise. The Commissioner or other authorized Internal Revenue Officer or employee may make the return by gathering information and making computations through electronic, automated or other means to make a determination of the taxpayer’s tax liability.

Bob seems to be whining because the SFR doesn't comply with the requirements of a return submitted by a taxpayer.

[Pantherphil]

I am wondering if this is an effort to reference Treasury Regulation 301.6020-1 which deals with returns prepared or executed by district directors or other internal revenue service officials.

Problem is, as others have noted, that the IRS officials don't have to prepare a return or SFR in order to issue an assessment. Treasury Regulations Section 301.6020-1 has no relevance to this situation.

Seems to me that if no timely appeal was taken from the IRS determination to revoke exempt status, WTP is stuck with a determination that it is a taxable corporation as of 1/1/2003 and all of the consequences that flow therefrom.

Also seems that if this is in fact an appeal from a collection due process decision that WTP also failed to exercise its right to appeal the underlying assessment on the merits and should be precluded from contesting the underlying tax assessment in this proceeding.

And there seems to be no substantial argument that the appeals officer erred in upholding the proposed collection action.

Plus, as pointed out, a corporation cannot appear pro se.

Looks like a total fail.

[jcolvin2]

UNITED STATES TAX COURT
WASHINGTON, DC 20217

WE THE PEOPLE FOUNDATION FOR )
CONSTITUTIONAL EDUCATION, INC . , )
)
Petitioner, )
) .
v. ) Docket No. 20998-10L
)
COMMISSIONER OF INTERNAL REVENUE, )
Respondent )

ORDER
On September 8, 2011, respondent filed (1) a motion for motion for summary judgment, and (3) a declaration of Thomas A. Conley. (We shall refer collectively to respondent's motion for
summary judgment, the affidavit in support of respondent's motion
for sum,mary judgment, and the declaration of Thomas A. Conley as
respondent's motion.)

The Court notes initially that in reviewing the record for
purposes of respondent's motion it appears to the Court that
petitioner may intend to advance frivolous and/or groundless
statements, contentions, questions, änd/or arguments in this
proceeding.

The Court reminds petitioner that section 6673(a) (1) of the.
Internal Revenue Code (I.R.C.) provides in pertinent part:

Whenever it appears to the Tax Court that--
(A) proceedings beforÉ it have been instituted or
maintained by the taxpayer primarily for delay, [or]
(B) the taxpayer's position in such proceeding is
frivolous or groundless, * * *
the Tax Court, in its decision, may require the taxpayer to
pay to the United States a penalty not in excess of $25, 000 .

In the event petitioner instituted or'maintains this proceeding
primarily for delay or advances frivolous and/or groundless
statements, contentions, questions, and/or arguments, the Court
will impose a penalty not in excess of $25,000 on petitioner
under I.R.C. section 6673(a) (1).

After due consideration and for cause, it is

ORDERED that petitioner shall(file a response to
respondent's motion, which shall be received by the Court on or
before September 29, 2011. In the event that the Court does not
receive from petitioner on or befofe September 29, 2011, a
response to respondent's motion, the Court may grant respondent's
motion and enter a decision for respondent.

For any party who does not make filings electronically,
please note that the Court is experiencing brief delays in the
delivery of U.S. Postal Service mail. However, timely deliveries
by private carriers have not been interrupted.
(Signed) Carolyn P. Chiechi
Judge
Dated: Washington, D.C.
September 15, 2011

[AndyK]

Identical order issued in TC case 20999-10L -- We The People Congress.

Hey, Bob: 8, 9, 10, OUT

[notorial dissent]

Why does this not sound like a good thing for poor old babbling Bob? Maybe because it really isn't going to go well. Did he actually get a lawyer to file for him finally, he must have since it sounds like it. I really wouldn't want to be in his shoes any time in the near future if he is dealing with Bob. Too bad Barringer is down for the count this is down his gutter.

[LPC]

Did he actually get a lawyer to file for him finally, he must have since it sounds like it. I really wouldn't want to be in his shoes any time in the near future if he is dealing with Bob. Too bad Barringer is down for the count this is down his gutter.

Both dockets list counsel for the petitioner as "pro se."

Which isn't really possible, because corporations can't represent themselves and must be represented by a lawyer.

I'm not sure why the Commissioner hasn't raised the issue but it could be because, in this particular case, he really doesn't care. If Schulz wants to present himself as the real party in interest (and the "responsible party" for corporate tax purposes), why stop him?

[notorial dissent]

Well, that is what I thought, but I figured that if it had gone that far he had found some dupe to take the first hit, but if he wants to go pro se and admit that the foundations are really only a shell for him, then more power to him, it will at least be a step towards some "tax honesty" on his part and save the gov't the trouble of having to go the piercing the corporate veil route.