Regarding A "7602(a)" Summons (and the
Summons/Examination/Audit Authority In General)
These comments were composed in preparation for my response to several simultaneous efforts by the IRS to poke around through my papers and effects.
The rather expansive-appearing language of internal revenue code section 26 USC 7602(a)...
7602(a) Authority to summons, etc.
For the purpose of ascertaining the correctness of any return, making a return where none has been made, determining the liability of any person for any internal revenue tax or the liability at law or in equity of any transferee or fiduciary of any person in respect of any internal revenue tax, or collecting any such liability, the Secretary is authorized—
(1) To examine any books, papers, records, or other data which may be relevant or material to such inquiry;
(2) To summon the person liable for tax or required to perform the act, or any officer or employee of such person, or any person having possession, custody, or care of books of account containing entries relating to the business of the person liable for tax or required to perform the act, or any other person the Secretary may deem proper, to appear before the Secretary at a time and place named in the summons and to produce such books, papers, records, or other data, and to give such testimony, under oath, as may be relevant or material to such inquiry; and
(3) To take such testimony of the person concerned, under oath, as may be relevant or material to such inquiry.
..is occasionally cited by the IRS as empowering the agency to conduct "fishing expeditions" through the papers of any American or American business-- that is, tax-related investigations ("examinations" or "audits") looking for evidence by which..., well..., an investigation might be justified, or a self-assessment challenged, even when no such evidence already stands in the record. These might be called, "Standing in a bucket and lifting yourself off the ground by the handle" investigations. However, it hardly needs to be pointed out that Congress cannot, and does not, acquire the authority to poke into the records, effects and affairs of any or every American in defiance of the Fourth Amendment; compel speech in defiance of the First; or compel what for practical purposes amounts to testimony in defiance of the Fifth; etc.; simply by passing a statute, no matter the purpose or language of that statute.
Congress is, of course, well aware of the limits imposed by the Constitution, and has not actually attempted to defy or circumvent those limits. Accurate consideration of the nature of the tax to which 26 USC 7602(a) relates, and the actual language of the statutes which it reflects, make clear that this is so.
The income tax is not a general, indiscriminate tax-- it is an excise on privilege only (why it is, and must be-- and the general issue of direct versus indirect taxation-- will not be considered in this discussion; it is enough for the immediate purpose that it is):
"The terms "excise tax" and "privilege tax" are synonymous. The two are often used interchangeably." American Airways v. Wallace 57 F.2d 877, 880
“Excises are taxes laid upon the manufacture, sale or consumption of commodities within the country, upon licenses to pursue certain occupations and upon corporate privileges; the requirement to pay such taxes involves the exercise of privilege." Flint vs. Stone Tracy Co. 220 U.S. 107 (1911).
“…taxation on income was [is] in its nature an excise…” Brushaber v. Union Pacific R. Co., 240 U.S. 1 (1916) (quoting, and seconding this conclusion of, its earlier ruling in Pollock v. Farmers Loan and Trust, 158 U.S. 601 (1895).
"The income tax is, therefore, not a tax on income as such. It is an excise tax with respect to certain activities and privileges which is measured by reference to the income which they produce. The income is not the subject of the tax: it is the basis for determining the amount of tax." F. Morse Hubbard, Treasury Department legislative draftsman. House Congressional Record March 27th 1943, page 2580
Thus, the “any person”, etc., to which all income-tax-related statutes refer in a peremptory manner are uniformly and necessarily those persons engaged in the exercise of the taxed privilege, and no others. It is by virtue of this distinction that the statutes do not violate the proscriptions of the Constitution (as otherwise they unmistakably and impermissibly would). Indeed, that the tax IS (and can be) no more than a tax on a voluntarily undertaken, privileged activity is made unmistakably clear by considering the reciprocal proposition: Were the tax of any other character, it (or the statutory structure by which it is imposed and administered) would necessarily-- and impossibly-- compromise the Constitutionally recognized rights to which we have referred.
After all, it hardly need be pointed out that a Constitutionally granted power of taxation cannot, and does not, trump any Constitutionally recognized right-- which precedes, is independent of, and thus supersedes, the Constitution itself. This is, of course, particularly inescapable where the Constitutional recognition of such rights is for the explicit purpose of prohibiting their infringement. No legal subtlety, no claim of need-- dire or mundane-- can overturn this simple reality and elevate the lesser grant of power over the greater recognized right, allowing Congress to pass legislation which evades or defeats, either directly or indirectly, a Constitutional provision.
Therefore, it comes as no surprise that when we look at the actual statutory provisions of which 7602(a) is a mere reflection, we find that those provisions are not intended to be applied involuntarily to most Americans. Only when, and if, credible (sworn) allegations of the receipt of sufficient "income" are allowed to stand past the point established by law for an answer to such allegations, without correction or acknowledgement, does a governmental inquiry become legitimate; and, per the explicit structure of the law, it is only then that such inquiries become authorized. The sole exceptions to this structure involve those who have deliberately contracted with the federal government in choosing to engage in a few specific activities referenced in the law, and who have thereby voluntarily waived their rights in this regard.
Not only is 7602(a) not law, but, like much of the Internal Revenue Code, it stands as evidence of not just one, but several different actual statutes, including sections 1104 of the Revenue Act of 1926, 618 of the Revenue Act of 1928, 507 of the Revenue Act of 1934, and 3165 and 3173 (as amended in 1919) of the Revised Statutes. As a consequence, some of the nuances of these individual statutes do not appear, or are obscured, in the code representation of the law.
Among those nuances is a key distinction drawn in section 3173 of the Revised Statutes (as amended in 1919)-- the only one of the statutes reflected in 7602(a) that provides authority for examinations involving, or relating to, individual annual tax returns. In this section, Congress specifies that, as regards any person other than those engaged in certain activities, it is only in the case of refusal or neglect to file a return (when allegations of obligation exist) that the authority to conduct examinations, issue summonses, etc. arises:
"... And if any person, on being notified or required as aforesaid, [this is a reference to the 10-day notice given to anyone-- including simple annual filers-- who has not filed timely by the tax collector when there is reason to believe a return is required] shall refuse or neglect to render such list or return within the time required as aforesaid, or whenever any person who is required to deliver a monthly or other return of objects subject to tax [this refers to distillers, per section 3307; brewers, per sections 3337 and 3338; tobacco producers, per sections 3358 and 3390; and bankers, per section 3414] fails to do so at the time required, or delivers any return which, in the opinion of the collector, is erroneous, false or fraudulent, or contains any undervaluation or understatement, or refuses to allow any regularly authorized Government officer to examine the books of such person, firm, or corporation, it shall be lawful for the collector to summon such person..."
(The statute goes on to authorize the other provisions reflected at 7602(a) of the code, including-- solely in the case of refusal to file or the filing of a false or fraudulent return by someone required to deliver a monthly or other return of objects subject to tax, as listed above-- the unilateral production of a return by the Secretary. It is worth emphasizing that this latter authority does not extend to individual annual returns of "income", even when such returns have not been filed. We see this distinction accurately reflected in the current IRC at section 6020, and the relevant portions of the Internal Revenue Manual.)
This language, insofar as it is relevant to the FIRST "any person" mentioned (that is, one who is not "required to deliver a monthly or other return of objects subject to tax" ) can be usefully condensed to:
"And if any person on being notified or required as aforesaid shall refuse or neglect to render such list or return within the time required as aforesaid, it shall be lawful for the collector to summon such person... (etc., etc.)"
Only the SECOND "any person" specified in 3173 can be subjected to the provisions reflected at 7602(a) under any other circumstances.
Thus, section 3173-- which has been re-enacted repeatedly in every major revenue act, and remains the law today-- ensures harmony between the federal taxing power and the rest of the Constitution, just as did its precursor, section 93 of the Revenue Act of 1862, which expressed the same principles even more clearly:
"Provided, that any party, in his or her own behalf, or as guardian or trustee, as aforesaid, shall be permitted to declare, under oath or affirmation, the form and manner of which shall be prescribed by the Commissioner of Internal Revenue, that he or she was not possessed of an income of six hundred dollars, liable to be assessed according to the provisions of this act, or that he or she has been assessed elsewhere and the same year for an income duty, under authority of the United States, and shall thereupon be exempt from an income duty; or, if the list or return of any party shall have been increased by the assistant assessor, in manner as aforesaid, he or she may be permitted to declare, as aforesaid, the amount of his or her annual income, or the amount held in trust, as aforesaid, liable to be assessed, as aforesaid, and the same so declared shall be received as the sum upon which duties are to be assessed and collected."
(Emphasis added; and note should be taken that nothing in this language precludes the declaration of "Zero" as the amount which shall be received as the sum upon which duties are to be assessed.)
By the way, although it is true that the 'codified' reflections of the statutes-at-large are typically misleading-- especially fourth-generation reflections such as section 7602(a) of the 1986 code, which is a recreation of the 1954 code reflection which was itself a recreation of the 1939 code reflection of the law-- there are exceptions to that rule. The first codified representation of the statutory language from R. S. 3173 offers a very clear reflection of the statute. In fact, having formatted the statute's language in a more accessible fashion, the 1939 code representation of R. S. 3173 actually has independent value in displaying the limitations of 7602(a). That representation is as follows:
(a) GENERAL AUTHORITY.—It shall be lawful for the collector, subject to the provisions of this section to summon any person to appear before him and produce books at a time and place named in the summons, and to give testimony or answer interrogatories, under oath, respecting any objects or income liable to tax or the returns thereof. The collector may summon any person residing or found within the State or Territory in which his district lies; and when the person intended to be summoned does not reside and can not be found within such State or Territory, he may enter any collection district where such person may be found and there make the examination herein authorized. And to this end he may there exercise all the authority which he might lawfully exercise in the district for which he was commissioned.
(b) ACTS CREATING LIABILITY.—Such summons may be issued—
So, the misconstruction of 7602(a) by which the government suggests that it has the authority to look into anyone’s affairs at its pleasure unravels. Such an inquiry can only have a legitimate purpose as to most Americans-- both Constitutionally and per the relevant statutes-- when credible (sworn) evidence of taxable activity goes unanswered, thus allowing the presumptions of a legal nexus, and a cause, upon the basis of which commands to perform can be issued, and examinations can be properly made. Otherwise, such Americans are legally invisible to the government insofar as the tax structure is concerned, meaning that the apparent paradox cannot arise in the first place. (On the other hand, those required to deliver monthly or other special returns are, by virtue of the activities imposing those requirements, engaged in a special relationship with the government that implies a waiver of Fourth Amendment considerations where those particular activities are concerned.)
P. S. Although it is irrelevant to the substance of this discussion, and will be of little interest to most of those reading these words, good scholarship requires mention of the fact that in 1982 Congress expanded the purposes for which the summons and examination authority could be exercised to include investigations into malfeasance in the administration and enforcement of the tax laws on the part of IRS employees (and other government actors) by adding the following language to 7602:
This expansion of purposes does not, of course, expand the classes of those in regard to whom the summons/examination authority can be exercised.
A summons issued under the authority discussed above, either directly to a target or to a third-party record-keeper, is likely to be based on presumptions that the target was among the limited class of persons to whom that authority applies, as discussed above, during the years for which records are sought. If such presumptions are inaccurate, an appropriate response might be putting the issuer of the summons on notice of the facts with an affidavit similar to the one below (and seeking judicial supervision of the issuer by way of a "petition to quash", which might look something like the generic version posted here or here, in the case of a third-party summons; or appropriately modified but substantially the same when addressing a first-person summons).
The same limits discussed above apply to the conduct of (and/or summons to) an "examination" (which is also known as an "audit"). Thus, the same responses are appropriate, including in the case of a claim that an "examination" or "audit" has been carried out, resulting in "changes" to a return...
NOTE: The summonses directed at me personally (and one "third-party
record-keeper" summons issued at the same time) which initially led to the
research and analysis presented above were all defeated (the DoJ was forced to
move three courts to dismiss actions to enforce them). Click
here for some comments on this
and to see the dismissal orders. For a comprehensive legal briefing relating to the
application of the summons authority exclusively to "third-party record-keepers", click
After reading those briefs, click
here to see the
court decision and subsequent petitions to the Supreme Court which were declined
without comment. You will see that my legal analysis could not be
defeated, and the DoJ and the courts found themselves obliged to deploy patently absurd and
unsupportable "reasoning" explicitly defiant of every possible authority
(including repeated, directly-on-point U.S. Supreme Court rulings) in order to
"justify" ruling against me.
NOTE: The summonses directed at me personally (and one "third-party record-keeper" summons issued at the same time) which initially led to the research and analysis presented above were all defeated (the DoJ was forced to move three courts to dismiss actions to enforce them). Click here for some comments on this and to see the dismissal orders.
For a comprehensive legal briefing relating to the application of the summons authority exclusively to "third-party record-keepers", click here. After reading those briefs, click here to see the "not-for-publication" appellate court decision and subsequent petitions to the Supreme Court which were declined without comment. You will see that my legal analysis could not be defeated, and the DoJ and the courts found themselves obliged to deploy patently absurd and unsupportable "reasoning" explicitly defiant of every possible authority (including repeated, directly-on-point U.S. Supreme Court rulings) in order to "justify" ruling against me.
The "reasoning" deployed was the assertion that the 1954 IRC entirely repealed and replaced all prior internal revenue law! That's how empty-handed those who would evade the law find themselves.
Demonstrating the inanity of this proposition needs nothing more than to point out that were this true, every judicial ruling made before August 1954 which was related to the subject of any internal revenue tax would have thus become irrelevant to any subsequent case or controversy (as would any subsequent ruling which references or relies upon any such prior ruling or any pre-1954 statute or practice). Nonetheless, both the courts and the executive continue to routinely cite such cases, and/or directly reference and rely upon pre-1954 statutory language and practices in their own brief and rulings.
therefore unambiguously clear for that reason alone that no one believes this
idiotic proposition-- not even the judges who have settled on it as the best thing
they could come up with as a pretext for evading the actual law. However,
and evidence in my briefs and petitions linked above address the issue in
considerably more depth,
and I encourage you to read them through. The
outcome of this case is of no practical significance, by the way. Even the
mis-application of the summons authority doesn't change what does and does not
qualify as "income", nor does it purport to do so. Further, even if taken
at face value, the Sixth Circuit's pretense of a rationale for ruling in defiance
of the law in this case has no impact on the application of the tax. The
Constitutional prohibition of unapportioned capitation remains unchanged, and
all the limitations on the application of the tax in the actual law are
accurately reflected in the 1954 IRC. Indeed, virtually all of the
material in CtC concerning the present-day application of the tax-- and those
limitations-- is illustrated, explained and supported using current IRC sections
and language. I
believe that the principle is of considerable importance, though. That's
why I chose to respond to this third-party summons notification as
comprehensively as I did, despite the fact that it was issued purely for the
sake of distraction during the brief window of time available to me for making
my initial response to the "lawsuit" discussed
The outcome of this case is of no practical significance, by the way. Even the mis-application of the summons authority doesn't change what does and does not qualify as "income", nor does it purport to do so. Further, even if taken at face value, the Sixth Circuit's pretense of a rationale for ruling in defiance of the law in this case has no impact on the application of the tax. The Constitutional prohibition of unapportioned capitation remains unchanged, and all the limitations on the application of the tax in the actual law are accurately reflected in the 1954 IRC. Indeed, virtually all of the material in CtC concerning the present-day application of the tax-- and those limitations-- is illustrated, explained and supported using current IRC sections and language.
I believe that the principle is of considerable importance, though. That's why I chose to respond to this third-party summons notification as comprehensively as I did, despite the fact that it was issued purely for the sake of distraction during the brief window of time available to me for making my initial response to the "lawsuit" discussed here.