All Press Releases for July 05, 2005

\"NO.\" -- U.S. Court Of Appeals Soundly Rejects IRS Plea To Soften Ruling Impeding Tax System

Schulz v. IRS Ruling Upheld IRS Must Have Federal Court Order To Enforce Administrative Actions

    / - Queensbury, NY, July 5, 2005 - On January 25, 2005 the U.S. Court of Appeals for the Second Circuit issued a decision in Schulz v. IRS (Case No. 04-0196-cv). The Court held that, absent a federal court order, taxpayers cannot be compelled by the IRS to turn over personal and private property to the IRS.

Quoting from that decision:

"...absent an effort to seek enforcement through a federal court, IRS summonses apply no force to taxpayers, and no consequence whatever can befall a taxpayer who refuses, ignores, or otherwise does not comply with an IRS summons until that summons is backed by a federal court order...[a taxpayer] cannot be held in contempt, arrested, detained, or otherwise punished for refusing to comply with the original IRS summons, no matter the taxpayer's reasons, or lack of reasons for so refusing."

On March 1, 2005, the Department of Justice filed a motion with the Court of Appeals requesting that the Court amend its decision in Schulz.

In its motion the DOJ stated, "...the Court's opinion threatens to seriously impede the effective administration and enforcement of the nation's tax laws."

In its motion the DOJ chastised the Court for "creating a false impression," and "misapprehending" and "misunderstanding" and "misstating" and being "inaccurate," regarding the "consequences that flow from the issuance of an IRS summons."

On June 29, 2005, the Court of Appeals issued its much-anticipated decision regarding the government's motion to amend the Court's earlier ruling. With a firm reliance on the Court's primary role of protecting the People's Individual, unalienable Right to Due Process guaranteed by the 5th and 14th Amendments, the court soundly rejected the government's pleading.

In rebuffing the government's view of Congress's tax enforcement scheme and characterizing it as "Draconian," the Court of Appeals stated:

"...the government appears to argue alternatively, or in combination, that: 1) the government may use the federal courts to punish taxpayers who disobey an IRS summons even if the summons is never enforced by court order; 2) if an IRS summons is enforced by a court order, the court may punish disobedience of the IRS summons before providing the taxpayer an opportunity to comply with the court's order; or 3) if an IRS summons is enforced by a court order, the court may punish disobedience of the IRS summons even if the taxpayer complies with the court's order. In our view, expressed in Schulz I, none of these proposals is consistent with the comprehensive tax-enforcement scheme in which 26 U.S.C. sections 7210, 7604(a) and 7604(b) are situated, constitutional due process, or the relevant precedents of this Court and the United States Supreme Court."

Trumpeting the primary role of the Judiciary of protecting the People from unconstitutional acts of the other two branches of the government, the Court went on to say:

"...the IRS summons is administratively issued but its enforcement is only by federal court authority in an adversary proceeding affording the opportunity for challenge and complete protection to the witness."

Most significantly, the Court held, relying on a 1920 decision by the United States Supreme Court, that the principles of due process apply to all administrative orders. Implicit in the holding is that the Court's order applies not only to IRS first party summonses, but also to IRS third party summonses, and to IRS levies and liens. In what may be the most significant sentence in the 13-page decision, the court stated:

"The rule of due process upon which we relied in Schulz I, and upon which we rely now, can be stated thus; any legislative scheme that denies subjects an opportunity to seek judicial review of administrative orders except by refusing to comply, and so put themselves in immediate jeopardy of possible penalties 'so heavy as to prohibit resort to that remedy,' Oklahoma Operating Co. v. Love, 252 U.S. 331, 333 (1920), runs afoul of the due process requirements of the Fifth and Fourteenth Amendments." [Page 10].

Although the objects in contention in Schulz were IRS administrative summonses, it is unavoidable that the Due Process issues raised and articulated by the Court in the Schulz decision have direct implication for all forms of routine IRS administrative process including liens, levies and seizures. This decision reiterates those constitutional principles.

The reaffirmation of Schulz I is clear: any legislative scheme that forces a taxpayer to make a "Hobson's choice" between either capitulating to an IRS administrative demand, or risk bearing the pains of IRS's wrath if she refuses to comply -- without access to judicial review, violates the Constitution.

The Court granted both Schulz and the Government 45 days to file a petition for an en banc rehearing for the sole purpose of clarifying the ruling.

Although the Second Circuit's decision has profound implications in its own right, to date, neither the Court nor the Government have addressed the fundamental issue underlying the original litigation - i.e., Schulz's claim that the IRS summonses were issued to him for the sole intent of infringing and defeating the First Amendment Right to Petition process that Schulz and the WTP Foundation are championing and which challenges, on constitutional grounds, certain actions of the government, including the authority of the IRS to force ordinary working Americans to pay a direct, un-apportioned tax on their labor.

Part of this historic effort includes the landmark Right-to-Petition lawsuit which is currently awaiting further action by the DC District Court. In that lawsuit, nearly 2000 Americans have petitioned the Court seeking a declaration of their Right to withhold taxes from their servant government until their Petitions are answered and Redress for Grievances is secured -- a Right explicitly expressed in 1774 by the Founding Fathers, while sitting as the Continental Congress after the start of the Revolutionary War. (Journal Number 1, Continental Congress).

Copies of all the court documents referred to above and additional details are available from the Foundation's website,

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Robert Schulz
We The People Foundation
Queensbury, NY
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