The IRS Claims New Patriot Act Type Powers to Punish Political Dissenters

by Robert R. Raymond November 28,2003

In a precendent-setting case, the IRS wielded new power to punish the
political speech of those who "espouse views" the government considers
"inconsistent" with government-held beliefs. In a hearing originally closed
to the public in a secret tribunal on a military island, but moved to a
public location after protests from the press and the public, the IRS wants
to wield this power against a former IRS whistleblower, who was forced to
resign upon his discovery of fraud in the agency. After monitoring and
taping the whistleblower's appearances on Sixty Minutes, talk radio shows,
and political publications where he rebroadcast his findings of IRS fraud,
the IRS initiated this inquisition against their former whistleblower. This
new power may find new political targets soon enough.

The IRS, through the small office of "Director of Practice," claims the
authority to wield carte blanche authority over all the other powers of
government -- the authority to monitor, surveil, and eavesdrop on political
dissenters, the authority to pry into the private financial records of
banks, businesses, and taxpayers, the authority to conduct secret
investigations under a criminal grand jury, and the authority to censure
political dissenters by branding on them a badge of infamy and stripping
them of governmentally-protected licenses. In short, under the guise of a
"practice" investigation, the IRS claims the right to wield all intrusive
and invasive powers of government available.

A "license" to practice before the IRS -- even for people who have never
requested such a license or actually practiced before the IRS, but are given
one as a matter of law if they are accountants -- "licenses" the IRS to
conduct private audits without notice to the taxpayer, confer with criminal
prosecutors without disclosure, and bring special "disbarment" proceedings
against disfavored dissenters, even if the alleged "disreputable" conduct
has nothing to do with any "practice" before the IRS.

The IRS now claims it can use these so-called "practice" investigations of
anyone who Congress licenses to practice before the IRS -- regardless of
whether they actually practice before the IRS -- to surveil the public
appearances of dissenters, eavesdrop on the political conversations of
dissenters, benefit from secret grand jury investigations, hold secret
conferences with the criminal investigators, surreptiously tap the private
database of taxpayer information, including taxpayers who merely have some
financial "connection" to the accused, audit the political dissenter's
personal financial records, and use all this information against the
dissenter in the "practice" proceeding.

Under the guise of a "practice" investigation, the IRS can ignore all the
normal procedural protections against an illicit audit while it conducts
such an audit. Simultaneously, the IRS can ignore all the legal protections
afforded a person accused of a crime while conferencing with the people
conducting a criminal investigation. Indeed, the IRS can even ignore the
sunshine laws, as the records of such "practice investigation" are exempt
from disclosure under the Freedom of Information Act, as are grand jury
proceedings.

The IRS claims it can exercise this authority in a secret proceeding without
allowing a person the opportunity to cure any alleged mistakes, the
opportunity to prepare a defense by knowing the exact facts they are accused
of, without any opportunity for discovery, without any opportunity to call
witnesses necessary for their defense, without any opportunity to cross
examine their accusers, without any opportunity to testify at their own
hearing about the merits of their position, without being forced to testify
against themselves without such an assertion being held against them, and
without even an opportunity for a hearing on the evidence.

This power of this little office with a Napoleonic vision goes even beyond
the Patriot Act type authority and stories of FBI monitoring of war
protestors.

Too Hoover-ish to be true in modern America? Just read the case of the IRS
against Joe Banister scheduled for a "hearing" -- a hearing where the IRS
prohibited Banister from introducing any witnesses or presenting any
evidence as to his defenses, and even discussing the sincerity, the truth or
the "reasonableness" of his positions -- on December 1 in the city by the
bay, in the Tax Court chambers of the federal courthouse in San Francisco.
History is being made.

The IRS Claims New Patriot Act Type Powers to Punish Political
Dissenters

by Robert R. Raymond November 28,2003

In a precendent-setting case, the IRS wielded new power to punish the
political speech of those who "espouse views" the government considers
"inconsistent" with government-held beliefs.


SNIP

No. 00-1412

In the Supreme Court of the United States

ROBERT R. RAYMOND AND ROBERT G. BERNHOFT, PETITIONERS

v.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

BARBARA D. UNDERWOOD
Acting Solicitor General
Counsel of Record
CLAIRE FALLON
Acting Assistant Attorney
General
RICHARD FARBER
THOMAS J. SAWYER
Attorneys
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217

QUESTIONS PRESENTED

1. Whether the district court had subject matter jurisdiction to enjoin
petitioners from promoting and selling a tax-protest program that
contained false and fraudulent statements regarding the federal income
tax system.

2. Whether summary judgment was properly entered in this case when
there were no material facts in dispute.

3. Whether an injunction prohibiting petitioners from selling tax-
protest materials that contained false and fraudulent statements, from
inciting others to violate federal tax laws, and from filing frivolous
Freedom of Information Act (FOIA) requests with the government violated
the First Amendment.

In the Supreme Court of the United States

No. 00-1412

ROBERT R. RAYMOND AND ROBERT G. BERNHOFT, PETITIONERS

v.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

SNIP

1. During 1996, petitioners advertised and sold a tax-protest plan
called "De-Taxing America." The plan contained materials
promoting "general tax-protest principles" and set forth the view that
the federal income tax is unconstitutional. Pet. App. 2. The materials
included forms that guided purchasers through the "de-taxing" process.
These forms led purchasers to believe that they no longer had to pay
income or social security taxes and that they were entitled to receive
refunds of all income taxes paid during the previous three years. Id.
at 2-3.

After petitioners refused to cooperate with an investigation by the
Internal Revenue Service into the "De-Taxing America" program, the
Service requested the Department of Justice to file a suit to enjoin
petitioners' actions. Pet. App. 4. Section 7408 of the Internal Revenue
Code, 26 U.S.C. 7408, authorizes the Secretary of the Treasury
to "request" the Attorney General to seek injunctive relief against the
promoters of abusive tax shelters. The Code defines "abusive tax
shelters" to include a "plan or arrangement" that makes false or
fraudulent statements regarding tax deductions, credits or exclusions
from income. 26 U.S.C. 6700(a)(1)(A)(iii). The request to the
Department of Justice was made in a letter signed by an Assistant
District Counsel of the Internal Revenue Service located in Milwaukee,
Wisconsin. It was reviewed and approved by the National Office of the
Chief Counsel located in Washington, D.C. Pet. App. 74. After receiving
that request, the United States filed suit against petitioners to
obtain a permanent injunction against their continued promotion of
the "De-Taxing America" scheme.

2. a. Petitioners filed two motions to dismiss the proceeding for lack
of subject matter jurisdiction, both of which were denied by the
district court. In response to the first motion, the government
submitted (i) a redacted copy of the letter from the Assistant District
Counsel to the Department of Justice requesting that the suit be filed,
(ii) the declaration of the Assistant District Counsel verifying that
he was a proper delegate of the Secretary for the purpose of submitting
such a request and (iii) the declarations of two officials of the
Department of Justice that explained that they had authorized the
filing of the suit on behalf of the Attorney General. Pet. App. 8.

The government thereafter filed a motion for summary judgment.
Petitioners opposed the motion, claiming that the district court lacked
subject matter jurisdiction over the suit. Petitioners also denied that
the tax-protest principles promoted in "De-Taxing America" were false.
They stated that the program contained statements "which [they]
believed, and still believe, to be true." Pet. App. 89. Finally,
petitioners submitted declarations stating that they had stopped
selling the "De-Taxing America" program and had no intention of selling
that program in the future.

b. The district court concluded that the "De-Taxing America" program
contained false statements and false advice concerning the federal
income tax and therefore granted the government's motion for summary
judgment. The court entered an injunction that bars petitioners from
(i) selling and marketing the "De-Taxing America" program, (ii)
inciting others to violate the tax laws and (iii) filing frivolous
Freedom of Information Act requests with the Internal Revenue Service
(IRS). Pet. App. 21-22. The court held that the suit had properly been
requested by a delegate of the Secretary, for "[t]he Declaration of
Edward G. Langer establishes that the Chief Counsel of the IRS (through
his delegate, Assistant Counsel Attorney Langer) authorized and
requested the Attorney General" to file the suit. Id. at 74.

3. The court of appeals affirmed. Pet. App. 1-23. The court agreed with
the district court that the declaration of the Assistant District
counsel and the agency's letter requesting the suit established that
this action had been properly authorized by the Secretary. Id. at 8.
The court noted that petitioners "had ample opportunity to produce
evidence that contradicts this declaration and have not done so." Ibid.

The court further concluded that the jurisdiction of the district court
was not, in any event, dependent on the procedures established in
Section 7408(a), which specifies that a suit for an injunction may be
prosecuted "at the request of the Secretary." 26 U.S.C. 7408(a). The
court held that jurisdiction for this suit exists under Section 7402 of
the Code, which authorizes the district courts "to make and issue in
civil actions, writs and orders of injunction, * * * and such other
orders and processes, and to render such judgements and decrees as may
be necessary or appropriate for the enforcement of the internal revenue
laws." 26 U.S.C. 7402(a).

The court of appeals also rejected petitioners' contention that there
were disputed facts that precluded the entry of summary judgment. The
court noted (i) that the statements made by petitioners "are clearly
false representations concerning the government's authority to tax its
citizens" and (ii) that the undisputed evidence reflects that
petitioners "reasonably should have known [that these statements] were
false." Pet. App. 14, 15.

The court rejected petitioners' assertion that the injunction entered
in this case violates their First Amendment rights. Construing the
injunction "to prohibit only false, deceptive or misleading commercial
speech that is related to the provision of tax advice," and noting
that "[i]t is permissible for the government to prevent the
dissemination of false or misleading commercial speech," the court held
that the injunction should be sustained because it is "narrowly
tailored to prohibit only those activities that can be restrained
consistent with the First Amendment." Pet. App. 21, 22, 23.