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Tax Protester Silenced

The Third Circuit has upheld an injunction, prohibiting a professional tax protester from maintaining a website and advertising his tax-dispute services.

In United States v. Bell, the Third Circuit overruled First Amendment arguments advanced by famous (or is it notorious?) tax protester Thurston Bell.

The trial judge, U.S. District Judge Christopher C. Conner of the Middle District of Pennsylvania had found that Bell's web site, www.nite.com, advocated violating the U.S. tax code and offered for sale products and advice on how to do it. Bell was one of several tax protestor who advanced the so-called "Section 861 argument" to avoid taxation. The article describes Bell's approach:

According to the U.S. Sources argument, domestically earned wages of U.S. citizens are not taxable because such wages are not specifically mentioned in � 861's list of items of gross income that "shall be treated as income from sources within the United States."
Following Bell's instructions, his clients would file zero-income tax returns with an "asseveration of claimed income" attached, disputing the gross income indicated on their W-2 forms. Court records show that several of Bell's clients succeeded in obtaining unwarranted tax refunds by filing returns according to his methods.
Bell's site invited visitors to pay a $195 annual fee for membership, which would give them access to tapes and documents to instruct them how to use the U.S. Sources rationale to file zero federal income tax returns.
Justice Department lawyers said Bell also recruited apprentices, known as "Senior Fellows," who, for a $3,500 fee, could receive training on how to market the U.S. Sources strategy to their own clients.

What might be surprising to some readers is how numerous professional tax protestors are. As an in-house lawyer, it is not unusual to get a letter, once a year or so, from a former employee who writes with the benefit of one of these scam artists to tell you why the company should not have issued him a W-2. The last one I received, for example, claimed that the money the employee was paid by the company was "remuneration" and not "income" and hence was exempt from withholding, etc. Helpfully, these letters are usually accompanied by several hundred pages of utterly irrelevant and ridiculous briefs and magazine articles purporting to "prove" the accuracy the protestor's position. (My last letter even included a transcript of a hearing in which a tax protestor was arguing with a judge over whether he violated the terms of his parole; I still haven't figured that one out).

The tax protestors are not only numerous, but brazen. One organization, the Save-A-Patriot Fellowship, offers its members a contract of insurance whereby the organization agrees to provide up to $10,000 in reimbursement for attorneys' fees and costs in defending the member if the member is prosecuted for income tax violations after following SAPF's process for avoiding taxes.

To be clear, the SAPF doesn't actually take or disburse "money" but rather only FRNs. If you're not familiar with FRNs, the SAPF explains that they are "the proper term for the fiat currency that most Americans commonly refer to as "dollars.""

Although they advertise openly, law enforcement has strangely permitted many of these groups to continue. For more background, this website contains a rogue's gallery of tax protest organizations and their exploits.



Rafael Mangual
Project Manager,
Legal Policy

Katherine Lazarski
Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.