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(For Frank ‘Austin’ England III) 
(Continuing where I left off)

In the event the United States secures a favorable judgment on the claim, it may be filed as a lien, per 28 U.S.C. § 3201:

(a) Creation. – A Judgment in a civil action shall create a lien on all real property of a judgment debtor on filing a certified copy of the abstract of the judgment in the manner in which a notice of tax lien would be filed under paragraph (1) and (2) of section 6323(f) of the Internal Revenue Code of 1986. A lien created under this paragraph is for the amount necessary to satisfy the judgment, including costs and interest.

Enforcement, execution and other particulars are prescribed by §§ 3202, etc., and garnishment by § 3205. These are all post-judgment remedies. The alternative administrative collection process preserved by 28 U.S.C. § 3003(b) vests the “delegate” of the Secretary of the Treasury (26 U.S.C. § 7701(a)(12)) with pre-judgment and post-judgment collection authority within internal revenue districts established in compliance with requirements of 26 U.S.C. § 7621 and Executive Order #10289, as amended.8 The U.S. Marshal for the judicial district would otherwise be responsible for execution.
(Foot Note 8)
  • This hair-splitting is essential to understandingof lawful judicial process as courts of the United States must sit either as admiralty and maritime courts or courts of common law – one jurisdiction is exclusive of the other. In another of his precedent decisions, former Chief Justice John Marshall addressed the matter in definitive terms. In The Sarah, 21 U.S. 391, 5 L.Ed. 644, 8 Wheat 391 (1823), he stated the following:
    By the act constituting the judicial system of the United States, the District Courts are Courts both of common law and admiralty jurisdiction. In the trial of all cases of seizure, on land, the Court sits as a Court of common law. In cases of seizure made on waters navigable by vessels of ten tons burthen and upwards, the Court sits as a Court of Admiralty. In all cases at common law, the trial must be by jury. In cases of admiralty and maritime jurisdiction, it has been settled, in the cases of United States v. La Vengeance, (reported in 3 Dallas’ Rep. 297.) The Sally, (in 2 Cranch’s Rep. 406.) and United States v. The Schooner Betsey and Charlotte, (in 4 Cranch’s Rep. 443.) that the trial is to be by the Court.  Although the two jurisdictions are vested in the same tribunal, tribunal, they are as distinct from each other as if they were vested in different tribunals, and can no more be blended, than a Court of Chancery with a Court of common law.

The Court for the Louisiana District, was sitting as a Court of Admiralty; and when it was shown that the seizure was made on land, its jurisdiction ceased. The libel ought to have been dismissed, or amended, by charging that the seizure was made on land.

The direction of a jury, in a case where the libel charged a seizure on water, was irregular; and any proceeding of the Court, as a Court of Admiralty, after the fact that the seizure was made on land appeared, would have been a proceeding without jurisdiction.

The Fifth, Sixth and Seventh Amendments preclude and condemn admiralty and maritime seizures on land within States of the Union. See Wayman v. Southard, cited supra. Therefore, the in rem action prescribed by 26 U.S.C. § 7323 cannot pass muster where it involves property “seized” on land within States of the Union; the Internal Revenue Service, when and if the agency has a legitimate claim, must file a civil action in a court of competent jurisdiction (26 U.S.C. § 7402) and, with colorable exceptions prescribed at § 3003(b), proceed according to the general procedure prescribed in the Federal Debt Collection Procedure Act (26 U.S.C. §§ 3001, et seq.).

In the Internal Revenue Manual for the Chief Council of the Criminal Division, the right to trial by jury is preserved at § (04-08-1998):

2. Jury Trials. A forfeiture arising from a seizure of land is a common-law action in rem and not an action within the admiralty jurisdiction of the district court; therefore, the Seventh Amendment applies so as to guarantee a jury trial. See, C.J. Hendry Co. v. Moore, 318 U.S. 133 (1943) and United States v. One 1976 Mercedes-Benz 280S, 618 F.2d 453 (7th Cir. 1980). The Supplemental Rules for Certain Admiralty and Maritime Claims are nevertheless applicable because these rules also apply to actions analogous to maritime actions in rem. See Rules A and C, Supplemental Rules for Certain Admiralty and Maritime Claims; 28 U.S.C. § 2461.

Suffice it to say that the seizure or forfeiture contemplated by § (04-08-1998) presumes an underlying criminal cause of action that has an admiralty or maritime nexus, i.e., that the act or omission that gives rise to the cause of action falls within the scope of Congress’ authority to regulate international commerce. Without that nexus, the court would have to set as a court of common law; per The Sarah, supra, common law and admiralty jurisdictions are mutually exclusive. Courts of the United States must convene under the “arising under” clause or the admiralty and maritime clause; they are prohibited from exercising hybrid or mixed jurisdictions.

All Internal Revenue Service criminal seizure authority falls under delegation orders 157 and 158. The former applies to Internal Revenue Code seizures under authority of 26 U.S.C. §§ 7301 & 7302; the latter applies to money laundering statutes in Titles 18 & 31. Both orders authorize seizures under admiralty criminal (Rule 41, Federal Rules of Criminal Procedure) and/or civil (Supplemental Admiralty and Maritime Rules) procedure. The reason is because both the money laundering statutes in Titles 18 & 31 and IRS’ Internal Revenue Code seizure authority link to controlled substance laws in Titles 19 & 21, with basic procedure prescribed in Title 19. The link for money laundering sections in Titles 18 & 31 is clearly states in the introduction to the Memorandum of Understanding Regarding Money Laundering Investigation (IRM Exhibit 31.8.1-3 (06-29-1994):

This Memorandum of Understanding (MOU) constitutes an agreement among the Secretary of the Treasury ( “the Secretary” ), the Attorney General and the Postmaster General as to the investigatory authority and procedures of Treasury and Justice bureaus and the Postal Service under 18 U.S.C. sections 1956 and 1957, as amended by the Anti-Drug Abuse Act of 1988, Pub. L. 100-690 (Nov. 18, 1988). This replaces a previous MOU on this subject between the Secretary and the Attorney General effective May 20, 1987.

The memorandum of understanding, delegation orders #157 & #158, and IRS’ sole regulation governing seizures and forfeitures, 26 CFR § 403, all link to Title 19 procedure and drug laws in admiralty and maritime jurisdiction. Although the subject is beyond the scope of this memorandum, it follows that any crime prosecuted by the Internal Revenue Service is predicated on the underlying presumption that it is a drug-related offense. Therefore, courts in which IRS is the principal agency responsible for prosecution are convened as admiralty rather than common law courts. This practice is contrary to substantive rights secured by the Fifth, Sixth and Seventh Amendments, assuming admiralty jurisdiction cannot be affirmatively established in record, as these amendments secure due process in the course of the common law. See Wayman v. Southard, cited supra.

It is useful to examine the genesis of 26 U.S.C.§§ 6321, et seq. (lien) and §§ 6331, et seq. (levy and distraint) as these sections all originate in 1860’s legislation applicable exclusively to alcohol, cotton, and in some instances, tobacco. This is the reason that the only survivingregulation listed in the Parallel Table of Authorities and Rules for §§ 6321 & 6331 is 27 CFR § 70, which is under Bureau of Alcohol, Tobacco and Firearms jurisdiction, as applicable to Subtitle E of the Internal Revenue Code.

Chapter 75, Subchapter C, Part I of the Code, “property subject to forfeiture,” is specific with respect to what property may be forfeited in the in rem action specified by 26 U.S.C. § 7323. There are two primary categories: § 7301 obviously applies to production and distribution of alcohol products9 where § 7302, property used in violation of internal revenue laws, which is not quite so obvious, applies to alcohol products and controlled substances in admiralty and maritime jurisdiction of the United States (foreign commerce). The two sections follow:§ 7301. Property subject to tax.(a) Taxable articles. Any property on which, or for or in respect whereof, any tax is imposed by this title which shall be found in the possession or custody or within the control of any person, for the purpose of being sold or removed by him in fraud of the internal revenue laws, or with design to avoid payment of such tax, or which is removed, deposited, or concealed, with intent to defraud the United States of such tax or any part thereof, may be seized, and shall be forfeited to the United States.

(b) Raw materials. All property found in the possession of any person intending to manufacture the same into property of a kind subject to tax for the purpose of selling such taxable property in fraud of the internal revenue laws, or with design to evade the payment of such tax, may also be seized, and shall be forfeited to the United States.

(c) Equipment. All property whatsoever, in the place or building, or any yard or enclosure, where the property described in subsection (a) or (b) is found, or which is intended to be used in the making of property described in subsection (a), with intent to defraud the United States of tax or any part thereof, on the property described in subsection (a) may also be seized, and shall be forfeited to the United States.

(d) Packages. All property used as a container for, or which shall have contained, property described in subsection (a) or (b) may also be seized, and shall be forfeited to the United States.

(e) Conveyances. Any property (including aircraft, vehicles, vessels, or draft animals) used to transport or for the deposit or concealment of property described in subsection (a) or (b), or any property used to transport or for the deposit or concealment of property which is intended to be used in the making or packaging of property described in subsection (a), may also be seized, and shall be forfeited to the United States.

§ 7302. Property used in violation of internal revenue laws.  It shall be unlawful to have or possess any property intended for use in violating the provisions of the internal revenue laws, or regulations prescribed under such laws, or which has been so used, and no property rights shall exist in any such property. A search warrant may issue as provided in chapter 205 of title 18 of the United States Code and the Federal Rules of Criminal Procedure for the seizure of such property. Nothing in this section shall in any manner limit or affect any criminal or forfeiture provision of the internal revenue laws, or of any other law. The seizure and forfeiture of any property under the provisions of this section and the disposition of such property subsequent to seizure and forfeiture, or the disposition of the proceeds from the sale of such property, shall be in accordance with existing laws or those hereafter in existence relating to seizures, forfeitures, and disposition of property or proceeds, for violation of the internal revenue laws.
(Foot Note 9)
Levy and distraint (26 U.S.C. § 6331) are seizure and forfeiture actions. It stands to reason that where Congress specifies what property is subject to forfeiture, the bureau or agency responsible for administration of internal revenue laws may not expand the object of its authority beyond what is authorized by Congress. As previously seen, the only expanded authority in § 6331 specifically applies to government agencies and personnel. There is no corresponding expansion of § 6321 (lien), so it is obvious that a judgment lien (28 U.S.C. § 3201) must be secured against government personnel when and if a government employee is liable for delinquent tax debts.Per The Sarah, supra, simply declaring that the seizure, levy or whatever was on land deprives the court of admiralty and maritime jurisdiction. Assuming the government has sufficient evidence to sustain a claim where there is no maritime nexus, the court must sit as a court of common law, thereby preserving substantive due process rights secured by the Fifth, Sixth and Seventh Amendments. Both of these sections are predicated on underlying presumptions of criminal conduct; BATF administers § 7302 under 27 CFR § 24, 72 & 252 where IRS colorably administers the section under 26 CFR § 403. Both 27 CFR § 72 and 26 CFR § 403 are applicable solely in admiralty and maritime jurisdiction of the United States.
(Foot Note 10)

The acid test to determine whether or not judicial due process is required where liabilities are contested is to examine the requirement for judicial process in admiralty and maritime jurisdiction and common law jurisdiction.

Particulars concerning requirements for judicial forfeiture of property seized by the Internal Revenue Service under the presumption that the property has been used in violation of internal revenue laws are at 26 CFR § 403.26(b):

(b) Judicial condemnation. Personal property seized as subject to forfeiture under the internal revenue laws and this part which has an appraised value of more than $ 2,500 and such seized property which has an appraised value of $ 2,500 or less with respect to which a bond has been filed pursuant to paragraph (a)(4) of this section, shall be forfeited to the United States in judicial condemnation proceedings, as authorized by the Director, General Legal Services Division, Office of Chief Counsel, Internal Revenue Service, or his delegate.

The Internal Revenue Service is successor of the Bureau of Internal Revenue. Original BIR authority as agent of government of the United States was enforcement of the China Trade Act (1904) in insular possessions of the United States. The China Trade Act was shell legislation that accommodated trade treaties relating to opium, cocaine and citric wines. Although the China Trade Act itself has been repealed, there are still many China Trade Act corporations, and older treaties have generally been displaced by more inclusive treaties that apply to the spectrum of what are classified as controlled dangerous substances. This residual IRS jurisdiction is preserved by 26 CFR § 403, and virtually all IRS seizures are predicated on the underlying presumption that a drug-related commercial crime listed at § 403.38(d)(1) has been committed:(1) Offenses against the revenue laws: burglary; counterfeiting, forgery; kidnapping; larceny; robbery; illegal sale or possession of deadly weapons; prostitution (including soliciting, procuring, pandering, white slaving, keeping house of ill fame, and like offenses); extortion; swindling and confidence games; and attempting to commit, conspiring to commit, or compounding any of the foregoing crimes. Addition to narcotic drugs and use of marijuana will be treated as commercial crimes.

Even in this colorable admiralty jurisdiction, property valued in excess of $2,500,or property valued at less than $2,500 where there is a claim against it, must be judicially forfeited.  Per the Internal Revenue Manual, the dollar limit prescribed by 26 CFR § 403.38(d)(1) are obsolete since promulgation of 26 U.S.C. § 7325, personal property valued at $100,000 or less, and a $500,000 minimum for money laundering seizures. However, provisions for remission or mitigation of forfeitures are still in effect (See Internal Revenue Manual §, and if the seizure is on land, simply declaring that it was on land forces judicial forfeiture with trial by jury even if there is a legitimate maritime cause of action. See IRM §, supra. Providing the rightful owner contests a seizure, the Internal Revenue Service doesn’t have lawful authority to convert as much as a toothpick without judicial due process of law.The at law or common law trail picks up with the sentence relating to government agencies and personnel grafted into 26 U.S.C. § 6331: “Levy may be made upon the accrued salary or wages of any officer, employee, or elected official, of the United States, the District of Columbia, or any agency or instrumentality of the United States or the District of Columbia, by serving a notice of levy on the employer (as defined in section 3401(d)) of such officer, employee, or elected official.”

(Foot Note 11)As is the case for the Federal Debt Collection Procedure Act, which is classified in Title 28 of the United States Code, administration of tax and debt collection for government agencies and personnel isn’t in the Internal Revenue Code. It is classified at 5 U.S.C. §§ 5512 through 5520a.  A government employee may voluntarily consent to garnishment in the event he has a debt owing to the United States. He must sign a waiver to do so. However, if the employee contests the obligation and otherwise does not consent to administrative garnishment, the Attorney General must initiate a civil action for collection. This requirement is set out at 5 U.S.C. § 5512:

§ 5512. Withholding pay; individuals in arrears

(a) The pay of an individual in arrears to the United States shall be withheld until he has accounted for and paid into the Treasury of the United States all sums for which he is liable.

(b) When pay is withheld under subsection (a) of this section, the employing agency, on request of the individual, his agent, or his attorney, shall report immediately to the Attorney General the balance due; and the Attorney General, within 60 days, shall order suit to be commenced against the individual.

Although the language is convoluted, § 5512(b) preserved the Fifth Amendment judicial due process clause even for government personnel.12 When challenged, the creditor, even government of the United States, must prove the claim in a court of competent jurisdiction. If the claim is contested, the government’s fiduciary responsibility as employer protects the employee’s claim on compensation until the controversy is adjudicated via judicial due process of law in the course of the common law. All cases and controversies “arising under” the Constitution and laws of the United States must be resolved by judicial due process of law. Just as the Constitution vests Congress with exclusive legislative authority via Article I § 8, clause 18, it vests exclusive jurisdiction for Article III courts of the United States to adjudicate cases and controversies “arising under” the Constitution and laws of the United States.

(Foot Note 12)The only way the Internal Revenue Service or any other administrative office or agency may administratively use forced collection instruments without a judgment from a court of competent jurisdiction is when the target of the collection action knowingly and intentionally waives his or her substantive rights13 and thereby consents to administrative collection. This principle is fundamental to the so-called republican form of government. Legislative, administrative and judicial departments are co-equal branches and one may not perform functions vested in the other. Where the administrative branch has exclusive responsibility for administering laws enacted by Congress, only the judicial may authorize anything beyond voluntary compliance when issues of fact and law are contested or compliance isn’t otherwise voluntary.

(Foot Note 13)The relation-back doctrine resolves otherwise ambiguous lien and levy powers codified at §§ 6321, et seq., & 6331, et seq., of the Internal Revenue Code. Cause for a lien or levy may arise at the time someone fails to perform a duty imposed by internal revenue laws of the United States, but the encumbrance, seizure, garnishment or whatever is not perfected (does not come into lawful existence and is not enforceable) until it has been properly adjudicated by a court of competent jurisdiction. If a seizure is on land within States of the Union, the court must sit as a court of common law.An obvious question necessarily needs to be resolved: Do regulations governing Internal Revenue Service conduct preserve the Fifth Amendment due process clause?

The answer is affirmative. The first rule of administrative appeal procedure at 26 CFR § 601.106(f)(1) speaks to the matter:

(1) Rule I. An exaction by the U.S. Government, which is not based upon law, statutory or otherwise, is a taking of property without due process of law, in violation of the Fifth Amendment to the U.S. Constitution. Accordingly, an Appeals representative in his or her conclusions of fact or application of the law, shall hew to the law and the recognized standards of legal construction. It shall be his or her duty to determine the correct amount of the tax, with strict impartiality as between the taxpayer and the Government, and without favoritism or discrimination as between taxpayers. [Underscore added for emphasis]

With or without the intentionally vague regulation, the Fifth Amendment due process clause speaks to the matter in unequivocal terms: No person shall be deprived of life, liberty or property without due process of law. Until such time as the amendment is repealed, it serves as a cornerstone to secure our republican form of government. The relation-back doctrine resolves the mystery of how the government’s interest arising from nonperformance required by a statute must be perfected. The executive branch cannot unilaterally proceed against life, liberty or property of the American people until a claim or other cause of action has been perfected through litigation in a court of competent jurisdiction.

In Ex Parte Mulligan, 71 U.S. 2, 18 L.Ed. 281, 4 Wall 2, at 104 (1866), the U.S. Supreme Court addressed this very issue:

We submit that a person not in the military or naval service cannot be punished at all until he has had a fair, open, public trial before an impartial jury, in an ordained and established court, to which the jurisdiction has been given by law to try him for that specific offence.

Our proposition ought to be received as true without any argument to support it; because, if that, or something precisely equivalent to it, be not a part of our, then the country is not a free country. Nevertheless, we take upon ourselves the burden of showing affirmatively not only that it is true, but that it is immovably fixed in the very framework of the government, so that it is impossible to detach it without destroying the whole political structure under which we live.

In the first place, the self-evident truth will not be denied that the trial and punishment of an offender against the government is the exercise of judicial authority. That is a kind of authority which would be lost by being diffused among the masses of the people. A judge would be no judge if everybody else were a judge as well as he. Therefore, in every society, however rude or however perfect its organization, the judicial authority is always committed to the hands of particular persons, who are trusted to use it wisely and well; and their authority is exclusive; they cannot share it with others to whom it has not been committed. Where, then, is the judicial power in this country? Who are the depositaries of it here? The Federal Constitution answers that question in very plain words, by declaring that “the judicial power of the United States shall be vested in one Supreme Court, and in such inferior courts as Congress may from time to time ordain and establish.” Congress has, from time to time, ordained and established certain inferior courts; and, in them, together with the one Supreme Court to which they are subordinate, is vested all the judicial power, properly so called, which the United States can lawfully exercise. At the time the General Government was created, the States and the people bestowed upon that government a certain portion of the judicial power which otherwise would have remained in their own hands, but they gave it on a solemn trust, and coupled the grant of it with this express condition, that it should never be used in any way but one; that is, by means of ordained and established courts. Any person, therefore, who undertakes to exercise judicial power in any other way, not only violates the law of the land, but he tramples upon the most important part of that Constitution which holds these States together.

We all know that it was the intention of the men who founded this Republic to put the life, liberty, and property of every person in it under the protection of a regular and permanent judiciary, separate, apart, distinct, from all other branches of the government, [***107] whose sole and exclusive business it should be to distribute justice among the people according to the wants and needs of each individual. It was to consist of courts, always open to the complaint of the injured, and always ready to hear criminal accusations when founded upon probable cause; surrounded with all the machinery necessary for the investigation of truth, and clothed with sufficient power to carry their decrees into execution.

For a time during the Civil War, normal judicial process was suspended. Congress authorized the President to suspend the writ of habeas corpus, and through the war it was suspended in many areas. During the time of armed conflict, the executive branch exercised extraordinary powers. When hostilities ceased, special procedure was prescribed to expedite normalization and the writ of habeas corpus was reinstated. In the Milligan decision, the Supreme Court took the opportunity to declare and re-establish the proper role of the judiciary. The meaning of “due process of law” was no mystery for justices who joined in the decision. The requirement for a court with an independent judge to dispense due process of law is so obvious as to be classified as self-evident truth that shouldn’t need further explanation.In Wayman v. Southard, supra, former Chief Justice John Marshall undertook to answer two questions relating to jurisdiction of federal courts: (1) What does the Constitution empower Congress to do so far as implementing Article III jurisdiction by way of legislation for courts of the United States; and (2) What has Congress done? Almost in passing, Marshall stated the obvious: With ratification of the Fifth, Sixth and Seventh Amendments, Congress “had no choice.” Where the judiciary act of 1789 did not definitively establish forms of action, the 1792 judiciary act, enacted subsequent to ratification of the Bill of Rights, specified that all actions at law would proceed in the course of the common law while equity, admiralty and maritime cases would proceed in the course of the civil law.
(Foot Note 14)
The same two questions are as relevant in the twenty-first century as they were in the nineteenth: What does the Constitution empower Congress to do and what has Congress done? Since declaratory and restrictive clauses in the First, Fourth, Fifth, Sixth and Seventh Amendments haven’t been amended or repealed, it is just as obvious that the contemporary Congress has no choice when it comes to preserving substantive rights. Thus, Marshall’s explanation of relation-back doctrine in United States v. Grundy & Thornburgh, 7 U.S. 337, 3 Cranch 337, 350-351, 2 L. Ed. 459 (1806) was valid in 1890 when Justice Gray wrote the opinion in United States v. Stowell, 133 U.S. at 16-17: “By the settled doctrine of this court, whenever a statute enacts that upon the commission of a certain act specific property used in or connected with that act shall be forfeited, the forfeiture takes effect immediately upon the commission of the act; the right to the property then vests in the United States, although their title is not perfected until judicial condemnation; the forfeiture constitutes a statutory transfer of the right to the United States at the time the offence is committed; and the condemnation, when obtained, relates back to that time, and avoids all intermediate sales and alienations, even to purchasers in good faith.”  The relation-back doctrine was also preserved by the U.S. Supreme Court in 1993 via the Buena Vista, decision, 507 U.S. 111; 113 S.Ct. 1126; 122 L.Ed. 2d 469.

Unfortunately, there would appear to be contrary judicial decisions extrapolated from Bull v. United States, 295 U.S. 247, at 259260, 55 S.Ct. 695, 79 L.Ed. 1421 (1935):A tax is an exaction by the sovereign, and necessarily the sovereign has an enforceable claim against every one within the taxable class for the amount lawfully due from him. The statute prescribes the rule of taxation. Some machinery must be provided for applying the rule to the facts in each taxpayer’s case, in order to ascertain the amount due. The chosen instrumentality for the purpose is an administrative agency whose action is called an assessment. The assessment may be a valuation of property subject to taxation which valuation is to be multiplied by the statutory rate to ascertain the amount of tax. Or it may include the calculation and fix the amount of tax payable, and assessments of federal estate and income taxes are of this type. Once the tax is assessed the taxpayer will owe the sovereign the amount when the date fixed by law for payment arrives. Default in meeting the obligation calls for some procedure whereby payment can be enforced. The statute might remit the Government to an action at law wherein the taxpayer could offer such defense as he had. A judgment against him might be collected by the levy of an execution. But taxes are the life-blood of government, and their prompt and certain availability an imperious need. Time out of mind, therefore, the sovereign has resorted to more drastic means of collection. The assessment is given the force of a judgment, and if the amount assessed is not paid when due, administrative officials may seize the debtor’s property to satisfy the debt.The Bull case concerned Mr. Bull’s estate in a partnership due to the Commissioner of Internal Revenue double-dipping. The executor of Bull’s estate paid income tax on partnership earnings the year following Mr. Bull’s death, then several years later the same earnings were fully assessed as estate taxes. The estate executor paid both assessments then sued for recovery of the excessive tax. Government attorneys attempted to avoid repayment, alleging that recoupment was prohibited by the statue of limitations.

At no time was there an effort to levy or seize property belonging to the estate or the executor. The Supreme Court comment cited above was merely “dicta” (extraneous comment) concerning effects of assessment and the “pay now, sue later” policy that is generally prescribed for recoupment when a liability is disputed. The notion that an assessment is or can be a judgment that rises to the level of a judicial order must be understood as an analogous statement. In reality, an assessment, even when there is a lawful, procedurally proper assessment, merely creates a statutory presumption that shifts the burden of proof to whomever it is against. By creating a presumption, the assessment has characteristics on the order of a judgment, but it is still an administrative act and would be repugnant to the Fifth Amendment if clothed with true judicial character. In fact, presumptions such as those created by lawful, procedurally proper assessments are rebuttable – Congress has no authority to create conclusive, irrefutable presumptions, much less authorize enforceable administrative judgments.

(Foot Note 15)

Irrefutable presumptions were addressed in Heiner v. Donnan 285 U.S. 312, 52 S.Ct. 358, 76 L.Ed. 772 (1932). The case was contemporary with the Bull decision:The executors paid the tax, and, after rejection of a claim for refund, brought this action in the federal district court for the western district of Pennsylvania to recover the amount of the tax attributable to the inclusion of the property in question by the commissioner. The trial court found that neither the transfer in trust nor the advancement was made in contemplation of death. Judgment was rendered in favor of the executors on the ground that the foregoing provision of § 302 (c) was unconstitutional as contravening the due process clause of the Fifth Amendment, and void as being repugnant to other sections of the act. 48 F.2d 1058. An appeal was taken, and the circuit court of appeals has certified to this court two questions of law upon which instruction is desired:

“1. Does the second sentence of section 302 (c) of the revenue act of 1926 violate the due process clause of the fifth amendment to the Constitution of the United States?

“2. If the answer to the first question be in the negative, is the second sentence of section 302 (c) of the revenue act of 1926 void because repugnant to sections 1111, 1113 (a), 1117, and 1122 (c) of the same act?”

The Heiner case involved the estate of a reasonably young man who put money in trusts for minor children and evidently gave some directly to an older son. Not quite two years later, he was killed by a lightening strike. The estate tax section at issue was from the 1926 revenue act; it created a conclusive presumption that any gift given in the two years prior to death should be taxed as part of the estate. If the conclusive presumption were permitted to stand, it would have the effect of taxing the estate additional tax based on money set aside for and given to the children, thereby reducing the estate that went to the executor. The decision hinged on the age of the deceased, who at the time he established the trusts and gave money to his children wouldn’t have been contemplating death. The Supreme Court ruled that conclusive presumptions that prohibit challenges are unconstitutional:

There is no doubt of the power of Congress to provide for including in the gross estate of a decedent, for purposes of the death tax, the value of gifts made in contemplation of death; and likewise no doubt of the power of that body to create a rebuttable presumption that gifts made within a period of two years prior to death are made in contemplation thereof. But the presumption here created is not of that kind. It is made definitely conclusive — incapable of being overcome by proof of the most positive character. Thus stated, the first question submitted is answered in the affirmative by Schlesinger v. State of Wisconsin, 270 U.S. 230, and Hoeper v. Tax Commission of Wis., 284 U.S. 206. The only difference between the present case and the Schlesinger case is that there the statute fixed a period of six years as limiting the application of the presumption, while here it is fixed at two; and there the Fourteenth Amendment was involved, while here it is the Fifth Amendment. The length of time was not a factor in the case. The presumption was held invalid upon the ground that the statute made it conclusive without regard to actualities, while like gifts at other times were not thus treated; and that there was no adequate basis for such a distinction. “The presumption and consequent taxation,” the court said (p. 240), “are defended upon the theory that, exercising judgment and discretion, the legislature found them necessary in order to prevent evasion of inheritance taxes. That is to say, ‘A’ may be required to submit to an exactment forbidden by the Constitution if this seems necessary in order to enable the State readily to collect lawful charges against ‘B.’ Rights guaranteed by the federal Constitution are not to be so lightly treated; they are superior to this supposed necessity. The State is forbidden to deny due process of law or the equal protection of the laws for any purpose whatsoever.”  The Schlesinger case has since been applied many times by the lower federal courts, by the Board of Tax Appeals, and by state courts; and none of them seem to have been at any loss to understand the basis of the decision, namely, that a statute which imposes a tax upon an assumption of fact which the taxpayer is forbidden to controvert, is so arbitrary and unreasonable that it cannot stand under the Fourteenth Amendment.  Nor is it material that the Fourteenth Amendment was involved in the Schlesinger case, instead of the Fifth Amendment, as here. The restraint imposed upon legislation by the due process clauses of the two amendments is the same. Coolidge v. Long, 282 U.S. 582, 596. That a federal statute passed under the taxing power may be so arbitrary and capricious as to cause it to fall before the due process of law clause of the Fifth Amendment is settled. Nichols v. Coolidge, 274 U.S. 531, 542; Brushaber v. Union Pacific R. Co. , 240 U.S. 1, 24-25; Tyler v. United States, supra, p. 504.

In Hoeper v. Tax Commission, supra, this court had before it for consideration a statute of Wisconsin which provided that in computing the amount of income taxes payable by persons residing together as members of a family, the income of the wife should be added to that of the husband and assessed to and payable by him. We held that, since in law and in fact the wife’s income was her separate property, the state was without power to measure his tax in part by the income of his wife. At page 215 we said:

“We have no doubt that, because of the fundamental conceptions which underlie our system, any attempt by a state to measure the tax on one person’s property or income by reference to the property or income of another is contrary to due process of law as guaranteed by the Fourteenth Amendment. That which is not in fact the taxpayer’s income cannot be made such by calling it income. Compare Nichols v. Coolidge, 274 U.S. 531, 540.”

The suggestion of the state court that the provision was valid as necessary to prevent frauds and evasions of the tax by married persons was definitely rejected on the ground that such claimed necessity could not justify an otherwise unconstitutional exaction. [Underscore added for emphasis]

A lawful, procedurally proper assessment has the same character as any other presumption created by statute. It may shift the burden of proof, but the government’s right of action is merely the right to perfect the claim, and subsequently execute a “choate” lien, by securing favorable judgment from a court of competent jurisdiction. Depending on the cause of action, the claim may be perfected as an action at law under the “arising under” clause or an in rem action within admiralty and maritime jurisdiction of courts of the United States.> Administrative agencies simply do not have unilateral authority to encumber, seize or dispose of life, liberty or property without judicial due process of law. Even an IRS admiralty criminal forfeiture cannot be administratively executed if the seizure is on land; the victim is entitled to jury trial if he submits a claim and petitions for remission or mitigation.In light of the Heiner and Buena Vista decisions, and particularly in light of the Milligan decision, the Bull comment, which wasn’t essential to the ruling, must be understood as rhetorical. The claim that arises from § 6321 of the Internal Revenue Code is inchoate until there is a judgment from a court of competent jurisdiction, and any levy, seizure, garnishment or other adverse action predicated on an inchoate lien is a nullity as it is condemned by the Fifth Amendment due process clause. Fuentes v. Shevin, Attorney General of Florida, et al, and Ray Lien Construction, Inc. v. Jack M. Wainwrite, , cited extensively in the first portion of this memorandum, condemn administrative wage and bank account garnishments without judicial due process of law that complies with essentials of the due process clause.

Foot Notes
#8 There is no evidence that the Secretary of the Treasury has established internal revenue districts in States of the Union since promulgation of the Internal Revenue Code of 1954. It is more probable, but yet to be proven, that the Treasury Financial Management Service is “delegate” of the Secretary of the Treasury for purposes of 26 U.S.C. § 7701(a)(12)(A), and that the Internal Revenue Service is supposed to function in a support capacity only. Congress did not legislatively create IRS or its predecessor, the Bureau of Internal Revenue, so IRS’ “agency” and “delegate” capacity is limited by operation of law. See the statement of IRS organization at 39 Fed. Reg. 11572, 1974-1 Cum. Bul. 440, 37 Fed. Reg. 20960, and the Internal Revenue Manual 1100 through the 1997 edition.
#9 Per the current Internal Revenue Manual, IRS has successfully used 26 U.S.C. § 7301 to prosecute cases involving gambling infractions, cases involving fuels, and cases involving 26 U.S.C. § 6050I infractions. However, where all underlying IRS authority presumes admiralty and maritime jurisdiction, convictions in these cases might all be vacated as void judgments, assuming a maritime nexus cannot be affirmatively established in record.

#10  Although it goes beyond the scope of this memorandum, there is a distinction between the “United States District Court” designated by 26 U.S.C. § 7323 and the “district court of the United States” designated by 26 U.S.C. § 7402. The former is a territorial or insular possession court where the latter is an Article III court of the United States. Insular possessions ceded following the Spanish-American War (1898) were under the civil law system when they were Spanish provinces. Congress elected to leave the civil law system in place in the newly acquired possessions as the cession treaty did not incorporate them in the constitutional scheme – they were not destined to become States of the Union. The civil law system is in many respects repugnant to the common law system of English-American heritage. See definition of “United States District Court” in Balzac v. Porto Rico, 258 U.S. 298 (1922), and definition of “District Court of the United States” in Mookini v. United States, 303 U.S. 201 (1938).

#11  The term “employee” is defined at 26 U.S.C. § 3401(c): “(c) Employee. For purposes of this chapter, the term ‘employee’ includes an officer, employee, or elected official of the United States, a State, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing. The term ‘employee’ also includes an officer of a corporation.” The corporation mentioned at the tail end of the definition is a corporation in which the United States has a proprietary interest, not a privately owned corporation.

#12  Historical and revision notes for § 5512 shed light on intent of the section: “In subsec. (b), reference to the ‘General Accounting Office’ is substituted for ‘accounting officers of the Treasury’ on authority of Act June 10, 1921, ch 18, title III, 42 Stat. 23. The words ‘on request of’ are substituted for ‘if required to do so by’ as more accurately reflecting the intent. Reference to the ‘Attorney General’ is substituted for ‘Solicitor of the Treasury’ and ‘Solicitor’ on authority of Act March 3, 1933, ch 212, § 16, 47 Stat. 1517; Ex. Or. No. 6166 of June 10, 1933 § 5; and Reorg. Plan No. 2 of 1950, 64 Stat. 1261.”

#13  Substantive rights. A right to the equal enjoyment of fundamental rights, privileges and immunities; distinguished from procedural rights.”

Substantive due process. Doctrine that due process clauses of the Fifth and Fourteenth Amendments to the United States Constitution require legislation to be fair and reasonable in content as well as application. Such may be broadly defined as the constitutional guarantee that no person shall be arbitrarily deprived of his life, liberty or property. The essence of substantive due process is protection from arbitrary and unreasonable action. Jeffries v. Turkey Run Consolidated School Dist., C.A.Ind., 492 F.2d 1, 3. See Due process of law. Both definitions fromBlack’s Law Dictionary, Sixth Edition.

#14  In many respects, the First Amendment right to redress and the Fourth Amendment restriction on searches and seizures are as important as due process of law secured by the Fifth, Sixth and Seventh, but the latter secure due process of law in the course of the common law where the First and Fourth aren’t “due process” amendments as such. The Fourth Amendment requirement for there being a complaint under oath or affirmation and a probable cause hearing before a warrant for search and/or seizure may be issued are substantive rights that precludes administrative agencies from seizing property or people without judicial orders, but that encumbrance lies beyond the scope of present consideration. The “oath or affirmation” must now be submitted in the form of a supporting affidavit. See Rule 3 of the Federal Rules of Criminal Procedure and 18 U.S.C. § 3045; the probable cause hearing and issuance of arrest warrants must comply with requirements of Rule 4 of the Federal Rules of Criminal Procedure; warrants for seizure of property must comply with Rule 41. Civil forfeiture arising from criminal causes is governed by Civil Supplemental Admiralty and Maritime Rules A through F.

#15  Requirements for lawful, procedurally proper assessments are prescribed by 26 CFR § 301.6203-1. In order for there to be a lawful, procedurally assessment, the assessment certificate must positively identify the taxpayer, the class or kind of tax, the amount, and the date of assessment. The date of assessment is the date on which an assessment officer signs the assessment certificate. Both 26 U.S.C. § 6203 and the regulation assure taxpayers of the right to secure copies of assessment certificates on request. There is no tax liability until the tax is assessed. For approximately three years there has been a coordinated effort to secure copies of assessment certificates but it appears that Internal Revenue Service assessment officers haven’t executed lawful, procedurally proper income tax assessment certificates for two decades or longer. The Parallel Table of Authorities and Rules does not list 26 CFR Part 1 or 31 authority for 26 U.S.C. § 6203 so it does not appear that IRS has authority to assess income taxes.