Some individuals argue that they have rejected citizenship in the United States in favor of state citizenship; therefore, they are relieved of their federal income tax obligations. A variation of this argument is that a person is a free born citizen of a particular state and thus was never a citizen of the United States. The underlying theme of these arguments is the same: the person is not a United States citizen and is not subject to federal tax laws because only United States citizens are subject to these laws.
The Law: The Fourteenth Amendment to the United States Constitution defines the basis for United States citizenship, stating that “[a]ll persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside.” The Fourteenth Amendment therefore establishes simultaneous state and federal citizenship. Claims that individuals are not citizens of the United States but are solely citizens of a sovereign state and not subject to federal taxation have been uniformly rejected by the courts. The IRS has warned taxpayers of the consequences of making this frivolous argument. Rev. Rul. 2007-22, 2007-1 C.B. 866; Notice 2010-33, 2010-17 I.R.B. 609.
In a variation of this argument, taxpayers argue that although they are citizens of the United States, for the purposes of the Internal Revenue Code they are non-resident aliens and are subject to taxation only on income that is connected with the conduct of a trade or business. The 11th Circuit rejected this contention as frivolous.
Relevant Case Law:
Taliaferro v. Freeman, 595 F.App’x 961, 962-63 (11th Cir. 2014) – the 11th Circuit upheld the lower court’s dismissal of Mr. Taliaferro’s complaint seeking to enjoin the IRS from collecting taxes assessed against him. The court rejected as meritless his argument that, despite his U.S. citizenship, he is, for purposes of the tax code, a nonresident alien who is subject to taxation only on income that is connected with the conduct of a trade or business.
United States v. Bowden, 402 F. App’x 967 (5th Cir. 2010) – in denying an appeal of a sentence for tax evasion, the 5th Circuit rejected the taxpayer’s argument that he was a sovereign and not subject to the laws of the United States.
United States v. Drachenberg, 623 F.3d 122 (2d Cir. 2010) – the 2nd Circuit affirmed Drachenberg’s conviction for tax evasion and conspiracy to defraud the United States and rejected his argument that the federal courts lacked jurisdiction because he was not a citizen of the United States.
United States v. Hilgeford, 7 F.3d 1340, 1342 (7th Cir. 1993) – the 7th Circuit rejected "shop worn" argument that defendant is a citizen of the "Indiana State Republic" and therefore an alien beyond the jurisdictional reach of the federal courts.
United States v. Gerads, 999 F.2d 1255, 1256 (8th Cir. 1993) – the 8th Circuit rejected the Gerads’ contention that they were “not citizens of the United States, but rather ‘Free Citizens of the Republic of Minnesota’ and, consequently, not subject to taxation” and imposed sanctions “for bringing this frivolous appeal based on discredited, tax-protester arguments.”
United States v. Sloan, 939 F.2d 499, 500 (7th Cir. 1991) – the 7th Circuit affirmed a tax evasion conviction and rejected Sloan’s argument that the federal tax laws did not apply to him because he was a “freeborn, natural individual, a citizen of the State of Indiana, and a ‘master’ – not ‘servant’ – of his government.”
United States v. Ward, 833 F.2d 1538, 1539 (11th Cir. 1987) – the 11th Circuit found Ward’s contention that he was not an “individual” located within the jurisdiction of the United States to be “utterly without merit” and affirmed his conviction for tax evasion.
Waltner v. Commissioner, T.C. Memo. 2014-35, 107 T.C.M. (CCH) 1189 (2014) – the court dismissed the possibility of being a citizen of a state but not the United States as “nonsensical” and “backwards; one cannot be a citizen of a State without also being a citizen of the United States. Indeed, citizenship in the United States is “paramount and dominant” over State citizenship.”
Kay v. Commissioner, T.C. Memo. 2010-59, 99 T.C.M. (CCH) 1236 (2010) – the court imposed a $500 penalty under section 6673(a) against James Kay for raising frivolous arguments in the proceeding, including that he “was not born a [U.S.] taxpayer” and that the United States may not tax him because “the United States is a corporation” to which he holds no “allegiance.”
Other Cases: United States v. Sileven, 985 F.2d 962 (8th Cir. 1993); Nevius v. Tomlinson, 113 A.F.T.R.2d 2014-1872 (W.D. Miss. 2014); O'Driscoll v. IRS, 1991 U.S. Dist. LEXIS 9829 (E.D. Pa. Jul. 16, 1991); Bruhwiler v. Commissioner, T.C. Memo. 2016-18, 111 T.C.M. (CCH) 1071 (2016); Carlson v. Commissioner, T.C. Memo. 2012-76, 103 T.C.M. (CCH) 1408 (2012); Callahan v. Commissioner, T.C. Memo. 2010-201, 100 T.C.M. (CCH) 225 (2010); Rice v. Commissioner, T.C. Memo. 2009-169, 98 T.C.M. (CCH) 40 (2009); Knittel v. Commissioner, T.C. Memo. 2009-149, 97 T.C.M. (CCH) 1837 (2009); BlandBarclay v. Commissioner, T.C. Memo. 2002-20, 83 T.C.M. (CCH) 1119, 1121 (2002); Marsh v. Commissioner, T.C. Memo 2000-11, 79 T.C.M. (CCH) 1327 (2000); Solomon v. Commissioner, T.C. Memo. 1993-509, 66 T.C.M. (CCH) 1201, 1202-03 (1993).
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