Some individuals and groups say the collection of Federal Income Taxes constitutes a “taking” of property without due process of law, in violation of the Fifth Amendment. Thus, any attempt by the IRS to collect federal income taxes owed by a taxpayer is unconstitutional.
"Shenanigans"
The Law: The Fifth Amendment to the United States Constitution provides that a person shall not be “deprived of life, liberty, or property, without due process of law . . . .” The United States Supreme Court stated that “it is . . . well settled that [the Fifth Amendment] is not a limitation upon the taxing power conferred upon Congress by the Constitution; in other words, that the Constitution does not conflict with itself by conferring, upon the one hand, a taxing power, and taking the same power away, on the other, by the limitations of the due process clause.” Brushaber v. Union Pacific R.R., 240 U.S. 1, 24 (1916). Further, the Supreme Court has upheld the constitutionality of the summary administrative procedures contained in the Internal Revenue Code against due process challenges on the basis that a post-collection remedy (e.g., a tax refund suit) exists and is sufficient to satisfy the requirements of constitutional due process. Phillips v. Commissioner, 283 U.S. 589, 595-97 (1931).
The Internal Revenue Code provides methods to ensure due process to taxpayers: (1) the “refund method,” set forth in section 7422(e) and 28 U.S.C. §§ 1341 and 1346(a), in which a taxpayer must pay the full amount of the tax and then sue for a refund in a federal district court or in the United States Court of Federal Claims; and (2) the “deficiency method,” set forth in section 6213(a), in which a taxpayer may, without paying the contested tax, petition the United States Tax Court to redetermine a tax deficiency asserted by the IRS. Courts have found that both methods provide constitutional due process.
In Rev. Rul. 2005-19 2005-1 C.B. 819 and in Notice 2010-33, 2010-17 I.R.B. 609, the IRS discussed this frivolous argument in more detail and warned taxpayers of the consequences of attempting to pursue a claim on these grounds.
For a discussion of frivolous tax arguments made in collection due process cases arising under sections 6320 and 6330, see Section II of this outline.
Relevant Case Law:Flora v. United States, 362 U.S. 145, 175 (1960) – the Supreme Court held that a taxpayer must pay the full tax assessment before being able to file a refund suit in district court, noting that a person has the right to appeal an assessment to the Tax Court “without paying a cent.”
Taliaferro v. Freeman, 595 F.App’x 961, 962-63 (11th Cir. 2014) - ordering sanctions against the taxpayer up to and including double the government’s costs, the 11th Circuit held that the taxpayer’s contention that IRS levies violate the Fifth Amendment right to due process was “simply without merit” and did not even warrant discussion.
The Internal Revenue Code provides methods to ensure due process to taxpayers: (1) the “refund method,” set forth in section 7422(e) and 28 U.S.C. §§ 1341 and 1346(a), in which a taxpayer must pay the full amount of the tax and then sue for a refund in a federal district court or in the United States Court of Federal Claims; and (2) the “deficiency method,” set forth in section 6213(a), in which a taxpayer may, without paying the contested tax, petition the United States Tax Court to redetermine a tax deficiency asserted by the IRS. Courts have found that both methods provide constitutional due process.
In Rev. Rul. 2005-19 2005-1 C.B. 819 and in Notice 2010-33, 2010-17 I.R.B. 609, the IRS discussed this frivolous argument in more detail and warned taxpayers of the consequences of attempting to pursue a claim on these grounds.
For a discussion of frivolous tax arguments made in collection due process cases arising under sections 6320 and 6330, see Section II of this outline.
Relevant Case Law:Flora v. United States, 362 U.S. 145, 175 (1960) – the Supreme Court held that a taxpayer must pay the full tax assessment before being able to file a refund suit in district court, noting that a person has the right to appeal an assessment to the Tax Court “without paying a cent.”
Taliaferro v. Freeman, 595 F.App’x 961, 962-63 (11th Cir. 2014) - ordering sanctions against the taxpayer up to and including double the government’s costs, the 11th Circuit held that the taxpayer’s contention that IRS levies violate the Fifth Amendment right to due process was “simply without merit” and did not even warrant discussion.
Schiff v. United States, 919 F.2d 830 (2d Cir. 1990) – the 2nd Circuit rejected a due process claim of a taxpayer who chose not to avail himself of the opportunity to appeal a deficiency notice to the Tax Court.
Obrien v. Green, 114 A.F.T.R.2d (RIA) 2014-5613 (E.D. Va. 2014) – the court rejected as frivolous the taxpayer’s claim that an IRS levy violated the Fifth Amendment.
Other Cases: Lund v. Chase Bank, 114 A.F.T.R.2d (RIA) 2014-5613 (D. Or. 2014); Rivas v. Commissioner, T.C. Memo. 2016-158, 112 T.C.M. (CCH) 247 (2016), appeal dismissed sub nom. Rivas v. Commissioner, No. 16-16365-C, 2017 WL 4842564 (11th Cir. Aug. 15, 2017).
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