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The Meaning of "Person" in 26 USC 7343 (IRS)

The Meaning of "Person" in 26 USC 7343 (IRS)

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Published by Bob Hurt
Bob Hurt presents Pablo Rodriguez's explanation of how the definition of Person makes income tax applicable only to corporations.
Bob Hurt presents Pablo Rodriguez's explanation of how the definition of Person makes income tax applicable only to corporations.

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Categories:Business/Law
Published by: Bob Hurt on Mar 06, 2011
Copyright:Attribution Non-commercial

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11/08/2013

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Introduction
Was Mr. Hendrickson a "person" pursuant to 26 U.S.C. § 7343 who could be charged with acriminal penalty? What about Irwin Schiff, Lindsey Springer, Larkin Rose, Cynthia Lynn Neun,Walter Allen Thompson, Bonita Lynn Meredith, Ward Dean, Walter M. Maken, Wayne Bentson,David R. Hinkson, John Thomas Harpole, Oscar Stilley, or Sherry Peal Jackson? Were all theseconvicted under Title 26, Subtitle F, Chapter 75?When I reviewed the indictments of Mr. Hendrickson, and Mr. Springer and Mr. Stilley, the DOJ
never 
asserted they met all the predicate factual issues surrounding the term "person" asutilized in the criminal penalties chapter of the internal revenue code (Title 26, Chapter F,Chapter 75). A predicate issue is a determining factual element of the law that determineswhether the rest of the law applies. So, in this case, if these people are not the "person"pursuant to § 7343, then nothing else after that can be applied to them. But what we've seenand learned first-hand, is that the government likes to "back into" these arguments. They arguethat since all the subsequent elements of the law were met, that means the individual must havebeen the "person" to whom the law applies.Did all these people meet
all 
the key factual elements necessary to be the "person" in § 7343who could be charged with a crime? I propose to you that they did
not 
meet the key criteria. Inmy research of over 125 cases involving clear disputes with 26 U.S.C. § 7343, not a singleperson challenged all the factual elements of that law. So, in order to understand the factualelements, we'll have to do some research into it's civil counterpart § 6671(b) "person" and see if we can make any parallels to the criminal "person" in § 7343.
Definitions
After reviewing over 389 cases dealing with the term "person" as defined in 26 U.S.C. § 6671(b)  that applies to the penalties in Title 26, Subtitle F, Chapter 68, Subchapter B, I found some veryinteresting case law that may potentially exonerate Mr. Hendrickson. Here's how § 6671(b) isdefined:
(b) Person defined
The term “person”, as used in this subchapter, includes an officer or employee of a corporation,or a member or employee of a partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs.
Factual Elements
1. Must be an individual;2. Must be under a duty; and3. The duty must be connected with a corporation or attached to his position within acorporation.
 
Note the similarity to that definition with 26 U.S.C. § 7343 in Title 26, Subtitle F, Chapter 75, Subchapter D:
§ 7343. Definition of term “person”
The term “person” as used in this chapter includes an officer or employee of a corporation, or amember or employee of a partnership, who as such officer, employee, or member is under aduty to perform the act in respect of which the violation occurs.
Factual Elements
- what are the factual elements of § 7343? They have never been defined incase law.Since we have good case law about § 6671(b) "person," we'll look at what the law and the caselaw show first.
The 1st Factual Element - One Must Be an Individual
Nearly universally in the civil and criminal cases I studied, everyone claimed they weren't the"person" because they (1) weren't an employee; (2) weren't an officer; (3) weren't a member of a partnership; (4) weren't tied to the corporation in any other position of authority (board of directors, stock holder, human resources/payroll officer,
etc.
). In Mr. Hendrickson's case, hewent to great lengths discussing the constitutional and legal reasons why he wasn't a personbased on "includes and including." No matter what any of the defendants argued about
not 
being the person, the courts found that, at a minimum, they were an individual and thus couldbe charged.Here's how the 9th Circuit explains "includes and including."The definition of "persons" in section 6671(b) indicates that the liability imposed by section 6672upon those other than the employer is not restricted to the classes of persons specifically listed officers or employees of corporations and members or employees of partnerships. "[B]y useof the word `include[s]' the definition suggests a calculated indefiniteness with respect to theouter limits of the term" defined.
First National Bank In Plant City, Plant City, Florida v.Dickinson
, 396 U.S. 122, 90 S.Ct. 337, 24 L.Ed.2d 312 (1969).
 
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d
 
 
th
 
 
Based on this, it seems pretty clear that "includes" really means
anybody 
. So where is the limit"within the meaning of the term defined" (26 U.S.C. 7701(c)"? That's easy! Two paragraphslater, the court clarifies where the limit of "includes" ends:Indeed, the language itself does not require that they be officers or employees of thecorporation at all, so long as they are in fact responsible for controlling31corporatedisbursements.[11] As we held in
Graham
, supra, 309 F.2d at 212, "the section must be
 
construed to include all those so connected with a corporation as to be responsible for theperformance of the act in respect of which the violation occurred"
 
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d
 
 
th
 
 
And just so there's no confusion, here's the fuller quote from Graham:In support of the district court Graham here contends that he was not a "person," as defined in §6671(b), since he was simply a member of the corporation's board of directors, was notemployed by the corporation and did not serve as an executive officer.[2]'This is too narrow a reading of the section. The term "person" does include officer andemployee, but certainly does not exclude all others. Its scope is illustrated rather than qualifiedby the specified examples. In our judgment the section must be construed to include all those soconnected with a corporation as to be responsible for the performance of the act in respect of which the violation occurred.
 
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d
 
 
th
 
So, as you should be able to conclude, it's not a good idea to argue "includes and including"because they
are
expansive but limited "within the meaning of the term defined." The limit of includes is overwhelmingly clear in this (and other cases), "of a corporation" and "under a duty."This is so clear that "duty" and "connected with a corporation" are the two fact elements thatmust be proved in order that one be the "person" within the meaning of § 6671(b).The interesting thing that the Graham case shows is that 6671(b) applies to anyone! But it alsoreveals the correct factual issues that need to be proved in order to be the § 6671(b) "person:"1. He (1) has a duty; and2. The duty is connected with a corporation as to be responsible for the performance of theact in respect of which the violation occurred.
The 2nd Factual Element - An Individual Must Have a Duty
"Person" Applied in 6671(b) in Case Law
While reviewing the case law, the overwhelming cases involving an explanation of § 6671(b)were applied to § 6672, penalties where the person was required to collect, withhold, and pay-intaxes. But within those cases, there were some startling explanations of how the term "person"in § 6671(b) is applied. There are two factual elements in order to be the § 6671(b) "person":duty and that the duty is connected with a corporation
DUTY
"Duty" under § 6671(b) has a much more focused meaning than the generalized duty of alltaxpayers to pay taxes and is expressly limited to the duty that attaches to the position anemployee holds within the corporation.
 
 
 
 
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