Tax Activist's Promotion And Sale Of Package Designed To Encourage Non-Compliance With Federal Tax Law Is A "Plan" Prohibited By 26 U.S.C. § 6700
UNITED STATES v. BENSON (April 6, 2009)
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William Benson claims to believe that the 16th Amendment to the United States Constitution was never properly ratified and that, as a result, the federal income tax system is unconstitutional. Benson has written a book on the subject and promotes and sells a package of materials that he claims will allow citizens to refuse to file federal income tax returns and still avoid liability as a result. The United States brought an action against Benson in federal court pursuant to 26 U.S.C. § 6700. The United States sought an injunction preventing Benson from promoting and selling his tax avoidance materials and also sought a list of Benson's customers. The district court enjoined Benson from promoting and selling his package of materials but declined to order him to produce a list of his customers. Benson and the United States appeal.
In their opinion, Judges Bauer, Ripple and Evans affirmed in part, reversed in part and remanded. The Court affirmed the lower court's grant of injunctive relief. The Court first concluded that Benson's activities fit within the broad definition of a § 6700 "plan." Second, the Court concluded that Benson knew or should have known that many of the statements included in the materials were false. Finally, the Court concluded that the statements were material because they could have a substantial impact on a person's decision to purchase his package of materials. Next, the Court concluded that the United States met the injunctive relief threshold contained in the statute. Considering the totality of the circumstances, the court relied on the facts that Benson's violation was not isolated and that he was not likely to stop without the injunction. With respect to Benson's First Amendment claim, the Court concluded that the language of the injunction was specific enough to prohibit only false or deceptive commercial speech -- -- speech not protected by the First Amendment. Benson is still free to encourage political action, communicate a political message, and otherwise share his views about the 16th Amendment or the federal tax system. The Court reversed the lower court with respect to its decision on the customer list. A district court has the authority to issue orders that may be necessary for the enforcement of the tax laws. The Court noted that such an order would not harm Benson but would serve the public interest by allowing the government to both warn Benson's customers of the falsity of his claims and also to enforce the income tax laws of the United States.
Michael Rigney practices in the law offices of GVC Ltd. in Chicago. In this blog, he reports on select