Tax Attorneys Endorse Phil Hart

In retaliation for not turning over these names, addresses and telephone numbers, the IRS denied me all of my business deductions for the eight audited returns. This ballooned up the taxable income by $300,000 and the sequent tax, interest and penalties. I was told by an IRS revenue officer, “When you don’t give us everything we ask for, we deny all of your deductions”.

I do not regret the decision to protect my readers, as I was defending their First Amendment right to be able to read whatever they want. I was also defending them against possible violations of their Fourth and Fifth Amendment rights as it was entirely likely they would be subjected to IRS scrutiny for having bought my book.

You will find here a sample of some of the business deductions that have been denied to me. During the audit, I gave the IRS over three banker’s boxes full of documents. The documents you’ll see here were all provided to the IRS, yet I was denied these expenses on my tax returns. And our Idaho State Tax Commission has also piled on denying me the same deductions and demanding that I pay taxes on the “income” for these monies that were expended for operating my business.

Recently, an oft quoted myth has resurfaced that legislative immunity is a perk for State Representatives which can be invoked whenever convenient. For example, this myth is being used as the basis for accusations of impropriety being leveled against Idaho State Representative Phil Hart (3rd H.D.)

Rep. Hart has relied on a provision in the Idaho Constitution to postpone an income tax controversy he is involved in until after the conclusion of the legislative session. Both Washington and Idaho legislators are protected from “any civil process” while their legislatures are in session. As a threshold matter of state sovereignty that protection also includes civil process attempted by the federal government.

State Constitutions

Article 2, Section 16 of the Washington Constitution reads:

Members of the legislature shall be privileged from arrest in all cases except treason, felony and breach of the peace; they shall not be subject to any civil process during the session of the legislature, nor for fifteen days next before the commencement of each session.

Similarly Article III, Section 7 of Idaho’s Constitution reads:

Senators and representatives in all cases…shall not be liable to any civil process during the session of the legislature, nor during the ten days next before the commencement thereof…

There are eleven states that have similar language in their respective constitutions which use the phrase “any civil process.” An I.R.S. decision on what Rep. Hart’s allowable business deductions are is administrative in nature and clearly a civil matter because it involves an attempt to take property. It is therefore, “any civil process.”

The History of and Reasons for Legislative Immunity

Our Founding Fathers just freed from English tyranny wanted to ensure that elected Representatives would not face arbitrary arrest for the sake of political retribution.

As stated by the United States Supreme Court:

The privilege of legislators to be free from arrest or civil process for what they do or say in legislative proceedings has taproots in the Parliamentary struggles of the Sixteenth and Seventeenth Centuries. As Parliament achieved increasing independence from the Crown, its statement of the privilege grew stronger. In 1689, the Bill of Rights declared in unequivocal language: “That the Freedom of Speech, and Debates or Proceedings in Parliament, ought not to be impeached or questioned in any Court or Place out of Parliament.” 1 Wm. & Mary, Sess. 2, c. II. See Stockdale v. Hansard, 9 Ad. & El. 1, 113-114 (1839)… Freedom of speech and action in the legislature was taken as a matter of course by those who severed the Colonies from the Crown and founded our Nation. It was deemed so essential for representatives of the people that it was written into the Articles of Confederation and later into the Constitution. Tenney v. Brandhove, 341 U.S. 367, 372 (1951).

The Founding Fathers also wanted to ensure that the people’s voice was protected and uninhibited:

The reason for the privilege is clear. It was well summarized by James Wilson, an influential member of the Committee of Detail which was responsible for the provision in the Federal Constitution. “In order to enable and encourage a representative of the public to discharge his public trust with firmness and success, it is indispensably necessary, that he should enjoy the fullest liberty of speech, and that he should be protected from the resentment of every one, however powerful, to whom the exercise of that liberty may occasion offence.” Id. at 373.

The court continued in summary “Legislators are immune from deterrents to the uninhibited discharge of their legislative duty, not for their private indulgence but for the public good. One must not expect uncommon courage even in legislators. The privilege would be of little value if they could be subjected to the cost and inconvenience and distractions of a trial… [Emphasis added] Id. at 377.

This idea has been affirmed time and again in many states.

In Wisconsin the Speaker of the House’s office received a subpoena for one of the speaker’s administrative assistants related to an audit of a lobbyist’s tax return. The Speaker took the position that his administrative assistant was his alter ego and should be protected by the constitutional provision that a member of the legislature not be “subject to any civil process, during the session of the legislature….” The Supreme Court of Wisconsin agreed with the Speaker.

“…the meaning of a constitutional provision may be determined by looking at the objectives of the framers in adopting the provision. We conclude, as did the court of appeals, that the rationale for the privilege was to preserve the public’s right to representation in the state legislature. When a legislator cannot appear the people whom the legislator represents lose their voice in debate and vote.” [Emphasis added] State v. Beno, 341 N.W. 2d 668 (1984).

In Michigan there was a legislator who had a garnishment on his wages. The judgement was in place before the legislative session started. The Attorney General for the state of Michigan defended the legislator because the garnishment was viewed more as an attack against the legislative branch of government as opposed to an attack on the legislator. The Michigan Constitution uses the same “any civil process” language used in Idaho and Washington. Here is what the Michigan Supreme Court said of the garnishment:

“This is too narrow view of the situation. The idea back of the constitutional provision was to protect the legislators from the trouble, worry, and inconvenience of court proceedings during the session, and for a certain time before and after, so that the state could have their undivided time and attention in public affairs.” Fuller v. Barton, 208 N.W. 696 (1926).

In Arizona and Wisconsin the Attorneys General agreed that a garnishment shall not be allowed on a legislator’s paycheck during the legislative session in their respective states. The Arizona Attorney General cited the Fuller v. Barton case as his authority. “It is my opinion that the Arizona constitutional provision prohibits garnishment proceedings, and, therefore, you should not honor any garnishments involving any legislator during the sessions of the Legislature.” Arizona, Opinion of Attorney General, No. 56-24.

In Kansas the point is made again that the immunity provision of their constitution is for the benefit of the state and of the people that the legislator represents.

The use of the words “subject to” means that the member is not “liable to” the service of civil process. To construe our constitution differently would be to defeat its apparent object. The state is clearly entitled to the service of its members of the legislature during the time sessions of either branch thereof are being held. Our constitution has wisely provided that the members shall not be annoyed with arrests or suits, or be obliged to be absent from their duties….”
Cook v. Senior, 45 P. 126, 127-8 (1896).

In California the language in that state constitution reads “A member of the Legislature is not subject to civil process during a session of the Legislature or for 5 days before and after a session.” The California Court of Appeals said:

In precise terms article IV, section 14, creates an exception from civil process without qualification as to the kind of subject matter of the lawsuit. Similar exemptions have been construed to cover civil actions of all kinds, including those involving the legislator’s personal affairs. …such immunities are designed to benefit the public by protecting legislators against compelled distraction and interference during the session.” Harmer v. Superior Court, 79 Cal. Reporter 855 (1969).

And finally in my state, Washington, a member of the Washington Senate, was sued for legal malpractice because he filed a lawsuit after the statute of limitations had expired. Senator Gordon Walgren, in his capacity as an attorney, argued successfully that the statute of limitations tolls (is postponed) while he was tied up with the business of the legislature.

These similar constitutional provisions convince us that immunity was granted by our constitution to protect the legislators from distraction during the stated periods of time and should be broadly construed. Immunity from service of “any civil process” should be granted during the constitutional described time periods… When a person is prevented from exercising his legal remedy by some positive rule of law, the time during which he is prevented from bringing suit is not to be counted against him in determining whether the statute of limitations has barred his right… Seamans v. Walgren, 82 Wn.2d 771, 774 (1973).

This is exactly the case with Representative Phil Hart. The deadline to appeal given by the IRS or the Idaho Tax Commission should toll (be postponed) during the legislative session. Otherwise, Rep. Hart would have likely missed votes and debate to address his tax litigation. However, it is important to also note that this constitutional provision cannot be waived. For example:

In Alaska, that Attorney General says the legislator has no flexibility. According to him, exercising the immunity from civil process is mandatory. “Immunity against civil process cannot be waived by the legislator since the Alaska immunity is intended to protect the public as well as serve the convenience of the legislators.” Alaska, Attorney General Opinion, 159 Op. Att’y Gen. No. 8.

Conclusion

Rep. Hart has relied on the legislative immunity provision of the Idaho Constitution to postpone working on his own tax issues, which have been ongoing for a few years. There is no question that it is within the sovereign power of the states to afford this protection. Furthermore, the law seems to be clearly on Rep. Hart’s side. So why does the witch hunt continue? Has the I.R.S. ever been used as a weapon for political retribution? Both President Richard Nixon and President Bill Clinton were accused of this.

For a man who wrote a book challenging the I.R.S. definition of “income,” to face an arbitrary I.R.S. denial of normal business deductions and then not be allowed to appeal that decision because the I.R.S. ignores the Idaho Constitution while he is in legislative session…is a glimpse into the future of an Obama nation. Remember Obama’s request for 16,000 additional I.R.S. agents?

Not only are Rep. Hart’s accusers in error, but the entire situation substantiates the very reason legislative immunity was written into the constitution in the first place…to prevent political persecution.

Matt Shea is an Army combat veteran, practicing attorney, and State Representative for the 4th Legislative District in Spokane Valley, Washington.

Rusche Charging Letter

Ethics Committee members

Ethics Committee Answer 7-14-10

Mr. Desfosses’ professional experience provides yet more evidence as to why we need a more simple tax system which will be less prone to abuse. We should all be thankful for the type of services Mr. Desfosses provided over the course of his career. Without people like Mr. Desfosses, who are willing to risk their lives, their fortunes and their sacred honor, America as we knew it will probably cease to exist.

Letter from Mr. Paul Desfosses

Download Paul Desfosses Letter PDF

If you have been following my case with the IRS, you may have noticed that there are a lot of different and confusing things being said out there about the situation. We felt it would be best to begin posting documentation surrounding these events so that you can draw your own conclusions.

You’ll see in these documents that the IRS has been requesting the names and addresses of all those individuals who have purchased my book, “Constitutional Income – Do you have any?”. I have stood fast in my stance that I will not turn over that information to the government. I believe that just as a journalist has a First Amendment Right to protect his sources, that I also have a First Amendment Right to protect my readers. Additionally, those who purchase my book also have a Fourth and Fifth Amendment Right against unreasonable search and seizure.

The documents speak for themselves. The litigation relating to the protection of these names and addresses was part of an audit of my tax returns that took over four years to complete. We spent two of those years litigating this First Amendment issue. I need to give all the credit for our successful litigation to the Center for Individual Rights, of Washington D.C., who did an excellent job in representing me in this matter.

Summons – Pay Pal[1] – IRS Requesting Customer Names

Stipulation to Dismiss with customer names removed – Center for Individual Rights

Letter from Center for Individual Rights 11_3_06[1]

Letter to Mr. Sergi – Center for Individual Rights 3_7_07[1]

Summons Idaho Independent Bank[1]

Petition to Quash PayPal Summons

Petition to Quash Idaho Ind Bank

I remember as a teenager hearing the annual results of Money Magazine’s income-tax survey. For this survey they would send out to about 40 accounting firms a hypothetical set of financial facts for an American family of four. Money Magazine would ask these accounting firms to calculate the income tax liability for this typical American family. And every year, Money Magazine would get 40 different answers back. Even the experts can’t agree on how the tax should be computed.

In 1995, I became interested in the legality of the income tax. The more I studied the more questions I had. The income tax statutes plus their regulations amount to approximately 20,000 pages of fine print. When you add to the statutes and regulations Treasury decisions, Internal Revenue manuals and all the relevant court cases, we’re now talking several hundreds of thousands of pages of material.

I reasoned that a study of the congressional and public debates of the Sixteenth Amendment would be a more efficient path to determining the purpose and the authority of the federal income tax. Since no one had written on the subject, my studies took me to Washington, D.C., and the original source documents.

Starting with the Congressional Record, I read the entire debate on the proposed income tax amendment that took place in 1909 and 1913. Next, I reviewed other congressional documents from that time period. I scoured every law, political economy and economic journal from that same period. I read and catalogued about 300 New York Times income tax articles from 1909 thru 1915. Then I reviewed the entire collection of related income tax books found in the Library of Congress that were published prior to 1913. Lastly, I visited the law library of the Supreme Court and picked up the transcript of record (the whole file) for about 20 early income tax cases.

Much of the evidence I discovered was apparently unknown to others who had written on the subject. Realizing that this information needed to be put out there for public consumption, I wrote a book about it. My book, “Constitutional Income,” was first printed in 2000.

I approached my legal analysis of the material I gathered in the same logical way that I tackle an engineering problem. I first gathered all the information that was available. Then I fit all the evidence into an argument that gave weight to all relevant parts in such a way that they agreed with each other. If there is one single thing that engineering school does for you, it’s to teach you how to solve a problem.

The intent and purpose of the Sixteenth Amendment is to bring tax relief to those who earn wages and salaries. Because the income tax was to tax only investment income and business profit, wage and salary earners were expecting the income tax amendment to give them a tax break. The entire body of evidence supports this position.

From a technical standpoint, the Sixteenth Amendment didn’t provide an “income tax exception to the apportionment clause” of the Constitution. The status quo has it otherwise whereby it is assumed a constitutional loophole exists allowing for an unapportioned direct tax on wages and salaries. An apportioned tax is a tax where everyone pays the same amount, or a state as a whole pays the tax for its people in proportion to the population of the state.

There were five early income tax cases where at least one party to the case argued that this exception to the apportionment clause was created by the Sixteenth Amendment. The Supreme Court said “no,” there is no apportionment clause exception. To my knowledge, the Supreme Court has never reversed this position.

In my litigation on this issue, I camped where the Supreme Court camps.

The Supreme Court’s position is right, because that is what the entire body of historical evidence supports. Today’s lower courts are out of step with this position of the Supreme Court.

Through my own litigation on the issue, I hoped to rectify this departure from the real intent of the income tax amendment. I was not successful in my endeavor and now realize the effort necessary to make this change is bigger than a single lawsuit.

My efforts have never been focused on me. Had that been the case, I would have traveled a much different path. Now I will focus on education, as I believe future changes to our tax system will be better thought out if we understand where we’ve been.

As Originally posted at the Spokesman-Review.

Because of the barrage of press reports claiming Phil Hart has somehow abused the legislative privilege or should not serve on the House Revenue and Taxation Committee, I wanted to make some further comments on the situation.

In relating to the most recent case, on September 30, 2009 the Idaho State Tax Commission made a decision to deny Phil Hart’s appeal of its tax assessment. This included blindly following the IRS’s arbitrary and blatantly malicious decision to deny ALL $300,000 in business deductions. This was retribution because of a book Phil wrote critical of the income tax.

Now put yourself in Phil’s shoes. Would you not use every means at your disposal to exercise every one of your due process rights to fight such a blatantly unfair and illegal determination of the tax commission? Well, that is what Phil is trying to do.

On October 2, Mr. Hart received this determination by certified mail which started a 91 day clock for an appeal. Article III, Section 7 of the Idaho state constitution states:

“Privilege from arrest. Senators and representatives in all cases, except for treason, felony, or breach of the peace, shall be privileged from arrest during the session of the legislature, and in going to and returning from the same, and shall not be liable to any civil process during the session of the legislature, nor during the ten days next before the commencement thereof; nor shall a member, for words uttered in debate in either house, be questioned in any other place.”

The 10 days prior to the legislative session started on December 31, which was just within the 91 day window. Mr. Hart informed the Tax Commission in a letter on day 85 that the 91day period ended within the time set forth in Article III, Section 7 and that he would be submitting the notice of appeal right after the session, which he did. The Tax Commission was seeking to confiscate $53,000 of Phil Hart’s assets due to the unlawful and unjustified elimination of his legitimate business deductions — which would qualify as a “civil process” of law. The Idaho constitution is clear that the legislative privilege extends to “any” civil process. So the Idaho State Tax Commission process should have been immediately halted and tolled until the end of the session.
The idea that this is not civil process since the tax payer is bringing the action as the Tax Commission argues is absurd. The action the tax payer is bringing is part and parcel of the appeal process as allowed by law (63-3049, Idaho Code). You cannot divorce the appeal from the original course of action since it is a valid defense in preservation of the taxpayer’s property under due process of law (or what at least passes for due process in Idaho).

Now there have been many out there who have claimed that Phil Hart “abused” his legislative privilege. This claim still boggles my mind. The legislative privilege was created to protect the People of Idaho by preventing distractions to their legislators during session. Remember during the session, the legislators are away from home and must do much of their work without even the benefit of the legislative aids that the state of Washington provides to their representatives.
Phil Hart in particular is a very hard worker fighting to protect the freedoms of Idahoans. Sure, Phil Hart could have acted like Barack Obama (who largely neglected his senatorial duties of his first term starting his presidential campaign almost immediately after his inaugural term) and been absent from a lot of votes, submitting little novel legislation, and failing to read the bills being distracted with putting together his defense. However, this would have left the people of Idaho with little effective representation during the session. Remember Phil Hart was not trying to forgo the process; he was only postponing it so he could focus on his duties as a legislator. If he had done otherwise, he would have done a great disservice to his constituents.

Washington has a similar provision in its constitution with nearly identical language in Article II, Section 16:
“PRIVILEGES FROM ARREST. Members of the legislature shall be privileged from arrest in all cases except treason, felony and breach of the peace; they shall not be subject to any civil process during the session of the legislature, nor for fifteen days next before the commencement of each session.”

A similar issue of civil process in the state of Washington came up in State v. Craig (82 Wn.3d 777) which affirmed that the matter of legislative immunity was meant to protect the public from a legislator being distracted and as such this provision should be BROADLY construed:

“In Auditor General v. Wayne Circuit Judge, 234 Mich. 540, 542, 208 N.W. 696 (1926), the court noted: The idea back of the constitutional provision was to protect the legislators from the trouble, worry and inconvenience of court proceedings during the session, and for a certain time before and after, so that the State could have their undivided time and attention in public affairs.

These similar constitutional provisions convince us the immunity was granted by our constitution to protect the legislators from distraction during the stated periods of time and should be broadly construed. Immunity from service of “any civil process” should be granted during the constitutionally described time periods.”

So courts have agreed with this interpretation. I think the interesting question is why the IRS and the state tax commission continue to time motions to coincide with his time in the legislature (at least four times I believe). Are they trying to take advantage of the fact that he is distracted by doing the people’s work to get their actions rubber stamped? Or is it an intimidation tactic to get him to toe the line with the status quo while in session? Come on, an IRS agent should know better than to attempt to serve process on a sitting legislator in session (which happened on a prior occasion).
The other matter here is that it has been suggested that Phil Hart should not be qualified to sit on the House Revenue and Taxation Committee because of a conflict of interest. I would beg to differ! I imagine thousands of Idahoans have received the same treatment Hart has with not a word or press or an ounce of concern from their representatives. Now they have a voice on the committee; but, if Phil is removed they do not.

This really brings up is the issue of due process. There was no jury process here. A bunch of unelected bureaucrats, who probably did not like Phil Hart to begin with (remember he proposed a bill to do away with the state income tax last year) got to arbitrarily decide not to count his deductions. Without a jury trial, Phil was then told he would have to pay 20% up front, BEFORE he could get an appeal. Does this sound like due process of law? Do you realize that the state can arbitrarily assess an outrageous amount? Then if you cannot afford a fifth of it to put up on an appeal, it automatically gets entered finally as a judgment without recourse? What recourse does a taxpayer have in this situation? — NONE! It is anathema to American legal jurisprudence and without Phil Hart on that committee, who has been railroaded in this same manner, these citizens will not have a voice.
It is not Hart that should be investigated. We should be investigating the process that allows someone to be railroaded because he exercised his first amendment rights by authoring a scholarly work which runs counter to the paradigm the state wants the people to blindly accept. If this can happen to a sitting legislator, this can happen to anyone who criticizes those in power.