Definition of a Taxpayer

[Koss]

On 12/29, in another thread, Bees Knees wrote:

The code defines anyone who is subject to the Internal Revenue Code as a taxpayer, regardless of whether or not they pay any taxes.

But the text of the law actually says something different. IRC 7701(a)(14) says:

The term “taxpayer” means any person subject to any internal revenue tax.

I concede that a nine year old who lives here in the US is indeed subject to the Internal Revenue Code. But if he has no income, I don't see how he is subject to an internal revenue tax. He is arguably not a taxpayer within the meaning of IRC 7701(a)(14).

The courts have ruled in some cases that a partnership is not a taxpayer. A partnership is certainly subject to the Internal Revenue Code, and may have filing requirements. But if all the income is passed through to the partners, then the partnership has no tax liability, and is not subject to any internal revenue tax.

These are not word games. This is not "just semantics." The word tax doesn't mean code, and the word code doesn't mean tax. They are totally different concepts.

The claim that an individual is "not a taxpayer" has indeed been used by tax protestors, and it has been repeatedly rejected by the courts. But those cases involved US citizens who had tax liability.

The text of the IRC and the relevant court decisions do not support the idea that every human being in the USA is automatically a taxpayer.

In July, 2006, the ABA Section on Taxation issued a "Report on the Uniform Definition of Qualifying Child," and sent it to Congress. The report addressed this very question, i.e., the definition of a taxpayer, and cited a letter sent to the IRS by the NAEA requesting clarification of this issue. I am posting a link to this report. The document is 26 pages long. On page 18, the authors write that

One interpretation of "taxpayer" would be "any person having a return filing requirement"...

another interpretation of of "taxpayer," at least for purposes of the federal income tax, would be "any person having taxable income."

I encourage everyone who has any interest in this issue to read at least page 18 of the report. It contains a rather thorough analysis of the relevant code sections, including IRC 7701(a)(14).

This report issued by the ABA Section on Taxation is not an authoritative interpretation of the tax code. It is a detailed discussion of multiple, conflicting interpretations of the law, and it is written by some of the most qualified and experienced tax attorneys in the country (ABA = American Bar Association).

Ironically, the authors actually recommended that the IRS issue regulations to define "taxpayer" as "individual" for purposes of IRC 152(d)(1)(D). The IRS apparently decided that wasn't a good idea, since it means that a nine year old with no income can have a qualifying child. Based on the conference report, the IRS concluded that this probably wasn't what Congress had in mind.

The ABA report proves a couple things:

(1) The law is ambiguous, and can reasonably be interpreted in several different ways

(2) The claim that an individual is "not a taxpayer" is not inherently frivolous; the value of such a claim depends heavily on the context

Here's a link to the report:

http://sgaweb.us/aba-report.pdf

IRC 7701(a)(1) reads as follows:

The term “person” shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation.

And, as noted earlier, the term "taxpayer" means any person subject to any internal revenue tax.

So... Bees...

Can an individual be the qualifying relative of a corporation?

A corporation is a taxpayer, right?

What if an indvidual lives all year in a household maintained by a corporation, and the corporation provides more than half the individual's support, and the individual has income below the amount of the personal exemption?

Is the individual the qualifying relative of the corporation? All the criteria for qualifying relative appear to be satisified.

On your reading of the code, the individual would be.

Never mind the fact that a corporation can't take a dependent exemption. I know that dependent exemptions aren't available to corporations. Those exemption things can only be claimed by individuals. I'm not asking if the corporation can claim any benefit from this relation. I'm asking whether the relation exists. Is the individual I described the qualifying relative of the corporation that is supporting him and maintaining the household in which he lives?

Or do you concede that an individual cannot be the qualifying relative of a taxpayer that is not eligible to claim dependent exemptions?

If a nine year old is the qualifying child of his twin brother, who has no income, why is it any more outrageous or far-fetched to claim that an individual is the qualifying relative of a corporation?

Burton M. Koss
koss@usakoss.net

[Golden Rocket]

Too far

Burton, I appreciate your intelligence, but this is another one of those

"...if a tree falls in a forest and no one is there to hear it does it still make a sound?"

or maybe

"...can nothingness exist?"

Like I said earlier, Ohio State 24, LSU 20. We have to keep our priorities straight...

GR

[Bees Knees]

Being subject to any Internal Revenue Tax is not necessarily the same as paying tax.

If I don't drive a car, does that mean I am no longer subject to the laws that forbid speeding? True, it may be difficult for me to break the 55 mile per hour speed limit without the aid of a car, but I'm still subject to the laws that forbid speeding.

Anyone and everyone in this country is subject to any Internal Revenue Tax, regardless of whether or not they actually earn income. Now you are starting to sound like one of those tax protesters arguing the meaning of the word U.S. citizen.

[dtlee]

Being subject to any Internal Revenue Tax is not necessarily the same as paying tax.

If I don't drive a car, does that mean I am no longer subject to the laws that forbid speeding? True, it may be difficult for me to break the 55 mile per hour speed limit without the aid of a car, but I'm still subject to the laws that forbid speeding.

Anyone and everyone in this country is subject to any Internal Revenue Tax, regardless of whether or not they actually earn income. Now you are starting to sound like one of those tax protesters arguing the meaning of the word U.S. citizen.

Bees,

Thanks for the interesting analogy. I think I am seeing more clearly the distinction you are making and why it differs from my interpretation.

To me, the IRS Code is analogous to the Speed Limit and the Internal Revenue Tax is analogous to the Speeding Fine. Meeting the Filing Requirements would then be analogous to Exceeding the Speed Limit.

In other words, from my perspective, you are not subject to the fine unless you have exceeded the speed limit. The limit, as you indicate, should apply to all, but the fine should only apply to some, and a very specific "some" at that.

[dtlee]

A corporation is a taxpayer, right?

What if an indvidual lives all year in a household maintained by a corporation, and the corporation provides more than half the individual's support, and the individual has income below the amount of the personal exemption?

Is the individual the qualifying relative of the corporation? All the criteria for qualifying relative appear to be satisified.

On your reading of the code, the individual would be.

Never mind the fact that a corporation can't take a dependent exemption. I know that dependent exemptions aren't available to corporations. Those exemption things can only be claimed by individuals. I'm not asking if the corporation can claim any benefit from this relation. I'm asking whether the relation exists. Is the individual I described the qualifying relative of the corporation that is supporting him and maintaining the household in which he lives?

Or do you concede that an individual cannot be the qualifying relative of a taxpayer that is not eligible to claim dependent exemptions?

If a nine year old is the qualifying child of his twin brother, who has no income, why is it any more outrageous or far-fetched to claim that an individual is the qualifying relative of a corporation?

Burton M. Koss
koss@usakoss.net

Burton,

This concept is not as bizarre as Golden Rocket makes it sound. A very realistic example would be an student who receives a full scholarship from a college and a small salary (less than the personal exemption) from a part time job. From the college's perspective, they could be providing well over half of the student's support.

As you are aware, I am in agreement with you that this scenario would not make the student a Qualifying Relative of the college, even though the college is also subject to the Internal Revenue Code.

As an aside, even if the student had parents around, from the parents perspective (and only the parent's perspective), the scholarship money does not count towards support and the student would be considered fully supporting himself/herself from their perspective.

[Koss]

Tax vs. Code

Anyone and everyone in this country is subject to any Internal Revenue Tax, regardless of whether or not they actually earn income. Now you are starting to sound like one of those tax protesters arguing the meaning of the word U.S. citizen.

Bees, there are dozens of court cases in which the tax court has rejected claims that a petitioner is "not a taxpayer." In most of these cases, the tax court has basically drilled the guy a second a**h**le. The tax court judges often cite an opinion in which the court said that the arguments are so frivolous, and have been rejected so many times, that they will not even address them, out of concern that doing so might lend the arguments some degree of credibility. They then proceed to impose massive penalties on the petitioner.

Every one of these cases involves individuals with taxable income.

Can you cite a single case in which any court has ruled that an individual with no income is a taxpayer?

This question has not been addressed by the courts in any meaningful way.

The Internal Revenue Code is a set of laws. Everyone in this country is subject to those laws.

An internal revenue tax is a tax that is imposed upon individuals who have taxable income.

Everyone is subject to the section of the Internal Revenue Code that imposes a 6% excise tax on excess contributions to IRAs--even a nine year who has not made any IRA contributions. A nine year old with no income is also subject to the laws that make it illegal to sell cocaine, and the laws that make it illegal to assasinate the President.

But a nine year old with no income is not subject to the tax on excess IRA contributions, because he hasn't made any excess IRA contributions. In fact, even a guy who has taxable income of eight million dollars isn't subject to the excise tax on excess IRA contributions, if he hasn't made excess IRA contributions.

A nine year old is also subject to the laws that require registration of sex offenders.
But if the nine year old has not been convicted of a sex offense, then he doesn't have to register. That's because he's not a sex offender.

There's a huge difference between the law itself and the tax that is imposed by the law. The law applies to everyone in the USA; the tax applies only to those who have income that is subject to tax.

The language of IRC 7701(a)(14) is very, very broad. But it isn't broad enough to automatically include every human being in the USA. If that's really what Congress meant, then they would have written something different.

Apparently, Bees, you didn't take the time to read page 18 of the ABA Report on UDC. There are a number of competent tax attorneys who apparently don't believe that every human being in the USA is automatically a taxpayer in every context.

What about a visitor from another country who enters the US lawfully on a tourist visa, spends only a few days here, and never has any income that falls within the scope of the Internal Revenue Code?

Does this person somehow become a taxpayer just by setting foot on US soil?

Why would it be any different for US citizen that has no income?

If the term taxpayer was synonymous with the term US citizen or resident, or the term individual, or the term person, then Congress would not have taken the time to define a separate term; they simply would have said "any person," or "any individual." There are court decisions that state that when the drafters of legislation use two different terms in the same context, there is a presumption that the two terms mean two different things.

Can you cite any authority that says that an individual with no income is a taxpayer?

Burton M. Koss
koss@usakoss.net

[Bees Knees]

Every one of these cases involves individuals with taxable income.

Can you cite a single case in which any court has ruled that an individual with no income is a taxpayer?

This question has not been addressed by the courts in any meaningful way.

Why would they have to? The IRS would never waste money taking a person to court to collect zero tax.

I could use the same argument on you. Cite one court case where an individual with no income was NOT considered a taxpayer. Since you can't, then I must conclude that such an individual IS a taxpayer.

[Koss]

How to prove...

I could use the same argument on you. Cite one court case where an individual with no income was NOT considered a taxpayer. Since you can't, then I must conclude that such an individual IS a taxpayer.

Bees, this isn't how it works in formal logic, and formal logic is the reasoning the type of reasoning used in most legal arguments and court decisions.

I happen to believe that you have an elephant living in your garage, and that's a violation of local zoning where you live. As a code enforcement officer, I cannot issue a citation and demand that you prove that there is no elephant in your garage. My burden is to prove that there IS an elephant living in your garage.

I also happen to believe that in Wichita, Kansas, it is unlawful to chew gum in a restaurant or grocery store. But I cannot demand that you show me where, in the local ordinances, it says that you can chew gum in a restuarant or grocery store. The person chewing gum is not required to prove that this particular behavior is lawful; it is exactly the other way around. Anyone attempting to issue a citation or make an arrest for such behavior would bear the burden of identifying an ordinance or statute that explicitly prohibits such behavior.

There are some aspects of the tax law that turn this concept upside down. The code does state that all income is taxable unless specifcally excluded by the code itself. So if you take the position that a particular type of income is not taxable, you bear the burden of showing what section of the code excludes it from taxation.

In an audit, the taxpayer often bears the burden of proving that he is entitled to certain deductions or exemptions. It is not a criminal proceeding, so there is no "presumption of innocence." A taxpayer who deducts mortgage interest bears the burden of substantiating the deduction in an audit.

But these aspects of the tax law don't change the basic rules of logic. I don't have to prove that a person with no income is not a taxpayer; the code defines taxpayer as a person who subject to any internal revenue tax. Your burden is to show how a person with no income could possibly be subject to an internal revenue tax. A tax is not a code, and a code is not a tax.

The code simply does not say that all persons in the USA are taxpayers. And that's not what it means.

Burton

[Bees Knees]

The code simply does not say that all persons in the USA are taxpayers. And that's not what it means.

According to you.

But you provide no citation that says only those who pay tax are taxpayers. In fact, you admit the partnership example, that is a taxpayer, but pays no tax.

The problem here is you are trying to interpret the code as if it should be consistent within itself. If there is a principal under one section, then that principal ought to apply under another. That is not always the case. Saying Mom is not a taxpayer because she has no income seems logical, and may be consistent with some examples in the code, but not other examples, such as a partnership or a tax exempt entity that pays no tax, yet is a taxpayer subject to an Internal Revenue Tax.