Lock-in Letter to Employer

There have been some inquiries as to a letter I sent to my employer.  Since sending this, I came across additional information while researching the levy on Social Security benefits.  The information contained here plus the information on the term “notwithstanding” should win the day, however, the government is not interested in the truth, only your property (money).  Employers don’t want to confront the IRS and attorneys are indifferent and like some are not educated in the Constitution or truth.

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Mary Pate

EIDE, MILLER & PATE P.C.

Attorneys at law

425 G Street, Suite 930

Anchorage, Alaska 99501

 

Ref: W-4 Withholding Certificate

 (This letter was sent in 2006)

Dear Ms. Pate,

Thank you for your letter and the information on this subject. What we have here is a failure to understand the tax laws and the law making process.  I don’t have a lot of letters behind by name, but I have studied the tax law for over 25 years. In that time I have made errors and they have been by instructor.

 When you say that I have never provided a certificate to support my claim of exempt that is not true. You need to understand that the W-4 certificate that is signed “under the penalty of perjury” is the “form” mentioned in §3402(n).  That form was provide to VECO upon my hiring.

 “(a)(1)Form W-4. Form W-4, “Employee’s Withholding Allowance Certificate,” is the form prescribed for the withholding exemption certificate required to be furnished under section 3402(f)(2)”. (See Federal Register/vol. 70, No. 71 Thursday, April 14, 2005, page 19697; CFR §31.3402(f)(5)-1T)

This is all that I am required to do.  As to my tax status the employer has no legal or lawful interest. As to the withholding question, all that either VECO or the IRS needs to do to settle this matter is to produce the “law” passed by Congress. Not the regulation written by the Treasury Department, but the statute which supports the regulation 26 CFR §31.3402(f)(5)-1T. This is because the regulation and the statute go hand in hand.

 In United States v. Mersky, 361 US 431, 437, 438 (1959); the court pointed out that;  “… [N]either the statute nor the regulations are complete without the other, and only together do they have any force.  In effect, therefore, the construction of one necessarily involves the construction of the other.”

 What is a “regulation”? Two facts support a valid regulation. First a regulation is the result of the agency’s rule-making authority and that authority must stem from an “enabling statute” (26 U.S.C. 7805).  Second, Black’s Law Dictionary states, that regulation are;  “Rules, orders, and the like, issued by various governmental departments to carry out the intent of the law.” (emphasis added)

 It follows then that there must FIRST be a “law” passed by Congress. The question I have been asking for years is “where is the statute”?

My research of Supreme Court cases on the authority of the Secretary (or his delegate) to promulgate regulations confirms the fact that the Secretary of the Treasury (or his delegate) cannot write or rewrite legislation or alter the intent of Congress.  The Separation of Powers doctrine prohibits this act.

 “The power of an administrative officer or board to administer a federal statute and to prescribe rules and regulations to that end is not the power to make law, for no such power can be delegated by Congress, but the power to adopt regulations to carry into effect the will of Congress as expressed by the statute. A regulation which does not do this, but operates to create a rule out of harmony with the statute, is a mere nullity. Lynch v. Tilden Produce Co., 265 U.S. 315, 320-322, 44 S.Ct. 488; Miller v. United States, 294 U.S. 435, 439 , 440 S., 55 S.Ct. 440, and cases cited. “And not only must a regulation, in order to be valid, be consistent with the statute, but it must be reasonable. International R. Co. v. Davidson, 257 U.S. 506, 514 , 42 S.Ct. 179, 66 L.Ed . 41.” The original regulation as applied to a situation like that under review is both inconsistent with the statute and unreasonable. [Manhattan General Equipment CO. v. C.I.R., 297 U.S. 129 at 135, (1936)]

 The actions of the IRS in its Questionable W-4 program is neither consistent nor reasonable with any statute. This principle was reaffirmed in Ernst & Ernst v. Hochfelder,425 U.S. 185 at 415 (1976) adding “Thus, despite the broad view of the Rule advanced by the Commission in this case, its scope cannot exceed the power granted the Commission by Congress….”.  The Secretary does have some latitude in writing regulations as the Court expressed in Mistretta v. U.S., 488 U.S. 361 at 372 (1989):

 “The nondelegation doctrine is rooted in the principle of separation of powers that underlies our tripartite system of Government. The Constitution provides that “[a]ll legislative Powers herein granted shall be vested in a Congress of the United States,” U.S. Const., Art. I, 1, and we long have insisted that “the integrity and maintenance of the system of government ordained by the Constitution” mandate that Congress generally cannot delegate its legislative power to another Branch. Field v. Clark, 143 U.S. 649, 692 (1892). We also have recognized, however, that the separation-of-powers principle, and the nondelegation doctrine in particular, do not prevent Congress from obtaining the assistance of its coordinate Branches. In a passage now enshrined in our jurisprudence, Chief Justice Taft, writing for the Court, explained our approach to such cooperative ventures: “In determining what [Congress] may do in seeking assistance from another branch, the extent and character of that assistance must be fixed according to common sense and the inherent necessities of the government co-ordination.”J. W. Hampton, Jr., & Co. v. United States, 276 U.S. 394, 406 (1928). So long as Congress “shall lay down by legislative act an intelligible principle to which the person or body authorized to [exercise the delegated authority] is directed to conform, such legislative action is not a forbidden delegation of legislative power.” Id., at 409.

 Applying this “intelligible principle” test to congressional delegations, our jurisprudence has been driven by a practical understanding that in our increasingly complex society, replete with ever changing and more technical problems, Congress simply cannot do its job absent an ability to delegate power under broad general directives. See Opp Cotton Mills, Inc. v. Administrator, Wage and Hour Div. of Dept. of Labor, 312 U.S. 126, 145 (1941) (“In an increasingly complex society Congress obviously could not perform its functions if it were obliged to find all the facts subsidiary to the basic conclusions which support the defined legislative policy”); see also United States v. Robel,389 U.S. 258, 274 (1967) (opinion concurring in result). “The Constitution has never been regarded as denying to the Congress the necessary resources of flexibility and practicality, which will enable it to perform its function.”Panama Refining Co. v. Ryan, 293 U.S. 388, 421 (1935). Accordingly, this Court has deemed it “constitutionally sufficient if Congress clearly delineates the general policy, the public agency which is to apply it, and the boundaries of this delegated authority.” American Power & Light Co. v. SEC, 329 U.S. 90, 105 (1946)” (emphasis added)

 This same principle was reaffirmed in Touby v. U. S., 500 U.S. 160 (1991). In 1891 the Supreme Court dealt with the conflict between the statute and agency regulations, Field v. Clark being one and United States v. Eaton, 144 U.S. 677 being the other. In Eaton the Court said;  “It was said by this court in Morrill v. Jones, 106 U.S. 466, 467, that the Secretary of Treasury cannot by his regulations alter or amend a revenue law, and that all he can do is to regulate the mode of proceeding to carry into effect what Congress has enacted.” 144 U.S. 677, 687 (emphasis added)

 The regulation that VECO has been advised by their attorney to rely upon (26 CFR §31.3402(f)(5)-1T) both alters and amends the law passed by Congress [Title 26 U.S.C. §§3402(n)And 7207] violating the principle put forth by the court. 26 CFR §31.3402(f)(5) -1T has no foundation in law.

 The process by which the Service is to follow has been outlined by Congress via legislation.  This is found in Title 26 U.S.C. Section 7207, to wit:

Section 7207. Fraudulent returns, statements, or other documents

Any person who willfully delivers or discloses to the Secretary any list, return, account, statement, or other document, known by him to be fraudulent or to be false as to any material matter, shall be fined …, or imprisoned …, or both….

 The Internal Revenue Service has not been given any judicial authority to make a ruling on the accuracy of any “returns, statements, or other documents”. Especially where there exists a penalty as set forth by section 7207. Such determinations are to be made by a court of competent jurisdiction.

 Regulation 26 CFR §31.3202(f)(5)-1T does not meet the “intelligible principle” test established by the Court for the “lock-in” letter.  Former Supreme Court Justice Sutherland, among others, explained the principle in question here with 26 CFR §31.3202(f)(5)-1T as he pointed out in Miller vs. U.S, 294 U.S. 435, 439, 440.

 “It (the regulation) is invalid because not within the authority conferred by the statute upon the Director (or his successor, the Administrator) to make regulations to carry out the purposes of the act. It is not, in the sense of the statute, a regulation at all, but legislation. … The vice of the regulation, therefore, is that it assumes to convert what in the view of the statute is a question of fact requiring proof into a conclusive presumption which dispenses with proof and precludes dispute. This is beyond administrative power. The only authority conferred, or which could be conferred, by the statute is to make regulations to carry out the purposes of the act-not to amend it.” (Cites omitted)

 Regulation 26 CFR §31.3202(f)(5)-1T does just what is condemned and voided concerning the regulation spoken of in Miller, “The only authority conferred, or which could be conferred, by the statute is to make regulations to carry out the purposes of the act-not to amend it.”  Other court opinions have voiced the same opinion. In Lynch v. Tilden Produce Co., 265 U.S. 315, 321 the regulation was held invalid because it “…fails to take into account and give proper weight to the conflict between the act and the regulation.” (cites omitted)

 In Ernst & Ernst v. Hochfelder, 425 U.S. 185 at 213, 214 (1976); the court confirmed that the regulation “… cannot exceed the power granted the Commission by Congress ….”

The court in Dixon v. U.S., 381 U.S. 68 (1965); again pointed out to the federal government that “The rulemaking power granted to an administrative agency charged with the administration of a federal statute is not the power to make law. Rather, it is “`the power to adopt regulations to carry into effect the will of Congress as expressed by the statute.”

 Over and over again the Supreme Court establishes the principle as to the correlation of the regulation to the statute. In Batterton v. Francis, 432 US 416, 425 n. 9 (1976); “Legislative, or substantive, regulations are ‘issued by an agency pursuant to statutory authority and  . . . implement the statute, . . . .  Such rules have the force and effect of law.” And in Chrysler Corp. v. Brown, 441 U.S. 281, 295 [1978]; “It has been established in a variety of contexts that properly promulgated, substantive agency regulations have the ‘force and effect of law. This doctrine is so well established that agency regulations implementing federal statutes …”

As my correspondence provided to VECO shows, I have on several occasions requested form the IRS the statute to support the regulation. The IRS has been unable to do so. Even my Senator, Orrin Hatch can not produce the law.  “Silence can only be equated with fraud….”  (U.S. v. Tweel, 550 F.2d 297, 299) The erroneous advise from your attorney has made VECO a part to the fraud.

As to the Stefanelli case cited by Ms. Pate, lower court rulings are never followed by the IRS from case to case. (Note 3)  Their own manual directs them not to pattern their procedures based upon those cases.  However, their manual directs that supreme court decisions are the same as law to them. (Note 2) Each side is at liberty to use these cases (note 1), however, the facts must support the conclusions.

4.10.7.2.9.8  (05-14-1999)

Importance of Court Decisions 

See www.irs.gov/irm/par14/ch10s11.html

1.  Decisions made at various levels of the court system are considered to be interpretations of tax laws and may be used by either examiners or taxpayers to support a position.

2.  Certain court cases lend more weight to a position than others. A case decided by the U.S. Supreme Court becomes the law of the land and takes precedence over decisions of lower courts. The Internal Revenue Service must follow Supreme Court decisions. For examiners, Supreme Court decisions have the same weight as the Code.

3.  Decisions made by lower courts, such as Tax Court, District Courts, or Claims Court, are binding on the Service only for the particular taxpayer and the years litigated. Adverse decisions of lower courts do not require the Service to alter its position for other taxpayers.

 Except for Malinowski all of the supports I have offered are from the Supreme court level.  The taxing principles set out by the Supreme Court are the guide to weeding out the errors of lower court decisions as contained in the quote cited in Ms Pate’s letter (Stefanelli v. Silvestri, 524 F. Supp. 1317).

Notwithstanding the opinion in Stefanelli the comments of the court in Malinowski at page 352 are correct having been founded upon revenue laws passed by Congress.  On the other hand the comment by the Stefanelli court regarding actions taken by the IRS involving VECO (26 CFR §31.3202(f)(5)-1T) has no foundation in any of the tax statutes passed by Congress and only Congress has the legislative authority.

Again, it in fact alters the will of Congress as expressed in 26 U.S.C. 7207 and 3402(n) and violates the natural rights of individuals respecting property rights protected by the Constitution (Amendments 5 “nor be deprived of life, liberty, or property, without due process of law” and 9 “The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.”). Again, this is a private property issue and private property cannot be taken except by due process of law. Due process of law as defined by Black’s is:

“Law in its regular course of administration through the courts of justice…. A course of legal proceedings according to those rules and principles which have been established in our systems of jurisprudence for the enforcement and protection of private rights…. If any question of fact or liability be conclusively presumed against him, this is not due process of law.” (emphasis added)

By the silence of the Service and their failure to disclose this to employers is fraud, via scare tactics. Once again the controlling language of §3202(n) and the intent of Congress is;  “Notwithstanding any other provision of this section, an employer shall not be required to deduct and withhold any tax under this chapter upon a payment of wages to an employee if there is in effect with respect to such payment a withholding exemption certificate (in such form and containing such other information as the Secretary may prescribe) furnished to the employer by the employee certifying that the employee -

       (1) incurred no liability for income tax imposed under subtitle A for his preceding taxable year, and

       (2) anticipates that he will incur no liability for income tax imposed under subtitle A for his current taxable year. ….” (emphasis added)

( For those who have read my research on SS benefits levy, will understand the importance of the “notwithstanding” term used in the statute.  It is obvious that this attorney doesn’t understand it either. )

This is the law! NO WHERE ELSE IN THIS CHAPTER OR SECTION 3402 CAN ONE FIND THE LANGUAGE SUPPORTING THE ACTIONS OF THE IRS OR VECO IN THIS INSTANCE.

According to the published information in the Document Drafting Handbook by the National Archives and Record Administration, “Each document classified as a rule or proposed rule must contain a citation of the legal authority under which the agency issues the document. As specified in 1 CFR part 21, subpart B, the citation should include -

.Any statutory general rulemaking authority;

.Any specific rulemaking authority delegated by statute; and

.Any Executive delegations that link the statutory authority to the issuing agency.

Federal Register, Vol. 70, No. 71 of Thursday April 14, 2005, cites the authority for the withholding exemption certificates and identifies two (2) statutes under which the regulation was written.  They are 26 U.S.C. 7805 and 3402 (i) and (m).  26 U.S.C. 7805 is the general authority Congress gives to the Secretary to write the regulations (enabling statute).  The other 26 U.S.C. §3402(i) which reads:

(i) Changes in withholding

     (1) In general

       The Secretary may by regulations provide for increases in the amount of withholding otherwise required under this section in cases where the employee requests such changes. (Emphasis added)

     (2) Treatment as tax

       Any increased withholding under paragraph (1) shall for all purposes be considered tax required to be deducted and withheld under this chapter. (Emphasis added)

 Part (i) of 3402 allows the increase in withholding ONLY if the “employee requests such change.” Part (m) reads:

(m) Withholding allowances

     Under regulations prescribed by the Secretary, an employee shall be entitled to additional withholding allowances or additional reductions in withholding under this subsection.  In determining the number of additional withholding allowances or the amount of additional reductions in withholding under this subsection, the employee may take into account (to the extent and in the manner provided by such regulations) -

       (1) estimated itemized deductions allowable under chapter 1 (other than the deductions referred to in section 151 and other than the deductions required to be taken into account in determining adjusted gross income under section 62(a) (other than paragraph (10) thereof)),

       (2) estimated tax credits allowable under chapter 1, and

       (3) such additional deductions (including the additional standard deduction under section 63(c)(3) for the aged and blind) and other items as may be specified by the Secretary in regulations. (Emphasis added)

 Code section 7805 is not in question here, however, neither parts (i) nor (m) of §3402 give authority to the IRS to unilaterally alter the W-4 exemption certificate. In each case it is at the employees option. Additional IRC sections listed by the IRS in the Code of Federal Regulations for authority to operate the Questionable W-4 program are §§6001 and 6011, not one contains the language authorizing either the IRS, its employees or private companies to alter an employee’s W-4. To tamper with private property outside the due course of law, is a violation of a most sacred right protected by the law of the land.

To take this principle one step further, all authority to act in our government is based upon the principle of delegation and the maxim is that “a body can delegate only the powers, duties or functions that it has at the time of delegation.” There is no basis or statute that delegates the authorization to IRS employees to write employers via the Lock-in letter, advising them disregard the provisions of Section 3402(n) and “alter or disregard” an employee’s W-4.

 Congress has not given it to the Treasury Department via statute because they, Congress, do not have the authority to tamper with the property of citizens of any of the sovereign 50 States. (See Article I, Section 8, cl. 17 for the legislative authority of Congress.) The wages that I have earned are my property by any definition you may choose to use.

 26 CFR §31.3202(f)(5)-1T is an unwarranted and a usurpation of authority by the Commissioner. It has no foundation in law and is therefore void.  “A regulation which . . . . operates to create a rule out of harmony with the statute, is a mere nullity.” (emphasis added) Lynch v. Tilden Produce Co. Once again the controlling language of §3202(n) is, “Notwithstanding any other provision of this section …” This is the “law” and there is no other law passed by Congress which countermands this directive.

The IRS has placed VECO “between a rock and a hard place.” Whether to honor the property rights of it’s employees or cower before the IRS. The IRS does this because it is easier to play upon the ignorance and fears of the employer with threats and harassment then follow the law.

Sincerely,     Sherwood Glazier

Cc: Linda Wiacek,     VECO Alaska (fn. Veco is no longer in business)