Below is the substance of an Affidavit I filed in State v. Butler on December 11, 2018.

On March 20, 2019, after a two day trial a Ramsey County jury convicted me of two felony counts of willful failure to file income tax returns. I chose not to testify. The Affidavit below represents my true belief regarding the lawful and constitutional scope of the federal income tax. I am publishing the Affidavit because by following the path I have taken I have caused a lot of pain and anguish to the people I love. I want them to fully understand my perspective. I also want to warn anyone who may be considering going down this road.


1. William Bernard Butler submits this affidavit in support of the motion to dismiss and motion in limine in State of Minnesota v. Butler, 62-CR-18-4120.

2. I am an attorney and practiced law for 23 years, from October 23, 1992 to August 12, 2015, when the Minnesota Supreme Court suspended my license for failing to pay federal court fines and penalties.

3. Because much of the State’s record here contains documents and orders relating to the federal court sanctions, it is necessary that I respond. The Minnesota federal courts fined me for asserting quiet title actions (an action in which the defendant mortgage holder bears the burden of proof) against national banks that had received 2008 federal bailout funds (to date $4.6 trillion according to the TARP Inspector General) and were nevertheless foreclosing on Minnesota residents. I believed then and still believe that because of the bailouts and other third party derivative payments, if subjected to a fair trial where the bailout bank properly bore the burden of proof, the bailout banks (third parties that did not initially lend to the borrower) could not show the requisite harm or loss necessary to take someone’s home. My briefs to the Minnesota Supreme Court in defense of my license are attached hereto as Exhibits 1 and 2. As indicated in these briefs, I thoroughly researched this strategy before I implemented it. Prior to initiating the first post-bailout securitized mortgage quiet title action, I met at length with a friend who was a partner at Dorsey and Whitney and one of the first lawyers to create the legal documentation necessary to securitize mortgages. I also hired a former law clerk to the Chief Judge of the Minnesota Court of appeals to assist in and verify my research. Finally, I had tried and won the only securitized mortgage quiet title action I am aware of in Minnesota history: First National Bank of Elk River v. Independent Mortgage Services, No. CX-95-1919 (Minn. Ct. App. 1996). In First National, although my client was the plaintiff, the defendant bore the burden of proof because it alleged ownership of recorded mortgages that the homeowners and my bank client denied. The case was originally styled as a declaratory judgment. Sherburne County Judge Gary Meyer, however, correctly recognized on the first day of trial that the defendant had the burden of proof because the defendant had alleged the right to foreclose on a recorded assignment of mortgage that was adverse to the homeowners. Judge Meyer ordered the defendant to proceed first at trial and thus converted the case to a quiet title action.

3. In my 23 years of practice, I have been admitted to practice before the following courts:

A. Minnesota State Courts (October 23, 1992);

B. Minnesota Federal District Courts (April 2, 1993);

C. Federal Eighth Circuit Court of Appeals (June 2, 2000);

D. United States Supreme Court (October 2, 2000);

E. United States Tax Court (April 13, 2010); and

F. Federal Sixth Circuit Court of Appeals (June 21, 2010).

4. I am 54 years old. I obtained my Juris Doctor degree from the William Mitchell College of Law in 1992. I graduated cum laude and was the Executive Editor of the William Mitchell Law Review. I hold a bachelor’s degree in Business Administration and Finance from the University of St. Thomas.

5. I have four grown children. My daughter holds a Bachelor of Arts degree from Northwestern University in Evanston, Illinois and a Master’s degree in teaching from the University of Minnesota. My oldest son holds a Bachelor of Science degree in Mechanical Engineering and Mathematics from the University of Wisconsin. My second son holds a Bachelor of Science degree in economics from the University of Minnesota. My third son is currently a senior and Mechanical Engineering student and the University of Minnesota and current member of the Dean’s List.

6. I have an infant son who is 10 months old.

7. I am not a tax protestor. In my view, the federal income tax is a legal and constitutional, indirect excise tax. I submit this affidavit to provide the court with my sincere understanding of the federal and state income tax law.

8. I have paid hundreds of thousands of dollars in income, property, and sales taxes in my life. As I recall, my final check to the federal Internal Revenue Service was in excess of $60,000. Sometime in the 2010 timeframe I informed the Internal Revenue Service that I did not believe that the federal income tax applied to me as a resident of Minnesota whose earnings came from performing activities that the Internal Revenue Code does not identify as taxable. I also informed the IRS that I withdrew whatever consent I had given to the IRS to declare my earnings federally taxable. I recently wrote the IRS a letter with an authorization form requesting my full IRS record and transcript in order to recover this letter. The IRS replied with a non-responsive form.


9. According the United States Supreme Court, federal tax laws must clearly identify the who, what, where, and when relating to the application and enforcement of any tax. In United States v. Merriam, 263 U.S. 179 (1923), the court holds that tax laws are strictly and literally construed because the constitution does not allow taxation by implication:

On behalf of the Government it is urged that taxation is a practical matter and concerns itself with the substance of the thing upon which the tax is imposed rather than with legal forms or expressions. But in statutes levying taxes the literal meaning of the words employed is most important, for such statutes are not to be extended by implication beyond the clear import of the language used. If the words are doubtful, the doubt must be resolved against the Government and in favor of the taxpayer.

Merriam, 263 U.S. at 187-188 (emphasis supplied), citing Gould v. Gould, 245 U.S. 151, 153 (1917); see also, Billings v. U.S., 232 U.S. 261, 265 (1914) (“Tax statutes…should be strictly construed, and, if any ambiguity be found to exist, it must the resolved in favor of the citizen”).


10. The Sixteenth Amendment to the Constitution allows for a tax on “incomes”:

The Congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

U.S. Const. amend. XVI.

11. The express language of the Internal Revenue Code and United States Supreme Court precedent support the position that the federal income tax is a legal and constitutional excise tax that is being applied and enforced beyond its express constitutional limits. Because the legal foundation for the Minnesota income tax is based squarely upon the federal income tax (the calculation of Minnesota income tax begins with “Federal Adjusted Gross Income”), I believe the application and enforcement of the Minnesota income tax also rests upon the same ground as the federal income tax.

12. Three foundational facts support this view. First, the United States Supreme Court states that the federal income tax is an indirect, excise tax, and that the 16th Amendment does not and cannot expand the federal government’s power to tax. Brushaber v. Union Pac. R.R. Co, 240 U.S. 1, 16 (1916) (“…taxation on income [is] in its nature a an excise entitled to be enforce as such...”); Stanton v. Baltic Mining, 240 U.S. 103 (1916) (“[the 16th Amendment] conferred no new power of taxation.”); Tyee Realty Co. v. Anderson, 240 U.S. 115 (1916); and Eisner v Macomber, 252 U.S. 189 (1920)(the 16th Amendment “did not extend the taxing power to new subjects”). Second, in all of Subtitle A of the Internal Revenue Code (containing all the statutory law directly relating to the federal income tax), the only persons who are “made liable” for collecting and paying the federal income tax are individuals and entities who are payors (and federally designated tax withholding agents) of money paid to foreign individuals and corporations. See 26 U.S.C. § 1461.

Third, the 16th Amendment does not allow and the Constitution expressly prohibits the federal government from collecting an income tax directly from individual residents of the 50 states without first apportioning, or dividing pro rata, the tax levy according to state population. U.S. Const. art. I, § 9, cl. 4. (“No capitation or other direct tax shall be laid unless in proportion to the Census or Enumeration herein before directed to be taken.”) The 16th Amendment and the Internal Revenue Code make liable only withholding agents (sources) and payors of federally taxable income. Apportionment of a direct tax requires the federal government to first determine the total tax due and then allocate that amount to the states proportionally by state population prior to collect the direct tax.

The vast majority of people who “become liable” for the federal income tax are not made liable by the Code itself, rather they are made liable by a federally identified withholding agent or source that has filed with the IRS a sworn declaration or information return—W-2, 1099, or K-1—identifying the recipient’s taxpayer identification number as having received federally taxable income. In my view, based on the express language of the Code, language that is strictly limited to comply with the constitution, most federal information returns are erroneously filed.

13. According to the United States Supreme Court in Brushaber, Stanton, and Eisner, the Sixteenth Amendment does not confer any new taxing power upon the federal government, does not allow the federal government to bypass state sovereignty and the constitutional mandate of apportionment to collect any direct tax, and does not empower the federal government to lay and collect an income tax directly from all individual residents of the 50 sovereign states without first apportioning it. Direct taxes, according to the Constitution and the Supreme Court, are taxes that apply to people and real estate directly and include capitations (head taxes) and taxes on real estate. Indirect or excise taxes are taxes on activities or transactions, the best example being the 18.4 cent per gallon federal gas tax.

14. As stated by the Brushaber court:

…the proposition and the contentions under [the 16th Amendment]…would cause one provision of the Constitution to destroy another; … That is, they would result in bringing the provisions of the Amendment exempting a direct tax from apportionment into irreconcilable conflict with the requirement that all direct taxes be apportioned…. This result, instead of simplifying the situation and making clear the limitations on the taxing power, which obviously the Amendment must have intended to accomplish, would create radical and destructive changes in our constitutional system and multiply confusion.

Brushaber, 240 U.S. at 11-12. The Brushaber court makes clear that the federal income tax authorized by the 16th Amendment is a constitutional, indirect tax because it is not intended to be directly collected directly from the recipient, but from the payor or “source” of federally taxable income:

The act provides for collecting the tax at the source that is, makes it the duty of corporations, etc. to retain and pay the sum of the tax on interest due on bonds and mortgages, unless the owner to whom interest is payable gives notice that he claims an exemption.

Brushaber, at 21. Finally, the Brushaber court warned that if the constitutional indirect income tax authorized by the Sixteenth Amendment were to ever be enforced directly without apportionment (by direct unapportioned federal collection directly from the recipient rather than the payor source), then it would become an unconstitutional direct tax:

…taxation on income is in its nature is an excise entitled to be enforced as such unless and until it is concluded that to enforce it would amount to accomplishing the result which the requirement as to apportionment of direct taxes was adopted to prevent, in which case the duty would arise to disregard form and consider substance and hence subject the tax to regulation as to apportionment which otherwise as an excise would not apply to it.

Brushaber at 17.

15. In the excerpts above, the Brushaber court is referring to the fact that the Constitution prohibits Congress from laying and directly collecting a direct tax on the earnings or property of state residents without first apportioning it among the states. The constitutional power and legal significance of apportionment is illustrated in the United States Supreme Court case of Pollock v. Farmer’s Loan & Trust, 157 U.S. 429 (1895), aff’d on rehearing, 158 U.S. 601. In Pollock, the United States Supreme Court held that a federal tax on individual incomes and property was unconstitutional and illegal because it was not first apportioned. As stated by the Pollock court:

The Constitution prohibits any direct tax, unless in proportion to numbers as ascertained by the census…[and]…prohibits Congress from laying a direct tax on revenue from property of the Citizen without regard to State lines…we are of the opinion that taxes on personal property, being a direct tax… the income of personal property, are likewise direct taxes.

Pollock, 158 U.S. at 634.

16. The Pollock case provides a thorough historical discussion detailing the debates among the Framers regarding the dangers of federal collection of direct taxes within the states. It is clear that constitutional apportionment—requiring that Congress first determine an amount due from the states and then divide that bill pro rata according to state population before attempting to collect it—was a means to sustain constitutional “vertical separation of powers” and protect state sovereignty by allowing direct federal collection of direct taxes (taxes directly upon persons or property) within the states only in cases of emergency. Apportionment is therefore a powerful procedural safeguard against federal tax collector abuse because it requires that Congress engage in an intentional and deliberate process prior to authorizing the direct federal collection of any tax within the states. The apportionment process requires that Congress first establish the amount it needs to raise and then requires Congress to allocate and divide the total bill among the states. Only then can the federal government collect a direct tax within the states.

17. Comments from the court in Pollock on direct taxation are below:

We must remember that the fifty-five members of the constitutional convention were men of great sagacity, fully conversant with governmental problems, deeply conscious of the nature of their task… Pollock, 157 U.S. at 559.

The principle was that consent of those who were expected to pay it was essential to the validity of any tax. Pollock, 157 U.S. at 557.

The requirement of the Constitution is that no direct tax shall be laid otherwise than by apportionment –the prohibition is not on direct taxes on land, from which the implication is sought to be drawn that indirect taxes on land would be constitutional, but it is against all direct taxes—and it is admitted that a tax on real estate is a direct tax. Pollock, 157 U.S. at 581.

But the acceptance of the rule of apportionment was one of the compromised which made the adoption of the Constitution possible and secured the creation of the dual form of government, so elastic and strong, which has thus far survived in unabated vigor. If by calling a tax indirect when it is essentially direct, the rule of protection could be frittered away, one of the great landmarks defining the boundary between the Nation and the States of which it is composed would have disappeared, and with it one of the bulwarks or private rights and private property. Pollock, 157 U.S. at 584.

18. The dissent in the Pollock decision protests the majority’s decision and at the same time recognizes the reality that the federal government can be guilty of wrongfully enforcing it tax laws:

Under the income-tax laws which prevailed in the past for many years, and which covered every conceivable source of income…vast sums were collected from the people of the United States.  The decision here rendered announces that those sums were wrongfully taken, and thereby, it seems to me, creates a claim, in equity and good conscience, against the government for an enormous amount of money…  I say, creating a claim, because, if the government be in good conscience bound to refund that which has been taken from the citizen in violation of the Constitution, although the technical right may have disappeared by lapse of time, or because the decisions of this court have misled the citizen to his grievous injury, the equity endures, and will present itself to the conscience of the government.  


Pollock v. Farmer’s Loan & Trust Co., 157 U.S. 429, at 637-38 (1895)(emphasis supplied). 


19. The primary difference between the 1894 income tax that the Pollock court found to be unconstitutional and all versions of the income tax since the 1913 Sixteenth Amendment is the fact that the income tax in Pollock specifically “made liable” “every citizen of the United States” and no version of the income tax since has “made liable” any citizen or resident of any state. The Income Tax Act of 1894 provided:

…there shall be assessed, levied, collected, and paid annually upon the gains, profits, and income received in the preceding calendar year by every citizen of the United States…

Pollock, 157 U.S. at 586 (emphasis supplied). The 16th Amendment, in contrast, does not identify any people that are subject to the income tax but allows for a tax only on “incomes, from whatever source derived…” This fact—the Sixteenth Amendment makes no identifiable person subject to the tax—is what makes the income tax an indirect, excise tax and is what makes it constitutional.

20. In my view, which is consistent with United States Supreme Court holdings in Stanton and Eisner, the 16th Amendment did not overrule or abrogate the Pollock decision. The Income Tax of 1894 was unconstitutional because the facts in Pollock show that the tax allowed unapportioned federal collection of the federal income tax from “every citizen of the United States.” Direct federal collection of an unapportioned income tax from individuals is unconstitutional because it violates Article I, section 9’s apportionment mandate. To comply with the constitution and avoid any requirement of apportionment, the 16th Amendment purposefully removed any direct federal claim against any human being—any individual or state resident—and instead targeted only “income.” By targeting only income and omitting any claim against any individual or state resident, the 16th Amendment is necessarily an indirect or excise tax as the Brushaber and Stanton decisions affirm. Because the 16th Amendment broadly targets “all income, from whatever source derived,” and does not identify any individuals subject to the tax, the Sixteenth Amendment begs the question: “what incomes and what sources are subject to properly delegated power of federal taxation?” That question can only be answered by the income tax provisions of the Internal Revenue Code.


21. I spent over three years of studying the Internal Revenue Code, United States Supreme Court cases, IRS “frivolous argument” publications, and other materials, in addition to speaking with lawyers, former IRS agents and criminal investigators—including former IRS criminal investigator Joe Banister—who have concluded that the federal income tax is being illegally and overbroadly applied and enforced. It is clear to me now: (1) in all of Subtitle A, relating to the income tax, the only persons and entities that are clearly “made liable” for the federal income tax are foreign persons and entities and non-resident aliens, see, 26 U.S.C. §§ 1461, and 1441-1446; (2) most income tax is tax collected on wages and comes into the federal income tax system not through Subtitle A’s income tax provisions but instead through Subtitle C’s employment tax provisions, see 26 U.S.C. §§ 3121(b), 3121(e), and 3401(c); and (3) in the thousands of pages and hundreds of definitions of Subtitle C, all of the legally operative definitions ultimately end in a definition that includes only people and activities that receive income as a direct result of federal employment or the exercise of a federal privileges.


22. There is no provision in all of Subtitle A of the Internal Revenue Code that states or claims that any typical earnings from a non-federal activity within any state (for example, operating a law firm in Minnesota) represents federally taxable income. This does not mean that everything that everyone does within the states is non-taxable. As detailed more fully below, the wages of federal employees working within the states are clearly federally taxable under the Code. If someone is a private insurance salesman and also is a member of the National Guard, I believe that persons National Guard earnings in Minnesota would represent federally taxable income.

23. In the entire income tax section of the Code (Subtitle A), section 1461 is the only section that makes anyone directly liable for paying anything and it makes only “sources” (payors of federally taxable income) liable and only as withholding agents for withheld amounts of federally taxable gross income:

Every person required to deduct and withhold any tax under this chapter is hereby made liable for such tax and is hereby indemnified against the claims and demand of any person for the amounts of any payments made in accordance with the provisions of this chapter.

26 U.S.C. § 1461. “This chapter” is chapter 3 (“withholding of tax on non-resident aliens and foreign corporations”) of Subtitle A (“Income Tax”).

24. In all of chapter 3 of Subtitle A, the only identified persons and entities who can receive federally taxable income and be subject to federal income tax withholding are foreign people and entities doing business in the United States: (1) non-resident aliens (section 1441); (2) foreign corporations (section 1442); (3) foreign tax exempt organizations (section 1443); (4) Virgin Islands source income (section 1444); (5) disposition of U.S. real estate by “foreign persons” (section 1445); and (6) foreign partners’ share of income connected to U.S. operations (section 1446).

25. The income tax’s omission of persons “made liable” for the tax does not appear to be an oversight. There are at least 23 other excise taxes in the Internal Revenue Code and each of these taxes has a specifically identifiable “persons liable” for the tax:

(1) The Estate Tax, 26 U.S.C. §§ 2032A, 2056A;

(2) FICA Tax, 26 U.S.C. § 3102(b);

(3) Railroad Retirement Tax, 26 U.S.C. § 3505;

(4) Luxury Passenger Automobile Excise Tax, 26 U.S.C. §§ 4002, 4003 (section 4003 identifies those secondarily liable) (now repealed);

(5) Heavy Trucks and Trailers Tax, 26 U.S.C. §§ 4051, 4052;

(6) Tire Manufacturer Excise Tax, 26 U.S.C. § 4071;

(7) Manufacturer’s Excise Tax, 26 U.S.C. § 4219;

(8) Wagers Tax, 26 U.S.C. § 4401;

(9) Wagering Occupational Tax, 26 U.S.C. § 4411;

(10) Vehicle Use Tax, 26 U.S.C. § 4481:

(11) Petroleum (Gas) Tax, 26 U.S.C. § 4611;

(12) Chemicals Tax, 26 U.S.C. § 4662;

(13) Qualified ERISA Pension Plans Contributions Tax, 26 U.S.C. § 4972;

(14) Excise Tax for Failure to Offer COBRA Group Health Continuation Coverage, 26 U.S.C. § 4980B;

(15) Excise Tax for Failure to Meet Certain Group Health Plan Requirements, 26 U.S.C. § 4980D;

(16) Excise Tax for Failure of Applicable Plans Reducing Benefit Accruals to Satisfy Notice Requirements, 26 U.S.C. § 4980F;

(17) Gallonage Tax on Distilled Spirits, 26 U.S.C. § 5005;

(18) Gallonage Tax on Wines, 26 U.S.C. § 5043;

(19) Storage Tax on Imported Distilled Spirits, 26 U.S.C. § 5232;

(20) Tax on Wine Imported in Bulk, 26 U.S.C. § 5364;

(21) Tax on Beer Imported in Bulk, 26 U.S.C. § 5418;

(22) Excise Tax on Tobacco, 26 U.S.C. § 5703; and

(23) Tax on Purchase, Receipt, Possession or Sale of Tobacco Products, 26 U.S.C. § 5751.

26. In all of Subtitle A, there is no provision that identifies William Bernard Butler or Butler Liberty Law or any other entity I have established as a person who is “made liable” for the income tax. Because I am not a foreigner doing business in the United States and because Subtitle A does not otherwise identify me as a “person liable” for the income tax, I do not believe I owe any federal income tax for 2012 or 2013. Because I can owe no federal income tax according to Subtitle A, I have no obligation to file an income tax return with the federal government for 2012 or 2013.


27. A comprehensive review of the method and means of the collection of the federal income tax must include another relevant “persons liable” withholding provision within the Internal Revenue Code. The other relevant provision is in Subtitle C which relates to “Employment Taxes.”

28. Before discussing Subtitle C, it is important again to put the analysis into context. As noted above, (1) Merriam prohibits taxation by implication, Merriam, 263 U.S. at 187-188 (“such statutes are not to be extended by implication beyond the clear import of the language used…. If the words are doubtful, the doubt must be resolved against the Government and in favor of the taxpayer”); and (2) Billings mandates that any ambiguity in tax law be resolved in favor of the citizen, Billings v. U.S., 232 U.S. 261, 265 (“Tax statutes…should be strictly construed, and, if any ambiguity be found to exist, it must the resolved in favor of the citizen”).

29. The United States Supreme Court also holds that the right to earn a living is a fundamental right:

Among these inalienable rights, as proclaimed in [the Declaration of Independence], is the right of men to pursue their happiness, by which is meant the right to purse any lawful business or vocation…

It has been well said that, “The property which every man has in his own labor, as it is the original foundation of all other property, so it is the most sacred and inviolable…”

Butcher’s Union v. Crescent City Co., 111 U.S. 746 652, 756 (1884), citing Adam Smith’s Wealth of Nations, Bk. I, Chapter 10. See also, Truax v. Raich, 239 U.S. 33, 41 (1915)(“the right to work for a living in the common occupations of the community is of the very essence of the persona freedom and opportunity that it was the purpose of the [14th] amendment to secure”) and Meyer v. Nebraska, 262 U.S. 390 (1923) (“the right of the individual to contract, to engage in any of the common occupations of life…is essential to the orderly pursuit of happiness by free men”). In order for the federal government to tax a “fundamental right,” it would have pass a “strict scrutiny” test before the United States Supreme Court; that is, it would have to show that the tax was “narrowly tailored” to achieve a “compelling governmental interest.”

30. Finally, although the Constitution gives the federal government broad powers of taxation, including the clear power to directly collect apportioned direct taxes and the right to directly collect excise taxes from persons “made liable” for the tax and residing in the states, federal legislative powers are not unlimited. The lawful scope of Subtitle C cannot encroach beyond the constitutional limits of federal power within the states.

31. The Constitution gives the federal government exclusive power to legislate and enforce laws within its territorial jurisdiction, including Washington, D.C., federal territories, and federal “forts” within the states that the states, or individuals, have expressly consented to:

To exercise exclusive legislation in all cases whatsoever, over such District (not exceeding ten miles square) as may, by cession of particular states, and the acceptance of Congress, become the seat of the government of the United States, and to exercise like authority over all places purchased by the consent of the legislature of the state in which the same shall be, for the erection of forts, magazines, arsenals, dockyards, and other needful buildings.

U.S. Const. art. I, § 8, cl. 17; United States v. Bevins, 16 U.S. 336 (1818) (federal authority ends at state borders and exists within the states only by express state assent); and New Orleans v. U.S., 35 U.S. (10 Pet.) 662, 737 (1836) (federal authority ends at state borders and exists within the states only by express state assent).

32. The Tenth Amendment re-affirms the principle that the federal government cannot encroach upon State or individual sovereignty without express consent:

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

U.S. Const. amend X.

33. In context of the foregoing, Chapter 24 of Subtitle C is entitled “Collection of Income Tax at Source on Wages.” While this title is instructive in understanding how the income tax operates in practice and how Subtitle A and Subtitle C interact, it may be legally irrelevant because the Code states that “descriptive matter relating to the contents of this title” has no legal effect. 26 U.S.C. § 7806.

34. Section 3402 requires “employers” paying “wages” to deduct and withhold a portion of those wages and pay them to the Secretary of the Treasury:

(1) In general Except as otherwise provided in this section, every employer making payment of wages shall deduct and withhold upon such wages a tax determined in accordance with tables or computational procedures prescribed by the Secretary.

26 U.S.C. § 3402.

35. Section 3403 makes the “employer” who is required to withhold under section 3402 “liable” for withheld amounts and also exonerates the employer from any wrongful withholding claims from any “person” subject to the withholding:

The employer shall be liable for the payment of the tax required to be deducted and withheld under this chapter, and shall not be liable to any person for the amount of any such payment.

26 U.S.C. § 3403.

36. The definitions of “employee” and “wages” for purposes of Subtitle C’s employment tax withholding requirement are contained in section 3401 and are limited to include only federal workers and federal instrumentalities. The definition of wages is found at 3401(a):

Wages For purposes of this chapter, the term “wages” means all remuneration (other than fees paid to a public official) for services performed by an employee for his employer, including the cash value of all remuneration (including benefits) paid in any medium other than cash.

26 U.S.C. § 3401(a). Section 3401(a)’s relative broad definition of wages is significantly narrowed by the later definition of “employee,” a definition that falls squarely within federal power and jurisdiction:

(c) Employee

For purposes of this chapter, the term “employee” includes an officer, employee, or elected official of the United States, a State, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing.

26 U.S.C. § 3401(c).

37. Consistent with Brushaber, Stanton, et al, section 3403 above “makes liable” the employer or indirect “source” of the federally taxable income, not the employee as defined in section 3401(c). Section 3401(d)’s later definition of employer makes clear that responsibility for determining, paying, and reporting federally taxable gross income lies with the person or entity that is the actual “source” that controls payment of federally taxable gross income:

(d) Employer For purposes of this chapter, the term “employer” means the person for whom an individual performs or performed any service, of whatever nature, as the employee of such person, except that— (1) if the person for whom the individual performs or performed the services does not have control of the payment of the wages for such services, the term “employer” (except for purposes of subsection (a)) means the person having control of the payment of such wages…

26 U.S.C. § 3401(d).

38. The narrow definition of employee in section 3401(c) is significant in my view because article I, section 8, clause 17 of the Constitution above limits federal power within the states and because the United States Supreme Court in Merriam holds that taxation by implication is unconstitutional. United States v. Merriam, 263 U.S. 179, 187-88 (1923) (“…in statutes levying taxes the literal meaning of the words employed is most important, for such statutes are not to be extended by implication beyond the clear import of the language used. If the words are doubtful, the doubt must be resolved against the Government and in favor of the taxpayer.”) And Billings holds that any ambiguity in tax law must be construed in favor of the taxpayer. 232 U.S. at 265.

40. The federal employment insurance (FICA/FUTA) section of the Code (Subtitle C, chapter 21) contains a much broader definition of employee that initially appears to include all common law employment relationships. 26 U.S.C. § 3121(d). This definition, however, is limited to the FICA/FUTA chapter and is also expressly limited to employment “within the United States.” 26 U.S.C. § 3121(b). Like section 3401 above, these relatively broad FICA/FUTA definitions in section 3121(d) are later narrowed by a definition of “United States” and “state” that includes only geographical areas within the clear Constitutional jurisdiction, power and authority of the federal government: Washington, D.C. the Commonwealth of Puerto Rico, the Virgin Islands, Guam and American Samoa:

(e)State, United States, and citizenFor purposes of this chapter—


The term “State” includes the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, and American Samoa.

(2)United States

The term “United States” when used in a geographical sense includes the Commonwealth of Puerto Rico, the Virgin Islands, Guam, and American Samoa.

An individual who is a citizen of the Commonwealth of Puerto Rico (but not otherwise a citizen of the United States) shall be considered, for purposes of this section, as a citizen of the United States.

26 U.S.C. 3121(e).

41. In light of Merriam’s mandate of no taxation by implication, Billings’ command that tax laws be construed in favor of the taxpayer, the Supreme Court’s view the that the right to one’s labor is a fundamental right, and the constitutional limitations on federal power, in my view the drafters of the Code purposefully limited the FICA/FUTA definitions to include only subjects that are and always have been within the clear taxable power and jurisdiction of the federal government. This view is supported by the fact that are other definitions of “United States” elsewhere in Code that expressly include the 50 states and other, broader, definitions of employer. See, e.g. 26 U.S.C. § 4612 (“The term United States means the 50 States…”), see also, 20 U.S.C. § 6103 (“The term “employer” includes both public and private employers.” The purposefully limited definition of “employee” and “United States” in the federal employment (FICA/FUTA) provisions to include only federal employees and federal territories in my view accords completely with the Constitution, Merriam and Billings and the other cases cited above.


42. In sum, there are three income-tax and income-tax-related rabbit trails in the Code that all lead to similarly narrowly-defined rabbit holes that include only people and territories expressly within clear federal Constitutional jurisdiction. First, Subtitle A purports to contain the entire “income tax” and has only one section, section 1461, that references any person liable or responsible for the tax. Section 1461 identifies all persons responsible for withholding income paid to include exclusively non-resident aliens and foreign corporations. 26 U.S.C. § 1441-46.

43. Second, Subtitle C relates to “employment taxes” and chapter 24 of Subtitle C relates to “collection of income at the source” with respect to wages. This set of definitions starts with section 3402 which requires all “employers” paying “wages” to an “employee” to withhold a portion of the wages paid. Section 3403 says that employers are liable for paying withheld tax. All of these definitions end, however, with the definition of “employee” contained in section 3401(c) which includes only federal employees.

44. Third, chapter 21 of Subtitle C relates to the “Federal Insurance Contributions Act,” specifically FICA and FUTA taxes and contains its own independent definitions of employee and wages. Chapter 21 identifies no “persons liable” or person or entity required to withhold FICA and FUTA taxes. This chapter’s definitions begin with section 3121(b) which defines “employment” to mean any service “within the United States” or outside the United States by an “American Employer.” These definitions lead to sections 3121(e) which define “state” and the “United States” to include only: Washington, D.C., the Commonwealth of Puerto Rico, the Virgin Islands, Guam and American Samoa. Although the definition of “employee” contained in section 3121(d) includes all employees, including common law employees, because of the way the previous statutes are constructed—application is based on the geographic location of the employer, not the nature of the employment relationship—this broader definition does not impact the scope of the FICA/FUTA chapter and limits it to employers located within federal geographic territories.

45. Because every other federal excise tax in the Internal Revenue Code contains clear definitions regarding “person’s liable” for the tax and also relatively clearly defines what activities or transactions trigger the tax, I believe that the definitions above are purposefully limited to fit within the scope of federal power and jurisdiction.

46. The federal income tax, in my view, is a legal and constitutional indirect excise tax that lawfully applies to federal employment, residents of the federal territories, and gain or profit from federally privileged activities. The federal income tax Code contains 3.4 million words. Nowhere in those words does it define “income.” Nowhere does it attempt to “make liable” a lawyer practicing law in Minnesota. It does not include me because, in my view, it cannot include me and my activities and remain constitutional.


47. The seminal case regarding what comprises federally taxable gross income under section 61 of the Code, a case relied on by the State in its audit and Initial Disclosures, is Commissioner v. Glenshaw Glass, 348 U.S. 426 (1955), a decision authored by Chief Judge Earl Warren. At issue in Glenshaw Glass was whether two corporate taxpayers’ receipt of federal punitive damage awards obtained as a result of asserting federal anti-trust claims in federal court represented federally taxable gross income under 26 U.S.C. § 61. Justice Warren’s decision states that the “income from any source derived” language in section 61 “was used by Congress to exert in this field the full measure of its taxing power.” Congress’ taxing power, however, cannot be construed beyond the Constitution or the facts in Glenshaw Glass. The facts in Glenshaw Glass show that the taxpayers in the case would not have received the punitive damage awards “but for” asserting a federal anti-trust claim in federal court (a federally privileged activity). When viewed in light of the facts, the holding in Glenshaw Glass therefore perfectly aligns with the Constitution and the Code—Congress’ income tax power clearly extends over federally privileged activities. Although federal punitive damage anti-trust awards are nowhere mentioned anywhere in either Subtitle A or Subtitle C, because the taxpayers in Glenshaw Glass would not have received the gain “but for” the exercise of a federal privilege, the federal anti-trust punitive damage award represents federally taxable gross income under section 61.

48. In its 2009 publication “The Truth About Frivolous Tax Arguments,” the IRS cites Reese v. United States, 24 F.3d 228 (Fed. Cir. 1994) and Murphy v. IRS, 460 F.3d 79 (D.C. Cir. 2006) for the proposition that “all income” referenced in 26 U.S.C. § 61 means everything, all earnings, revenues, receipts, received by anyone anywhere. It is true that the courts in Reese and Murphy properly held that the plaintiffs’ wages and income in both cases represented federally taxable income. The holdings are proper, however, in my view not because of the breadth and scope of section 61, but because the facts of both cases show that plaintiffs received money as a direct result of federal employment or exercising federal privileges. In Murphy, the plaintiff was a member of the federal National Guard who asserted a federal whistleblower claim in a federal Department of Labor proceeding and received a monetary award. Consistent with Glenshaw Glass and the Code, because Ms. Murphy would not have received the whistleblower award “but for” asserting a federal claim in a federal tribunal based on her work for the federal government, the award clearly represents federally taxable income. Similarly, in Reese, the plaintiff was a Washington D.C., federal, employee who received a punitive damages award as a result of asserting a sexual harassment lawsuit in Washington D.C. federal district court asserting claims under the Washington D.C. Human Rights Act (a federal law). Because the Code itself does not purport to directly assert jurisdiction or power over any resident of any state, the facts of these cases, particularly when cited by the IRS itself, are highly relevant in my view.

49. In its indirect audit report, the State indicates that the Internal Revenue Code defines income as “from any source derived”:

Income is defined in IRC § 61 as from any source derived.

(Ex. 5, Initial Disclosures, 4558.) Section 61 actually states that “gross income means all income from whatever source derived.”

50. In my view, the phrase “from any source derived” does not and cannot include all income from everywhere as is commonly accepted in lower (non-Supreme) federal and state court decisions over the last 40 years. Three points support this. First, as noted above the Code has no “persons liable” section making it clear “who” is responsible for the tax. Because there is no identifiable person liable for the income tax anywhere in the Code, section 61 begs the question of “all of who’s income?” Second, the Code itself and Supreme Court decisions admit that section 61 does not mean that all income everywhere is taxable by the United States federal government. Boulware v. U.S., 552 U.S. 421 (2008) holds that section does not and cannot mean that all income everywhere is section 61 income because section 301 of the Code provides and additional exclusion (return of stock or share capital) to gross income. Sections 101 to 140 of the Code also provide 40 separate and specific exclusions to section 61 gross income. Third and finally, section 61 cannot mean that all income everywhere (including the income of non-federal individuals within the states) is federally taxable gross income because that would make the federal income tax an unapportioned direct tax, and therefore an unconstitutional tax.

51. Sections 101 to 140 of the Code provide 40 specific “exclusions” to the calculation of federally taxable gross income. 26 USC §§ 101-140. These are receipts that even according to the Code cannot be included in the calculation of federally taxable gross income. Further, neither loans nor gifts are included in the calculation of federally taxable income. Sections 71 to 91 include ten specific “inclusions” to federally taxable gross income. 26 USC §§ 71-91. These inclusions do not include any non-privileged activity within the states and do not include practicing law in Minnesota. Finally, Subtitle A’s regulations contemplate the notion of income that is “exempt” from federal taxation:

(ii) Exempt income and exempt asset defined -

(A) In general. For purposes of this section, the term exempt income means any income that is, in whole or in part, exempt, excluded, or eliminated for federal income tax purposes. The term exempt asset means any asset the income from which is, in whole or in part, exempt, excluded, or eliminated for federal tax purposes.

26 C.F.R. 1.861-8T(d)(ii).

52. The Supreme Court in Boulware v. U.S., 552 U.S. 421 (2008) holds that corporate distributions may represent “returns of capital” and rejects the government’s claim that section 61 means everything everywhere and that a taxpayer in a criminal case has any burden to prove the character of any transfer:

It is no answer to say that § 61(a) of the Code would step in where § 301(a) [distributions of corporate property] has been pushed out. Although § 61(a) defines gross income, “[e]xcept as otherwise provided,” as “all income from whatever source derived,” the plain text of § 301(a) does provide otherwise for distributions made with respect to stock. So using § 61(a) as a stopgap would only sanction yet another eccentricity: § 301(a) would be held not to cover what it “shall” (the class of distributions made with respect to stock for which no other more specific provision is made), while § 61(a) would need to be applied to what by its terms should not be (a receipt of funds for which tax treatment is “otherwise provided” in § 301(a)).

53. The Supreme Court believes that “income” requires a corporate profit or gain after taking into account capital account losses:

Whatever difficulty there may be about a precise and scientific definition of "income," it imports, as-used here, something entirely 'distinct from principal or capital either as a subject of taxation or as a measure of the tax; conveying rather the idea of gain or increase arising from corporate activities. As was said in Stratton's Independence v. Hobert, 231 U. S. 399,- 415: "Income may be defined as the gain derived from capital, from labor, or from both combined." Understanding the term in this natural and obvious sense, it cannot be said that a conversion of capital assets invariably produces income. If sold at less than cost, it produces rather loss or outgo. … In order to determine whether there has been gain or loss, and the amount of the gain, if any, we must withdraw from the gross proceeds an amount sufficient to restore the capital value that existed at the commencement of the period under consideration. This has been recognized from the beginning by the administrative officers of the Government.

Doyle v. Mitchell, 247 U.S. 179 (1918).

54. Incidentally, according to the United States Supreme Court in Collector v. Day, 78 U.S. 113 (1781), the Tenth Amendment and the concept of “dual federalism,” the income tax does not constitutionally apply to the salaries of state judges. Day, 78 U.S. at 128. In holding that the federal income tax is unconstitutional as applied to state judge, the Day court stated:

It is a familiar rule of construction of the Constitution ofthe Union, that the sovereign powers vested in the State governments by their respective constitutions, remained unaltered and unimpaired, except so far as they were granted to the government of the United States. That the intention of the framers of the Constitution in this respect might not be misunderstood, this rule of interpretation is expressly declared in the tenth article of the amendments, namely: "The powers not delegated to the United States are reserved to the

States respectively, or, to the people." The government of the United States, therefore, can claim no powers which are not granted to it by the Constitution, and the powers actually granted must be such as are expressly given, or given by necessary implication.

The general government, and the States, although both exist within the same territorial limits, are separate and distinct sovereignties, acting separately and independently of each other, within their respective spheres. The former in

its appropriate sphere is supreme; but the States within the limits of their powers not granted, or, in the language of the tenth amendment, "reserved," are as independent of the general government as that government within its sphere is

independent of the States.

Day, 78 U.S. at 124 (emphasis supplied). Compare, Helvering v. Gerhardt, 304 U.S. 405 (1939)(holding that income of employees of New York Port Authority—a state-owned corporation approved by the United States Congress and with delegated federal privileges regarding interstate travel and commerce—was properly subject to the federal income tax; the Gerhardt court did not expressly overrule Day).

55. I am not aware of any Supreme Court decision that has held that the federal income tax lawfully applies to non-federal activities within the states. I am aware of lower court authority that may contradict or appear to contradict my view. Most cases that appear to contradict this can be resolved by asking two questions. First, as in Glenshaw Glass, Reese and Murphy above, do the facts of the case show that the gain is the result of the exercise of a federal privilege, for example is the taxpayer earning a profit by operating an interstate railroad or earning a profit or receive a distribution from a publicly traded corporation governed by the federal Securities and Exchange Commission? If yes, then the gain likely represents federally taxable income. Second, did the taxpayer agree with and consent to a federal information return filed against him by swearing to the truth of his return? If yes, then again the income will represent federally taxable income regardless of what the Code says.

56. I am aware that the IRS and some federal judges have labeled some of the points in this affidavit “frivolous.” I am also aware that at least 25 people, including former IRS criminal investigator Joe Banister and Louisiana attorney Thomas Cryer, have read and understood the Code and relevant caselaw as I have, have been charged with the crime of “willful failure to file” and juries have returned verdicts of “not guilty” in these cases.


57. As I have believed for over a decade and have publicly written, the overbroad application and enforcement of the income tax appears to be caused initially by employers and “sources” who erroneously, (and perhaps intentionally to avoid federal prosecution or fines), file false W-2s or 1099s against individuals claiming that the individual has received federally taxable income. This is outlined in my 2008 article “Bearing False Witness” attached to this Affidavit as Exhibit 3. Because all of Subtitle A does not make any private employee residing in the 50 states “liable” for the income tax, any statement to the contrary is in my view false. Employees who resist or attempt to dispute this claim meet stiff resistance from the IRS and federal courts. Because an independent, third party (generally the employer), has filed with the IRS a sworn statement declaring that the employee’s earnings are federally taxable, the employee is at a distinct procedural, evidentiary, and jurisdictional disadvantage. If the employee submits to federal jurisdiction and provides the taxing authority with the law or other information indicated that the employee’s earning are not federally taxable income, the IRS or federal court often labels the employee and his position “frivolous.” In my experience, the “frivolous” label is evidence of a fearful and groundless position. Otherwise very smart people resort to this emotional namecalling when presented with an uncomfortable point. I witnessed and felt this acutely in my quiet title cases with the federal court. In the multiple hundreds of quiet title actions I asserted, the federal courts dismissed every case on a procedural Rule 12 motion without allowing any public hearing on the merits and allowing no cross examination of any bank witness. Not one federal judge applied state substantive law which places the burden of proof on the bailout banks. To apply federal procedural law to avoid the application of state substantive law violates the constitution and Erie v. Tompkins, 304 U.S. 64 (1939). As I recall, no court even used the phrase “burden of proof” in their orders dismissing these cases. I know from experience that these quiet title cases were legitimate, well-grounded and not frivolous because, as noted above, I tried and won the first and only Minnesota securitized mortgage quiet title action in First National Bank of Elk River v. IMS. A quiet title action is the only antidote to the ongoing plague of fraudulent foreclosures spawned by the 2008 bailouts. Because the federal courts in the mortgage crisis labeled “frivolous” a position and claim I had seen with my own eyes and had won after a four-day trial, from my perspective the label “frivolous” likely really means “I’m afraid of this and wish it would go away.”

58. Nowhere does the Constitution allow the federal government to lay and collect an indirect, excise tax with no identifiable “persons liable” upon everyone in the United States. Similarly, the Constitution does not allow the federal government to enforce an indirect excise tax on “incomes” as if it were a direct tax on individuals residing within the sovereign states. The Supreme Court foresaw the possibility in Bailey v. Drexel Furniture, 259 U.S. 20 (1922):

All that Congress would need to do hereafter, in seeking to take over to its control any one of the great number of subjects of public interest, jurisdiction of which the states have never parted with and with are reserved to them by the Tenth Amendment, would be to enact a detailed measure of complete regulation of the subject and enforce it by a so-called departure from it. To give such magic to the word ‘tax’ would be to break down all constitutional limitation of the powers of Congress and completely wipe out the sovereignty of the states.

59. As I see it, the income tax in practice applies directly to taxpayer ID numbers and indirectly to the people associated with those taxpayer ID numbers. The law detailed above shows that only a few identified “sources” (payors) of federally taxable gross are responsible for paying anything to the federal government. In practice, these source/payors provide testimony in the form of “information returns” (1099s, W-2s, and K1s) testifying that a certain taxpayer ID number has received federally taxable gross income. When the individuals associated with these taxpayer ID numbers respond by filing a “return” with the taxing authority and swear, under penalty of perjury, to the facts stated in the return, they (likely unwittingly) submit themselves to the power and jurisdiction of the taxing authority. This indirect and “voluntary” consent is in my view a subterfuge that makes the income tax ostensibly constitutional. People like former IRS criminal investigator Joe Banister and attorney Thomas Cryer have also recognized this and chosen not to file rather than submit to a dishonest or at least fatally biased adjudication and determination of tax liability.


60. Below is a point-by-point response to the State’s legal authorities as cited on page 4556-4557 of the State’s Initial Disclosures. Not one case cited by the State is a criminal case.

IRC § 6001 “Every person liable for any tax imposed by this title, or for the collection thereof, shall keep such records, render such statements, make such returns, and comply with such rules and regulations as the Secretary may from time to time prescribe.”

Response: The income tax has no “persons liable” section other than section 1461. Every other excise tax in the Internal Revenue Code follows this pattern: (1) identification of taxable activity/tax imposed; and (2) an express identification of “person’s liable” for the tax. For example, foreign insurance excise tax (tax imposed by section 4371 and “persons liable” section at 4374), wagers excise tax (tax imposed by section 4401(a) and “persons liable” section at 4401(c)) , gas excise tax (tax imposed by section 4611 and “persons liable” section at 4611(a)), distilled spirits excise tax (tax imposed by section 5001(a)(1) and “persons liable” section at 5005(a)), imported tobacco excise tax (tax imposed by section 5701 and “persons liable” section at 5703). The income tax has no persons liable section (other than withholding agents/“sources” of federally taxable payments, see below).

IRC § 61(a) States that gross income is “all income from whatever source derived.”

Response: See paragraph 50 above. There are 40 categories of specific “exclusions” to gross income listed at 26 USC 101 – 140. In addition, neither loans nor gifts are includable or reportable as “gross income.” Treasury Regulation 26 C.F.R. 1.861-8T(d) contemplates income that excluded from the gross income calculation. The Supreme Court in the cases cited above acknowledges that things like returns on corporate capital are not federally taxable gross income. In sum, not even the Code accepts the idea that section 61 stands for proposition that “all income is federally taxable gross income.” The income tax is an indirect, excise tax that requires payment for money received from a federally taxable activity as testified to by the “source” in order to establish federally taxable gross income and trigger the tax. Operationally, income tax on “wages” (and actually all federally taxable gross income) is taxable at its “source” 26 USC 3401 – 3405 and requires the source/payor to file a sworn information return declaring that wages represent federally taxable income. If the taxing authority has received no information return filed by a “source” declaring that money paid represents federally taxable gross income, then there exists no evidence of federally taxable gross income. If no legally obligated source files an information return declaring payment of federally taxable gross income, then there is and can be no federally taxable gross income. The 16th amendment did not expand the federal government’s power to tax and did not allow the federal government to lay and collect an indirect excise tax as though it was a direct or capitation tax. Brushaber v. Union Pacific, 240 U.S. 1 (1916). The understandable assumption/belief that all bank deposits must be federally taxable gross income is the result of the federal government collecting and enforcing the income tax as though it were a direct, capitation tax rather than an indirect, excise tax. The failure to provide express, clear guidance on “persons liable” reinforces this misperception.

IRC § 6011(a) “When required by regulations prescribed by the Secretary any person made liable for any tax imposed by this title, or with respect to the collection thereof, shall make a return or statement according to the forms and regulations prescribed by the Secretary.”

Response: See above. The only personal liability relating to the income tax is found at section 1461. This liability relates to withholding agents (people who are “sources” of federally taxable gross income). These sources of federally taxable gross income are required to withhold and deduct taxes due under Chapter 3 of the Code. The specific people who must be withheld from are:

Non-resident aliens, section 1441

Foreign corporations, section 1442

Foreign tax-exempt organization, section 1443

Virgin Islands source income, section 1444

Dispositions of US real property by non-resident aliens, section 1445

Foreign partner’s share of above, section 1446.

IRC § 6012(a)(1)(A) “Returns with respect to income taxes under subtitle A shall be made by the following: Every individual having for the taxable year gross income which equals or exceeds the exemption amount…”

Response: See above. If there is no direct evidence of federally taxable gross income as supported by a federal information return provided by an obligated “source” or withholding agent, then there is no federally taxable gross income and no obligation to file a “return.”

IRC § 6017 “Every individual (other than a nonresident alien individual) having net earnings from self-employment of $400 or more for the taxable year shall make a return with respect to the self-employment tax imposed by chapter 2.”

Response: The State has indicated that it abandoned this calculation and it may in fact be a better one to use in my case. Section 6017 points to section 1402 which defines net earnings. In 2012 and 2013 I was sanctioned out of business by the federal courts, with total sanctions of over $300,000. This was and is certainly a liability and I believe should be factored into whether I or my businesses had a loss or a gain. As I ended up homeless in 2014 and living out of my office, I would suspect that I had a loss and not a gain.

IRC § 1402(a) “The term “net earnings from self-employment” means the gross income derived by an individual from any trade or business carried on by such individual, less the deductions allowed by this subtitle which are attributable to such trade or business…”

Response: See above.

IRC § 446(b) Provides that “if no method of accounting has been regularly used by the taxpayer, or if the method used does not clearly reflect income, the computation of taxable income shall be made under such method as, in the opinion of the Secretary, does clearly reflect income.”

Response: This section lists several methods of accounting that the IRS (not the State) may use. It does not list an “indirect” or “bank account” or “bank deposit” method.

IRC § 162 Expenses that are ordinary and necessary to conducting a trade or business are allowed as a deduction in the tax year they are paid or incurred.

Response: I have not examined in detail what the State has allowed or disallowed. What I do know is that after the two years in question I spent four years living out of an office and could not make a meaningful contribution to my daughter’s wedding expenses I believe in 2014.

Minnesota State Statutes

Minn. Stat. § 289A.08 subd. 1(a) “A taxpayer must file a return for each taxable year the taxpayer is required to file a return under section 6012 of the Internal Revenue Code…”

Response. I agree, provided that one has a tax liability, is someone identified in section 1461 or section 3403, or has had an information return filed against them and they need to respond. I don’t fit into any of these categories.

Minn. Stat. § 270C.33 subd. 4(a)(2) “The commissioner may issue an order of assessment in any of the following circumstances: no return has been filed and the commissioner determines the amount of tax that should have been assessed.”

Response: See discussion below. This is only true for people who have a federal tax liability and federally taxable gross income. State law is completely coextensive with federal law. If there is no federal obligation, there is no state obligation.

Federal Tax Regulations

Treas. Reg. § 301.7701-2(c)(2)(i) “Except as otherwise provided in this paragraph (c), a business entity that has a single owner and is not a corporation under paragraph (b) of this section is disregarded as an entity separate from its owner.”

Response: This is true for determining a tax liability of someone with federal taxable income. I’m not certain how or whether this can be used in a criminal failure to file case when there are no information returns filed agains the defendant and the defendant sincerely believes that he has no federal income tax liability.

Treas. Reg. § 1.446-1(a)(4) Defines accounting records as any and all records or data necessary to substantiate entries made in the books of account and on their return.

Response: In order to fill in the box “federally taxable gross income,” the state must have some evidence that the deposit is taxable income. Without an information return—W-2, 1099, or K-1—a deposit means nothing.

Case Law

Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 429-30 (1955) - Referring to the passage in IRC § 61 "income derived from any source whatever," the Supreme Court stated, "this language was used by Congress to exert in this field 'the full measure of its taxing power.' . . . And the Court has given a liberal construction to this broad phraseology in recognition of the intention of

Congress to tax all gains except those specifically exempted."

Response: The “income” at issue in Glenshaw was a federal anti-trust punitive damage award received by Glenshaw (and Mann Theatres, also a party to the case). Applying a federal power, federal jurisdiction “but for” test, Glenshaw would not have received this income “but for” its assertion of a federal right (federal lawsuit and federal anti-trust statute) in federal court. Admittedly, the Court nowhere limits its analysis to this. And the reality is that the US Supreme Court does not have the legal authority to claim that all income everywhere is federally taxable income, although it is easy to see how people would be misinfluenced to believe this because it comes from the US Supreme Court.

Webb v. Commissioner, 394 F.2d 366, 371-72 [21 AFTR 2d 1150] (5th Cir. 1968) - Held that arithmetic precision of the tax return is exclusively the taxpayers duty. When a taxpayer fails to maintain adequate books and records, the Commissioner is authorized to use whatever method they deem appropriate to clearly estimate the taxpayer’s income.

Response: Webb is a civil, not criminal, case and so has no authority in a criminal proceeding. Webb is an appeal from a tax court decision. It is true that the IRS completely destroyed this poor guy and performed an audit and assessment that had no basis in reality—arbitrarily estimated sales, expenses, etc. The most relevant fact, however, is that in the process of the audit the taxpayer consented to the abuse by signing an IRS Form 870—“Waiver on Restrictions on Assessment and Collection of Deficiency.”) The taxpayer had no hope of getting an honest civil assessment after he had signed form 870. I have not done this. I have withdrawn my consent to a broken system.

Roberts v. Commissioner, 62 T.C. 834 (1974) - The Commissioner's determination is not made arbitrary or unreasonable because of his failure to have all the facts when the failure is caused solely by the petitioner.

Response: Roberts is a civil, not criminal case and so has no authority in a criminal proceeding. Further, Roberts is a tax court decision. The U.S. Tax Court (I am a member of its bar) is an Article I (executive branch) court, not an Article III court. An federal Article I executive court can’t provide any meaningful guidance in a State criminal proceeding. That said, the case is interesting. The poor taxpayer here had an angry dispute with the IRS in 1967 and he apparently came out winning. The IRS got him back in 1969 by auditing his return and challenging two expenses—a $470 casualty loss and a $402.40 medical deduction. The taxpayer claimed that the audit was retaliatory and therefore “arbitrary and unreasonable.” Taxpayer also claimed that because his return was signed and sworn under oath, the Erie Doctrine established the truth of his deductions and shifted the burden to the IRS to disprove his deductions. He lost. The lesson here is: IF you decide to file a return and sign it under penalty of perjury, THEN all that does is require you to later prove any deduction you have claimed. Once again, this to me shows that the IRS has turned the Code into an unwinnable and dishonest “oath swearing” game. This is why the people who win against the IRS are those who refuse to play the game, refuse to file, and refuse to make false, under oath, statements.

Rowell v. Commissioner of Internal Revenue, 884 F.2d 1085, 1087 [64 AFTR 2d 89-5660] (8th Cir. 1989) – Held the “court must accept the Commissioner's method of reconstructing income so long as it is rationally based.”

Response: Rowell is a civil, not criminal case and so has no authority in a criminal proceeding. Further, Rowell is a review of an Article I tax court decision. Rowell was an attorney who had a side gig with his bookkeeper preparing tax returns. He determined his income by taking all bank deposits as his gross income and then deducting his expenses. In an audit of his filed return, the IRS determined that he wasn’t being straight about his total income or his deductions—it appears he may have claimed personal expenses as business deductions. The “rational method” that the IRS used to reconstruct income was to review the total returns that he filed under his name as a tax preparer and multiply this by the average amount received for each tax prep—something like $120 per client. This case does not support the State’s claim that I received $311,000 in wages. Again, the lesson here is that filing IRS forms under oath makes everyone a liar.

Mendelson v. Commissioner, 305 F.2d 519 [10 AFTR 2d 5175] (7th Cir. 1962) - Where reconstruction of a taxpayer’s income is necessary, respondent has great latitude in the method used. The method, however, must produce a result that is reasonable and substantially correct.

Response: Mendelson is a civil, not criminal case and so has no authority in a criminal proceeding. Further, Mendelson is a review of a federal Article I tax court decision. In Mendelson, the taxpayer filed a sworn under oath return that his wife made $200 in tips per year. In the audit the IRS determined that the wife worked at an upscale Milwaukee restaurant and made some reasonable guesstimates on check size and found that she probably made tips of around $2-3K per year. The IRS used 12 percent of total check as a guide, accounting for tipping out busboys. The method was reasonable and based in fact. The problem again was that the taxpayer conceded the first point—that his income was federally taxable gross income in the first place.

Schroeder v. Commissioner, 40 TC 30, 33 (1963) - Although respondent’s reconstruction of income need not be exact, it must be “reasonable in light of all surrounding facts and circumstances.”

Response: Schroeder is a civil Article I tax court decision and has no authority in a criminal proceeding. This is another tip case. Because the taxpayer filed a sworn, under oath return claiming to have received $800 in tips, the taxpayer had the burden of proving this income. The court found that this Milwaukee waitress worked a fancy restaurant called “Frenchy’s.” The method of determining tips here was truly arbitrary, the IRS really didn’t even examine her hours or the average check size. The IRS guesstimated and the poor woman probably got audited by claiming a round number in tips. All of these cases highlight the fact that if someone I files a sworn, under oath return, then that person has the burden of proving that the statements in the return were true. IF there is no return filed and the case is a criminal and not civil proceeding then the state has the burden of establishing beyond a reasonable doubt, gross income, taxable income, and tax due.

Palmer v. United States, 116 F.3d 1309, 1312 (9th Cir. 1997) - Courts have long held that the IRS may rationally use statistics to reconstruct income where taxpayers fail to offer accurate records. Reasonable methods include average local income statistics for a particular profession.

Response: Another civil case and appeal of a tax court decision. Angry people who refused to file (no evidence of why) and refused to cooperate with the IRS. After the IRS placed an illegitimate lien on property owned they did not own but controlled in trust, they were forced to play ball with the IRS. The facts show that the IRS released the lien after these people were forced to bring a case in tax court to get the lien removed, which they did. IRS agents investigated this solo practice electrician and found only $2500 a year in actual income. IRS nevertheless used statistical evidence (local median income) to claim that he had $12,000 a year in income. Case truly shows how abusive the IRS can be and how far courts will go to support them than anything else.

Estate of Mason v. Commissioner, 64 T.C. 651, 656-657 (1975), affd. 566 F.2d 2 (6th Cir. 1977) Bank deposits are prima facie evidence of income to the taxpayer, and the Commissioner does not need to provide a likely source of the income.

Response: Not a criminal failure to file case. Civil, Article I tax court decision based on a taxpayer’s under oath representations to the IRS and was audited. The taxpayer here was a convicted arsonist who admitted to “kiting” checks by transferring funds between three bank accounts to take advantage of the “float.” Bank deposits are prima facie evidence of income only when someone admits, under oath, that some of the those deposits represent federally taxable income.

Tokarski v. Commissioner, 87 T.C. 74, 75-76 (1986) - The taxpayer bears the burden of proving receipts are from nontaxable sources.

Response: maybe true in a civil, Article I tax court proceeding. In a state criminal proceeding, a defendant has no burden of proving anything. This case again illustrates a hopelessly broken system. The taxpayer’s mother testified that she gave the taxpayer $30,000 as a gift, that the money was cash that was in a cigar box given to her by her late husband who did not believe in/was suspicious of banks. There was no evidence that the taxpayer ever earned one dollar of income and no conflicting testimony. Court disbelieved this the mother and refused to accept that the $30K was a gift.

New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 [13 AFTR 1180] (1934) - Deductions are a matter of legislative grace, & the taxpayer bears the burden of proving that they are entitled to any deduction claimed.

Response: True, if one has federally taxable gross income in the first place. And this is a civil case involving corporate returns.


61. The State bases its case on the claim that William Butler received $311,000 in federally taxable wages and bases this position on Robert Half statistics for lawyers’ salaries in Minnesota:

The professional services & consulting firm Robert Half International publishes yearly salary guides for specific industries, which includes the legal field. Robert Half is recognized as a research authority that is able to aggregate and analyze salary trends, and give specific figures for local and national markets. Their published 2012 salary guide gives a high and low compensation value for a senior lawyer with 10 years’ experience at a small firm. These figures can then be adjusted to the local salary variance of Minneapolis. The mean value of the range is roughly $130,000. It is a reasonable conclusion that Mr. Butler would make regularly scheduled payments of at least $130,000 to himself throughout the 2012 tax year. This figure is approximately 28% of all payroll transactions. Mr. Butler will therefore be allocated 28% of payroll transactions in 2013 and 2013. The payroll transactions allocable to Mr. Butler will be disallowed as an expense deductible from gross income.

(Ex. 5, Initial Disclosures, p. 4559-4560.)

62. I did not receive $311,000 in federally taxable wages in 2012 and 2013. In 2012 and 2013 federal courts drove me out of business by fining me $325,103.08 for asserting quiet title actions against the bailout banks. I lost my own home to foreclosure in 2014, spent the next four years living out of an office, and did not have sufficient funds to meaningfully contribute to my daughter’s wedding.

63. The State alleges that I am “a person required to file a return” and have “willfully attempted to evade or defeat it by failing to file it when required” in violation of Minn. Stat. § 289A.63, subd. 1(a).

64. Section 289A.63 does not identify who is required to file a Minnesota income tax return. Section 289A.08 separately states that “a taxpayer” must file a return only if the taxpayer is required to file a return under section 6012 of the federal Internal Revenue Code.

65. Section 6012 of the Internal Revenue Code does not identify any individuals required to file a federal return, rather it identifies circumstances and exceptions as to when income tax returns “shall be made.” In summary, section 6012 states that income tax returns shall be made when federally taxable gross income exceeds the threshold of the “exemption amount” (defined at 26 USC § 151(d)) plus the available “standard deductions” (defined at 26 USC § 63(c)). Nowhere do these statutes specifically identify any individual required to file a return.

66. Section 61 initially states that federally taxable “gross income” is “all income from whatever source derived.” Sections 101 through 140, however, provide 40 “exclusions” to (items specifically exempted from) the calculation of federally taxable gross income. 26 USC §§ 101-140.

67. Minnesota “jurisdiction” over and authority to tax a Minnesota resident’s income aligns exactly with federal jurisdiction. Section 290.014 states: “All net income of a resident individual is subject to tax under this chapter.” Minn. Stat. § 290.014. Minnesota’s definition of “net income” is limited to federally taxable income:

Subd. 19.Net income.


The term "net income" means the federal taxable income, as defined in section 63 of the Internal Revenue Code of 1986, as amended through the date named in this subdivision, incorporating the federal effective dates of changes to the Internal Revenue Code and any elections made by the taxpayer in accordance with the Internal Revenue Code in determining federal taxable income for federal income tax purposes, and with the modifications provided in sections 290.0131 to 290.0136.

Minn. Stat. § 290.01.

68. The State’s “indirect analysis” does not affirmatively state that William Bernard Butler received or earned the required threshold federally taxable gross income in the years in question. The State instead claims that I received federally taxable gross income via “constructive receipt” of business revenues (not including business expenses) though deposits in business bank accounts and that I bear the burden of proving that bank deposits are from non-taxable sources:

An individual must have income in order to have a filing requirement. Income is defined in IRC § 61 as from any source derived. During the period of 2011 to 2013, Mr. Butler had total deposits in various bank accounts in excess of $350,000 each year. Treas. Reg. § 1.451-2(a) describes constructive receipt of income as having funds available to the taxpayer in their bank account. These bank deposits are prima facie evidence of income to the taxpayer according to the precedent established in Estate of Mason v. Commissioner, 64 T.C. 651, 656-657 (1975), aff’d 566 F.2d (6th Cir. 1977), and the Department does not need to provide a likely explanation for the source of the deposits. Lastly, applying the rational [sic] used in Tokarski v. Commissioner, 87 T.C. 74, 75-76, the taxpayer bears the burden of proving that the deposits are from non-taxable sources.

(Initial Disclosures, p. 4558.)

69. A defendant in a criminal has no burden. Mason and Tokarski are civil decisions from an article I, executive branch tax court. The State in this state criminal case must prove beyond a reasonable doubt that I have a federal tax liability for 2012 and 2013. In Boulware v. U.S., 552 U.S. 421 (2008) the Supreme Court acknowledge the “disconnect between civil and criminal [tax] liability” and rejected the idea that the taxpayer had a burden to prove anything about the character of any transaction.

70. The State’s indirect analysis concludes, without providing any legal or factual basis, that business revenue exclusive of expenses, represents federally taxable gross income to William Bernard Butler:

Bank deposit analysis for each of these years yields gross income to Mr. Butler in excess of the pre-established thresholds. It can therefore be reasonably concluded that Mr. Butler was required by federal statute to file income tax returns for the 2011-2013 tax years.

It is an established fact that Mr. Butler received gross income during the period of 2011 – 2013.

(Ex. 5, Initial Disclosures, p. 4559.)

71. The State claims that its indirect analysis is authorized by 26 U.S.C. § 446 and does not explain why it did not perform “net earnings” from business in light of the $325,000 in federal sanctions in 2012 and 2013:

Indirect Analysis

The bank deposit method will be used to analyze Mr. Butler’s business activities. The Department is empowered to use indirect analysis when the accounting method of the taxpayer does not clearly reflect income. See IRC § 446(b). Mr. Butler has had ample opportunity to determine his filing requirements utilizing his selected method of accounting. He has determined, through his selected method, that he is not required to file individual income tax returns for the 2011-2013 period.

Mr. Butler is engaged in a trade or business carried on by himself, and by definition this qualifies him as self-employed. Mr. Butler is therefore obligated to file an individual income tax return if he meets the criteria set forth in either IRC § 6012 or IRC § 6017. IRC § 6012 outlines gross income requirements whereas IRC § 6017 relies on net earnings from self-employment threshold.

The IRC § 6017 net earnings from self-employment thresholds do not need to be evaluated because of the establishment of Mr. Butler’s requirement to file under IRC § 6012.

(Ex. 5, Initial Disclosures, p. 4558.)

72. By attributing $311,000 in federally taxable income to me personally in 2012 and 2013, the State has determined that I have a base total tax liability of $22,042:

(Ex. 5, Initial Disclosure, p. 4561.) For allegedly failing to pay the State $22,000, the State has threatened to imprison me for 10 years. Section 12 of the Minnesota Constitution expressly states “No person shall be imprisoned for debt in this state…” Minn. Const. art. I, § 12.


73. The State calculated taxable income by first looking to what a lawyer should have made according to Robert Half statistics, applied that number, and then disregarded business payroll expenses that did not agree with this supposition:

The professional services & consulting firm Robert Half International publishes yearly salary guides for specific industries, which includes the legal field. Robert Half is recognized as a research authority that is able to aggregate and analyze salary trends, and give specific figures for local and national markets. Their published 2012 salary guide gives a high and low compensation value for a senior lawyer with 10 years’ experience at a small firm. These figures can then be adjusted to the local salary variance of Minneapolis. The mean value of the range is roughly $130,000. It is a reasonable conclusion that Mr. Butler would make regularly scheduled payments of at least $130,000 to himself throughout the 2012 tax year. This figure is approximately 28% of all payroll transactions. Mr. Butler will therefore be allocated 28% of payroll transactions in 2013 and 2013. The payroll transactions allocable to Mr. Butler will be disallowed as an expense deductible from gross income.

(Ex. 5, Initial Disclosures, p. 4559-4560.)

74. Rule 702 of the Rules of Evidence requires that the basis of an expert opinion have “foundational reliability”:

Rule 702.Testimony by Experts

If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise. The opinion must have foundational reliability. In addition, if the opinion or evidence involves novel scientific theory, the proponent must establish that the underlying scientific evidence is generally accepted in the relevant scientific community.

Minn. R. Evid. 702. Minnesota State law requires that experts testifying in a criminal proceeding meet the Frye-Mack standard: (1) that they show that their scientific theory, technique, or method is generally accepted in the scientific community; and (2) that the evidence they offer has a scientifically reliable foundation. State v. Traylor, 656 N.W.2d 885 (Minn. 2003). The State has provided no authority that would allow it to use its statistical method to establish a tax liability and create a debt in a state criminal proceeding.

75. In order to prevail in a willful tax crime case, the government must prove, beyond a reasonable doubt: (1) willfulness; (2) existence of a tax deficiency; and (3) an affirmative act constituting evasion or attempted evasion of the tax. Sansone v. U.S., 380 U.S. 343, 251. Boulware v. U.S., 552 U.S. 421 (2008) (“There is no criminal tax crime without a tax deficiency”).


76. Because the federal income tax is an indirect excise tax with no identified “persons liable,” federally taxable gross income is established by a sworn federal information return filed by a “source” of federally taxable income under section 3402 or 1461 of the Code. The state has no direct evidence of federally taxable gross income.

77. The State’s witnesses do not have the factual foundation necessary to claim or assert that any bank deposit represents federally taxable gross income.


78. A person cannot be convicted of a willful tax crime if their position is based on a good faith belief. Cheek v. U.S., 498 U.S. 192 (1991).

79. I have held the views contained in this affidavit for nearly ten years. My published pieces on the income tax include: Bearing False Witness (November 9, 2009, Ex. 3) and Why Joe Stack Was So Angry (April 5, 2010, Ex. 4).


William Bernard Butler

Subscribed and affirmed before me this 10th

day of December, 2018