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Relationship of U S codes titles 26 to title 27

THE RELATIONSHIP OF UNITED STATES CODES TITLES 26 TO TITLE 27 by Albert E. Carter

I can understand why IRS agents are so confused as they try to do their job.  I must admit, I am utterly intimidated by the voluminous 6000 plus pages of the Internal Revenue Code.  It is so vague, confusing and impossible to understand that even commissioner Roscoe Egger, Jr., IRS, admitted to an audience on November 30, 1994, in Baltimore that he didn't understand it.

"Any tax practitioner, any tax administrator, any taxpayer who has worked with the Internal Revenue Code knows that it is probably the biggest 'mish-mash" of statutes imaginable.  Congress, various Administrations and all the special interest groups have tinkered with it over the years, and now a huge assortment of special interest and pet economic theories have been woven into the great 'hodgepodge" that is today's Internal Revenue Code." Roscoe Egger, Jr., Commissioner of the Internal Revenue Service IR-84-123, 11-30.84.

Even former President Reagan, while he was president has attested to the fact that the Code is impossible to understand.  The President said in a 1984 Associated Press (AP) release:

"The government has the nerve to tell the people of the country, 'you figure out how much you owe us - and we can't help you because our people don't understand it either - and if you make a mistake, we'll make you pay a penalty for making the mistake."'

Let me refer you to the government's own official publication No. 21 "UNDERSTANDING TAXES", issued by the Internal Revenue Service (1982).  The IRS says that "You must decide whether the law requires you to file a return".

Shirley Peterson, Former IRS Commissioner under the Bush Administration was quoted in Fortune September 6, 1993 issue, "I would repeal the Internal Revenue Code and start over."

And what does Margaret Milner Richardson, Clinton's Commissioner of Internal Revenue have to say about the IRS?

"We realize that for our voluntary income tax system to survive, and for us to accomplish our mission, we need to change the way we do business." NY Times.

Obviously even the experts are confused when it comes to understanding the Internal Revenue Code.  So what we are undertaking with this presentation, at the very best will be confusing, but that is not our fault.  We will try to help you understand the IRS Code Book as nobody else has been able to.  To do that we need to understand how laws are made.

"When Congress passes a bill into law, it is recorded into the Statutes At Large, a huge group of books taking up many shelves in the law library.  The Statutes at Large continue to grow as laws are passed and included chronologically.  If we had to research federal laws by relying only on this set of books, it would be close to impossible.  So, after the laws have been passed by congress they are codified into fifty separate classifications or codes known as, The United States Code, containing the general and permanent laws of the United States.  Naturally, because these books cover the same information only codified, this set of books takes up approximately the same number of shelves.  Some of the Titles of the Code, for example are, Title 2. The Congress, Title 3. The President, Title 4. Flag and Seal, Seat of Government, and the States, Title 18.  Crimes and C Procedure, etc.  The two Codes we are interested in are, Title 26.  Internal Revenue Code, and Title 27.  Intoxicating Liquors, (or the Bureau of Alcohol, Tobacco and Firearms).

In the preface of the 1988 edition, the eleventh edition of the United States Code, it states:

"The Office of the Law Revision Counsel of the House of Representatives has been engaged in a comprehensive project authorized by law to revise and codify, for enactment into positive, each title of the Code.  When this project is completed, all the titles of the Code will be legal evidence of the general and permanent laws and recourse to the numerous volumes of the United States Statutes at Large for this purpose will no longer be necessary."

It then numerates the Titles that have been enacted as positive law:

"Titles 1, 3, 4, 5, 9, 10, 13, 14, 17, 18, 23, 28, 31, 32, 25, 37, 38, 39, 44, 46, and 49 have been codified, and enacted into positive law and the text thereof is legal evidence of the laws therein contained."

Notice that neither 26, or 27 is included in the positive laws, so what are they?  The matter contained in the other titles of the Code is only prima facie evidence of the laws. What do they mean by prima facie?  Let's go to Blacks Law Dictionary.

PRIMA FACIE Lat.  At first sight: on the first appearance; on the face of it; presumably; a fact presumed to be true unless disproved by some evidence to the contrary.

So any prima facie law may or may not be real, but it appears to be real and will be treated as such until challenged.  Blacks Law Dictionary uses the term prima-facie to define the word, color.

COLOR An appearance, semblance, as distinguished from that which is real.  A prima-facie of apparent right.  Hence, a deceptive appearance; a plausible, assumed exterior, concealing a lack of reality; a disguise or pretext.

While we are in Black's, lets look up Special Law.  It is possible that Title 26 and 27 might fall within that definition.

SPECIAL LAW.  One relating to particular persons or things; one made for individual cases or for particular places or districts; one operating upon a selected class, rather than upon the public generally.  A private law.  A law is "special' when it is different from others of the same general kind or designed for a particular purpose, or limited in range or confined to a prescribed field of action or operation.

IRS Can Ignore Its Own Rules

IRS attorneys seem to know what is real and what is not, because they take advantage of the fact that their IRS manual has no force of law when they are cornered.

When the IRS tried to levy against a person's IRA account the protested that the IRS manual forbids any levy against an IRA unless the "taxpayer "flagrantly disregards requests for payment," which wasn't the case here.  TAX COURT: The procedures in the IRS manual do not have the force of law, so the IRS is not legally bound to follow them.  Source: First Federal Savings and Loan Assn. of Pittsburgh, WD Pa., 644 F. Supp. 101

Well, if the IRS manual doesn't have the force of law, and Title 26 is only prima facie, it appears that we will have to go to the underlying law to get anywhere.  To do this, it will take a little bit of research into the history of both the Internal Revenue Service (IRS) and the Bureau of Alcohol, Tobacco, and Firearms (BATF)

Excerpts from the Internal Revenue Manual - Administration:

1111.1        (5-27-88) Mission

(1)  The purpose of the IRS is to collect the proper amount of tax revenues at the least cost to the public, and in a manner that warrants the highest degree of public confidence in our integrity, efficiency and fairness, To Achieve that purpose, we will: encourage and achieve the highest possible degree of voluntary compliance in accordance with the tax law and regulations; advise the public of their rights and responsibilities; determine the extent of compliance and the causes of noncompliance; do all things needed for the proper administration and enforcement of the tax laws; and continually search for and implement new, more efficient and effective ways of accomplishing our Mission.

1111.2        (7-6-83) Organic Act

(1)  The Office of the Commissioner of Internal Revenue was established by and act of Congress (12 Stat 432) on July 1 1862, and the first Commissioner of Internal Revenue took office on July 17, 1862.

(2)  The act of July 1 provided:

"...That, for the purpose of superintending the collection of internal duties, stamp duties, licenses, or taxes imposed by this Act, or which may be hereafter imposed, and of assessing the same, an office is hereby created in the Treasury Department to be called the Office of Commissioner of the Internal Revenue: ... shall be charged, and hereby is charged, under the direction of the Secretary, with preparing all the instructions, regulations, directions, forms, blanks, stamps, and licenses, and distributing the same...

It is important to note that internal revenue did not mean income tax at this time.  It meant collecting taxes on duties, exports, excises on commodities taxes on corporations and other activities that fall under the general heading of taxable activities such as the manufacture, distribution and sale of alcohol and tobacco products.

1111.31           (7-6-83) Internal Taxation

Madison's Notes on the Constitutional Convention reveal clearly that the framers of the Constitution believed for some time that the principal, if not sole, support of the new Federal Government would be derived from customs duties and taxes connected with shipping and importation's, Internal taxation would not be resorted to except infrequently, and for special reasons.  The first resort to internal taxation, the enactment of internal revenue laws in 1791 and in the following 10 years, was occasioned by the exigencies of the public credit.  These first laws were repealed in 1802.  Internal revenue laws were reenacted for the period of 1813-1817 when effects of the war of 1812 caused Congress to resort to internal taxation.  From 1818 to 1861, however, the United States had no internal revenue laws and the Federal Government was supported by the revenue from import duties and the proceeds from the sale of public lands.  In 1862 Congress once more levied internal revenue taxes.  This time the establishment of an internal revenue system, not exclusively dependent upon the supplies of foreign commerce, was permanent.

1111.32      (7-6-83) Background and Evolution of Present Organization

(2)  Since 1862, the Internal Revenue Service has undergone a period of steady growth as the means for financing Government operations shifted from the levying of import duties to internal taxation.  Its expansion received considerable impetus in 1913 with the ratification of the Sixteenth Amendment to the Constitution under which Congress received constitutional authority to levy taxes on the income of individuals and corporations.  With the enactment of income tax laws the work of the Revenue Service began to take on a highly technical character.

1111.41 (8-15-90 Changes 1950 through 1959

(2)  Reorganization Plan No. 1 established the three-tier structure for the Service - a multifunctional national office, up to 25 regional offices, and up to 70 district offices.

(b)  Major field programs, including alcohol and tobacco tax enforcement, were integrated under district directors

"Now wait a minute,- I can here you say, "I thought the taxing of alcohol and tobacco was under Title 27." And I agree with you but it appears that under Title 27 Subsections (a) to (d) provided for the creation of a Federal Alcohol Administration as a division of the Treasury Department.  By Act June 26, 1936 Ch. 830 Title V 49 Stat 1964, however, those subsections were repealed and a new Administration created as an independent agency.  The repealing act was to be effective when the new administrators authorized thereby were appointed.  While the officers so authorized were never appointed and the repeal therefore never became effective, subsections (a) to (d) have been omitted in view of Reorg.  Plan No. III of 1940, set out in Appendix to Title 5, Government Organization and Employees, which abolished the Administration and transferred its functions to the Secretary of the Treasury to be administered through the Bureau of Internal Revenue (now Internal Revenue Service).

At this time, the district directors of the IRS had all of the authority to tax alcohol, and tobacco.  The rules and regulations were included in Title 26, which means that many of the regulations in Title 26 were written for the control and taxing of the sale activities of the sale and distribution of alcohol tobacco and firearms.

1111.5        8-15-90) Changes 1960 Through 1969

(7) (a) Effective in 196& Alcohol and Tobacco Tax Division renamed Alcohol, Tobacco and Firearms Division.

Now although there was a name change there was not a change in responsibility.  ATF was still under the control of the IRS.  Then, something did happen.

1111.61 (8-15-90) Changes 1970 Through 1977

(2)(a) Effective in 1972.  Alcohol, Tobacco and Firearms activity transferred to Department of the Treasury as a separate bureau (based on Secretary directed Study on Organizational Placement of ATF Functions, 1971).

Now, this is something that very few people know.  First, the ATF was at one time part of the IRS.  Second, the ATF was transferred into a separate Bureau under the Secretary of the Treasury.  The key word here is Transferred.  Let's see what Black's Law Dictionary has to say about Transfer.

Transfer, v. To convey or remove from one place, person, etc. to another, pass or hand over from one to another, specifically, to change over the possession or control of.

Transfer, n. An act of the parties, or of the law, by which title to property is conveyed from one person to another.  The sale and every other method, direct or indirect, of disposing of or parting with property of with and interest therein, or with the possession thereof, absolutely or conditionally, voluntarily or involuntarily, The assignment or conveyance of property, including an instrument of document, that vests in the transferee such rights as the transferor had therein.  Transfer is the all-encompassing term used by the Uniform Commercial Code to describe the act which passes an interest in an instrument to another.

With the BATF kicked out or divorced from the IRS what property, rules, laws, sections of the IRS Code did the BATF take with them and what property, rules, laws sections of the IRS Code did they leave behind?  To find that out, we need to go to the genesis of the BATF.  On page 7 of Title 27 - Intoxicating Liquors para 201:

... Department of the Treasury Order 221 of July 1, 1972, established the Bureau of Alcohol, Tobacco and Firearms and transferred to it the alcohol and functions of the Internal Revenue Service.

First, let's identify what the BATF left Behind.  That is easy.  We turn to the Internal Revenue Manual ­Administration and read:

1112.4        (8-15-90) District Offices

1112.41 (8-15-90) Mission

The mission of district offices [of the IRS] is to administer the internal revenue laws (except those relating to Alcohol, tobacco and firearms) within a geographically defined internal revenue district and to provide services to and contact with, taxpayers.

Thus, The District Offices have the responsibility to administer over all laws and regulations of Title 26 that was not taken by the BATF when it left in 1972.  Notice that there is no exception to the exception.  All powers, laws, rules, sections and regulations were transferred to the BATF Treasury Department Order No. 221.

So, let's go to TDO 221 of July 1, 1972, written by Charles E. Walker, Acting Secretary of the Treasury and see what the BATF took with them as they left the IRS.

Establishment of the Bureau of Alcohol, Tobacco And Firearms

By virtue of the authority vested in me as Secretary of the Treasury, including the authority in Reorganization Plan No 26 of 1950 it is ordered that:

1.  The purpose of this Order is to transfer as specified herein, the functions, powers and duties of the Internal Revenue Service arising under laws relating to alcohol, tobacco,  and explosives (including the Alcohol, Tobacco and Firearms Division of the Internal Revenue Service) to the Bureau of Alcohol, Tobacco and Firearms ...

2.  The Director (BATF) shall perform the functions, exercise the powers, and carry out the duties of the Secretary in the administration and enforcement of the following provisions of law:

(a)  Chapters 51, 52, and 53 of the Internal Revenue Code of 1954, and sections 7652 and 7653 of such Code insofar as they relate to the commodities subject to tax under such chapters;

(b)  Chapters 61 to 80, inclusively, of the Internal Revenue Code of 1954, insofar as they relate to activities administered and enforced with respect to chapters 51, 52 and 53.

3.  All functions, powers and duties of the Secretary which relate to the administration and enforcement of the laws specified in paragraph 2 hereof are delegated to the Director [BATF].

4.  (a) All regulations prescribed, all rules and instructions issued, and all forms adopted for the administration and enforcement of the laws specified in paragraph 2 hereof, which are in effect or in use on the effective date of this Order, shall continue in effect as regulations, rules, instructions and forms or the Bureau and superseded or revised;

    (b)  All existing activities relating to the collection, processing, depositing, or accounting for taxes (including penalties and interest), fees, or other moneys under the laws specified in paragraph 2 hereof shall continue to be performed by the Commissioner of Internal Revenue to the extent not now performed by the Alcohol, Tobacco and Firearms Division or the Assistant Regional Commissioners (Alcohol, Tobacco and Firearms), until the Director shall otherwise provide with the approval of the Secretary.

5.  (a) The terms 'Director, Alcohol, Tobacco and Firearms Division" and "Commissioner of Internal Revenue" wherever used in regulations, rules, instruction, and forms, issued or adopted for the administration and enforcement of the laws specified in paragraph 2 hereof, which are in effect or in use on the effective date of this Order, shall be held to mean the Director.

    (b)  The terms 'Assistant Regional Commissioner" wherever used in such regulations, rules, instructions, and forms, shall be held to mean Regional Director.

    (c)  The terms "internal revenue officer" and 'officer, employee or agent of the internal revenue" wherever used in such regulations, rules, instructions and forms, in any law specified in paragraph 2 above shall include officers and employees of the United States engaged in the administration and enforcement of the laws administered by the Bureau, who are appointed or employed by, or pursuant to the authority of, or who are subject to the directions, instructions or orders of the Secretary.

6.  There shall be transferred to the Bureau all positions, personnel, records, property, and unexpended balances of appropriations, allocations, and other funds of the Alcohol, Tobacco and Firearms Division of the Internal Revenue Service, including those of the Assistant Regional Commissioners of ATF and the IRS.

By now, there should be no question in your mind that there was indeed a split and that the BATF took with it not only money and property and authority but many of the sections of Title 26 of the Internal Revenue Code.

Chapters 51 through 53 of Title 26 is also known as Alcohol, Tobacco, Miscellaneous Taxes.  It is the entire Subtitle E. It includes Sections 5001 through 5871 except for Chapter 54 Greenmail.

Chapters 61 to 80 of Title 26 is known as Procedure and Administration.  It includes Sections 6001 through section 7873.

There are certain sections that the BATF claims to have taken with them.  According to T.D. ATF-6, 38 FR 32445, just a little over a year later, on November, 26, 1973.

Title 27 - Alcohol, Tobacco Products and Firearms

CHAPTER I-BUREAU OF ALCOHOL, TOBACCO AND FIREARMS, DEPART7WENT OF THE TREASURY

SUBCHAPTER F-PROCEDURES AND PRACTICES

[T.D. ATF-6]

PART 70 - PROCEEDURE AND ADMINISTRATION

The following regulations are hereby prescribed as Part 70 of Title 27 of the Code of Federal Regulations (a portion of the CFR devoted exclusively to alcohol, tobacco, and explosives matters, as administered and enforced by the Bureau of Alcohol, Tobacco and Firearms), These regulations, which were formerly included in 26 CFR Part 3 10 (a portion of the CFR currently devoted to both Internal Revenue and Bureau of Alcohol, Tobacco and Firearms matters), set forth the procedural and administrative rules of the Bureau relating to the issuance and enforcement of summonses; examination of books of accounts and witnesses; administration of oaths; entry of premises for examination of taxable objects; granting of rewards for information; canvassing of regions for taxable objects and persons; and the authority of officers of the Bureau.  At a later date additional provisions, based on those in 26 CFR Part 301 under the center head note of "Discovery of Liability and Enforcement Title" embracing paragraphs 301.7601 through 301.7655, to the extent that it applied to laws formerly administered by the Alcohol, Tobacco, and Firearms Division of the Internal Revenue Service and as of July 1, 1972, administered by the Bureau of Alcohol, Tobacco and Firearms, under Treasury Department Order No. 221.

Naturally, the sections from Title 26 the BATF claims to have taken with them are included in the Code of Federal Regulations Title 27, para. 70.487.

Authority: 5 U.S.C. 301 and 552; 26 U.S.C. 4181, 4182, 5146, 5203, 5207, 5275, 5367, 5555, 5684(a) 5415, 5504, 5555, 5684(a), 5741, 5761(b), 6020, 6021, 6064, 6102, 6155, 6159, 6201, 6203, 6204, 6301, 6303, 6311, 6313, 6314, 6321, 6323, 6325, 6326, 6331-6343, 6401-6404, 6407, 6416, 6423, 6501-6503, 6511, 6513, 6514, 6523, 6601, 6602, 6611, 6621, 662, 6651, 6653, 6656, 6657, 6658, 6665, 6671, 6672, 6701, 6723, 6901, 6862, 6863, 6901, 7011, 7101, 7102, 7121, 7122, 7207, 7209, 7214, 7304, 7401, 7403, 7406, 7423, 7424, 7425, 7426,7429, 7430, 7432, 7502, 7503, 7505, 7506, 7513, 7601,7606, 7608,7610, 7622, 7623, 7653, 7805.

The United States Code is the underlying law for the Code of Federal Regulations.  To understand where the rulemaking authority for regulations codified in the Code of Federal Regulations, we need to go to "Table I of Parallel Table of Authorities and Rules" of the 'Index and Finding Aids to the Code of Federal Regulations" an index of the "United States Code Service.  On page 509, it tells us that,

Entries in the table are taken directly from the rulemaking authority citation provided by Federal agencies in their regulations.  Federal agencies are responsible for keeping these citations current and accurate.

On the same page, it makes the point that, "this table is revised as of January 1 1993."

Table I beginning on page 510 starts with Title I of the United States Code and goes through all fifty titles ending on page 592.  It cross references the sections in numerical order to the Code of Federal Regulations.  Title

26 USCS (1986 I.R.C) begins on page 549.  For purposes of clarification lets turn to page 550, you will find the following:

          USC                               CFR

          26 USCS                        Continued

          67                                   26 Part 1

          72                                   26 Part 1

          79                                   26 Part 1

          83                                   26 Parts 1,301

          101                                 26 Part 1

          103                                 26 Parts 1, 5f

          103A                              26 Parts 1, 6&

          105                                26 Parts 7, 31

          108                                 26 Parts 1, 301

          120                                 26 Part 1

Notice that 67, 72, 79, 101 and 120 only have something to do with 26 Part 1. That is Tax on Individuals.

Notice that 83 and 108 has something to do with 26 Part 1, but also Part 301.  That is Tax on Individuals and Distributions of Property.

It is important to notice that the authority for each Part is cross referenced to the United States Code so that there can be no mistake where that authority is to be used.  Most of the sections in the USCS on page 550 are cross referenced to 26 Part 1. In contrast on page 551 beginning with 26 USCS section 5001 and continuing through section 5801, the cross reference in the CFR is 27 Parts.  That is because Sections 5001 through 5801 are referring to Chapters 51 through 53 of Title 26 which is also known as Alcohol, Tobacco, Miscellaneous Taxes.  It is the entire Subtitle E. Although they are cross referenced to Title 27, they are very specific as to what sections in the CFR they refer to.

          USC                               CFR

          26 USCS                        Continued

          5001 - 5002                     27 Part 19 170, 194

          5001                               27 Parts 18 20, 22, 24, 250, 251

          5002                               27 Part 25

          5004 - 5006                     27 Part 19

Let's look at section 600 1, on page 552.  Notice that it refers to 26 Part 1, 3 1, 55, 156, and 27 Parts 19, 53, 194, 250, 296.  Meaning that several parts of the CFR rely on the USC to give them proper authority.

There is no question that USC 6011 - 6012 provides the authority to CFR 26 Part 1, just as USC 6321 (Lien for Taxes) and 6331 (Levy and Distraint), 6332 (Surrender of Property Subject to Levy), 6333 (Production or Books), 6335 (Sale of Seized Property), 6501 (Limitations on Assessment and Collection) refers only to 27 Part 70. Title 26 Part 1 is not even mentioned.

          USC                     CFR

          26 USCS               Continued

          7601 -7606            27 Part 70

7602                      27 Parts 170, 296

7606                      27 Parts 24, 25, 170, 270, 275, 285, 290, 295, 296

7608                       27 Parts 70, 170, 296

7610                       27 Part 70

Chapter 78 of Title 26, Internal Revenue Code is Discovery of Liability and Enforcement of Title

Subchapter A is Examination and Inspection

Sec. 7601.   Canvas of districts for taxable persons and objects.

Sec. 7602.   Examination of books and witnesses..

Sec. 7603    Service of summons.

Sec. 7604.   Enforcement of summons.

Sec. 7608.   Time and place  of examination.

Sec. 7609.   Special  procedures for third party summonses.

Sec. 7610.   Fees and costs for witnesses.

Please note from the information from the table above taken from page 554 that the only cross reference is to Title 27 and various parts thereof.  Again, Title 26 is not included.

These findings deserve a letter to the Office of the Federal Register.  A Reply Dated May 16, 1994, from Michael L. White, Attorney for the Office of the Federal Register states:

The Director of the Federal Register has asked me to respond to your inquiry.  You have asked whether Internal Revenue Service provisions codified at 26 U. S. C. 6020, 6201, 6203, 6301, 6303, 6321, 633 1 through 6343, 6601, 6602, 6651, 6701, and 7207 have been processed or included in 26 CFR part 1. [individual income tax]

The Parallel Table of Authorities and Rules, a finding aid compiled and published by the Office of the Federal Register (OFR) as a part of the CFR Index, indicates that implementing regulations for the sections cited above have been published in various parts of title 27 of the Code of Federal Regulations (CFR). There are no corresponding entries  of title 26.

CONCLUSION

Before July 1, 1972, The Bureau of Alcohol, Tobacco and Firearms was under the direction of the Internal Revenue Service.  The Internal Revenue Code of 1954 and the Reorganization Act 26 included all regulations of the IRS and the ATF in the one Title 26.  On July 1 1972, the BATF was established under the Secretary of the Treasury as separate agency.  It took with it certain property, authority and sections of the IRS Code, Title 26 as presented in Treasury Order 221 of July 1, 1972.  This was recognized by both the IRS and the BATF and was duly recorded in the Federal Register.  Since that time the IRS has been Shepardizing authority that it doesn't have.  They have been able to get away with this because the relationship between the IRS and the BATF, Title 26 and Title 27 has never been brought to light.  I do hope this information will help you in your personal fight for freedom.  I have tried to be very precise so that you can use this document to do your own research.

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