Irwin Schiff's Supplemental Appeal

This Appeal was filed by Irwin Schiff to supplement the appeal being filed by his lawyer. The Appeal Docket # is 06-10199 and the Case # is CR-S-04-0119-KJD-LRL. Note about Appearance: When these two Supplemental Appeals were created and filed with the Court, they were properly double-spaced and typed by Irwin on a prison typewriter.

To save space and make them more presentable on the Internet we reformatted them with single spacing and a little cosmetic editing.

Issues Presented

  1. The Government's Burden
  2. The Government Did Not Prove The Law Imposed a Duty on Defendant
  3. Schiff Cannot be Guilty of Count 17
  4. Jury Instructions 20, 24 and 25 Erroneous
  5. The Court Gave an Erroneous Charge With Respect to the Meaning of "Income"
  6. The Court Erred in Not Giving the "Bishop" Charge

1. The Government's Burden

In Cheek v US (1991) 498 US 192 the Supreme Court held that the government has a threefold burden in connection with income tax prosecutions, which it stated as follows:
Willfulness, as construed by our previous decisions in criminal tax cases, requires the government to prove that the law imposed a duty on the defendant, that the defendant knew of that duty, and that he voluntarily and intentionally violated that duty. (Emphasis added)
The government, as the following will show, did not meet any of its burdens as mandated by the Supreme Court.

2. The Government Did Not Prove The Law Imposed a Duty on Defendant

Proof is defined in Ballentine's Law Dictionary, 3rd Edition, as follows:
Evidence. More precisely, the effect of evidence; the establishment of a fact by evidence...
The American Heritage Dictionary of the English Language defines "proof" as follows:
The evidence establishing the validity of a given assertion.
Based upon the meaning of "proof", did the government prove that some law imposed a duty on the defendant? In what way did the government prove it? Did the government introduce any evidence at trial concerning a tax law that "imposed a duty on the defendant"? NO! Did the government put on any witness who would testify (and be subject to cross examination) concerning a tax law that "imposed a duty on defendant"? None whatsoever! During the trial, Defendant asked the Court, "When is the Government going to prove that the law imposed a duty on the defendant?" The Government's answer was "We do not intend to prove it, since the Court will instruct the jury on the law." [1] So the government admittedly was going to default on its burden of having to prove the law (some law) "imposed a duty" on defendant and would rely on the Court to meet its burden for them by way of a Jury Instruction.

However, a judge's charge to the jury is not "proof" of what the "law" is. There have been numerous reversals based upon erroneous jury instructions concerning what the "law" is. Even appellate courts disagree on what the "law" is, resulting in "dissention among the circuits." And even Appellate courts get reversed (by the Supreme Court) based upon their erroneous application of "the law." But in the instant case, Judge Dawson gave a jury instruction that displayed a totally bizarre understanding of "the law."

In Jury Instruction #19, Judge Dawson referred to Code Sections 1, 61, 63 and 6012 and then charged the jury that "These sections, working together, make an individual liable for income taxes." Such a claim finds absolutely no support anywhere in American jurisprudence. What makes this instruction even more incomprehensible is that Defendant provided the Court with a number of pleadings (Docket numbers 14, 66, 78 and 107) in which Defendant quoted numerous statutes in which Congress specifically made persons "liable" for various federal taxes, such as 26 USC 1461, 4103, 4401, 5005 and 5703, having to do with wihholding, petroleum, wagering, liquor and tobacco taxes. In each of those instances, it did not take a number of statutes "working together" to establish the liability in question; one statute did it.

Obviously, it would take only one statute to establish an income tax "liability", if Congress intended to establish such a liability. Congress would not have done so by using four statutes, none of which even mention "liability."

In addition, Defendant provided the Court with numerous excerpts from court decisions, such as the following which were included in Document #107 (which showed Schiff's "objections" to the Magistrate's "Report and Recommendation", Doc #85) which showed that "liability" must clearly appear in the statute allegedly imposing the liability. For example:

Moreover, even the collection of taxes should be extracted only from persons upon whom a tax liability is imposed by some statute Botta v Scanlon 288 F2d 504, 506

Liability for taxation must clearly appear Higley v Commissioner 69 F2d 160

A tax is a legal imposition exclusively of statutory origin (37 Cyc 724, 725) and naturally, liability to taxation must be read in the statute, or it does not exist Bente v Bugbee 137A 552, 553, 103 NJ law 608

While Judge Dawson's jury instruction is in conflict with all of the above, the holding of the 9th Circuit in Roat v C.I.R. 847 F2d 1379, 81 is in harmony with all of the above.

In Roat, appellants argued that "the deficiency provision (in §6211) should be read in conjunction with another statute, 26 USC 6020(b)." In rejecting this argument, the 9th Circuit said:

Nothing in the language of either statute suggests Section 6211(a) should be read together with Section 06020(b). Nothing in the Code's structure suggests the statutes should be read together, either. Section 6020 resides in Chapter 61 of Title 26, governing information and returns. By contrast, Section 6211 resides in chapter 63, governing assessments. See Hartman, 65 C at 545. [2] Tax policy calls for the statutes to be read independently." (Emphasis added.)
Similarly, nothing in the language of Sections 1, 61, 63 and 6012 suggests that these statutes should be read together, much less that they "work together" to make persons "liable" for income taxes when the word "liable" does not appear in any one of those statutes.

It is clear that the 9th Circuit's unequivocal holding in Roat that "tax policy calls for the statutes to be read independently" renders Judge Dawson's jury instructions null and void and it was plain error for him to have given it. This error was material, fundamental and crucial to Defendant being found guilty on all counts.

In addition, as Defendant had also pointed out in his pre-trial motions (Doc # 85,78, 14, 66) the Disclosure Notice in a 1040 booklet (page 1 of Schiff's Excerpt of Record) only notices the public that Code Section 6001, 6011 and 6012 are somehow related to why persons "must file" tax returns. There is no mention in the Disclosure Notice of Code Sections 1, 61 and 63 - much less that they "work together" with Code Section 6012 to make persons "liable" for income taxes, and the Treasury Department, by law, would have to mention this fact in the Disclosure Notice if these statutes operated in the manner suggested by Judge Dawson.

The Court, by giving a jury instruction that the 9th Circuit had already ruled was erroneous, failed to meet the Government's expectation that the Court would give a jury instruction that would absolve it from having to prove, during its case in chief, that "the law (some law) imposed a duty on the defendant."

Therefore, the Government failed to meet its first burden as required by Cheek and, as a result, Defendant's conviction as to all counts must be reversed, based just on this failure alone.

3. Based on Government Documents, Schiff Cannot be Guilty of Count 17

In Jury Instruction #33 the Court charged the jury, in accordance with Sansone v US, 380 US 343, that "in order for you to find Mr Schiff guilty of the charges in Count 17 (with respect to the years 1979-1985) you must find a tax deficiency existed for those years." The jury could not have found that a "tax deficiency" existed for those years [3] because Government documents prove that no such deficiencies existed in any of those years.

(A) For the Years 1980-85

Included in Schiff's "Excerpts of Record" page 21 are excerpts from the IRS decoding manual "ADP and IDRS Information." It shows that a transaction code (TC) 300 indicates an "additional tax or deficiency assessment." Pages 3-8 of Schiff's Excerpts of Record contain IRS documents which were introduced at Schiff's criminal trial, that showed income tax assessments and other tax activities for the years 1980-1985. Each record shows an entry coded 300 and identified as "additional tax assessed by examination." These entries therefore represent the "deficiencies" for each of those years and they are all shown as "0.00" or zero. Therefore they show no deficiencies existed for any of the years 1980-1985, and pursuant to Sansone v US supra, and the Court's instruction, Schiff cannot be found guilty for any of the years 1980-1985 because no deficiencies existed in any of those years.

(B) For the Year 1979

Showing that there was no valid deficiency for the year 1979 is slightly more complicated. Schiff has included in his "Excerpts of Record" pages 9 thru 13 the IRS documents showing all of the assessment and other income tax activity with respect to him for the year 1979.

It shows a TC 150 entry as of 05-20-1985, which claims that a "return was filed" and an assessment was made. The amount claimed to have been assessed was "0.00." In other words, no actual tax liability was assessed as of that date. However, the IRS recorded a "return filed" for that year, when Schiff did not file a return as acknowledged by the 9th Circuit in its ruling of Sept 11th 2006 (US v Schiff - Docket # 05-15233) - in which it noted on page 2 "Schiff filed no tax return in 1979." Well, if Schiff filed no tax return in 1979, how could the IRS claim that he did?

The return referred to in that entry was a "dummy" return prepared by the IRS as shown in Schiff's Excerpts of Record at page 14. If one were to ask the IRS what statute authorized the IRS to prepare such a "Dummy" return, they would say §6020(b). However, §6020(b)(2) states: "Any return so made and subscribed to by the Secretary shall be prima facie good and sufficient for legal purposes." So in order for this "substitute [dummy] return" to be good for anything, it had to be "Subscribed to" by the Secretary or his delegate, but this return was not "Subscribed to" by anybody. Therefore it was not good for any purpose whatsoever [4]. In addition, §6020(b) does not indicate that returns prepared pursuant to it are "Substitute" returns. The returns contemplated by §6020(b) are, obviously, actual returns (not substitutes) from which legitimate assessments can be made.

Therefore, it is clear that the "return" referred to in that first entry can serve no legal purpose. While the 0.00 assessment associated with it was in fact illegal [5], §6203 makes clear that the Secretary is authorized to assess only "the liability of the taxpayer." In claiming to have assessed "zeros" as Defendant's tax "liability" the Secretary would have assessed an absence of a liability and the law does not allow the Secretary to assess, as a liability, the absence of one.

Thus, it is clear that the entire first entry on that document was both fraudulent and illegal, thus invalidating every succeeding entry, including the $44,199 alleged deficiency [6].

In addition, the $44,199 alleged deficiency was determined by the US Tax Court. However, 26 USC 6215 states, in relevant part, "...the entire amount determined as the deficiency by ... the Tax Court shall be assessed and shall be paid upon notice and demand from the Secretary." [Emphasis added.] 26 USC 6303 requires that the notice and demand be sent out "within 60 days after the making of an assessment..." Since the document shows that 1979 assessments were made on 5/20/85 and 9/3/92, a "notice and demand" for payment had to be sent out before 7/20/85 and 11/3/92. However, an examination of the five (5) pages constituting Schiff's 1979 income tax activities reveals that no "notice and demand" for payment was ever sent to Defendant Schiff for that year.

Therefore, not only was this failure "fatal to the acquisition of the government's lien" against Schiff (US v Coson, 286 F2d 453 (9th Circuit 1961) [7] but its deficiency determination was never finalized by the sending out of a notice and demand for payment, as required by 26 USC 6215. Based on all the above, it is clear that:

  1. there were no deficiencies for the years 1980-85, and
  2. no lawful deficiency existed for the year 1979
Therefore, Defendant Schiff's 7201 conviction as contained in Count 17 must be reversed and dismissed because no deficiencies existed in any of the years at issue in Count 17.

4. Jury Instructions 20, 24 and 25 Were All Given Contrary to Law

Apart from the erroneous Jury Instruction #19, already discussed, the Court gave a number of other erroneous jury instructions, three of which Defendant discusses below.

1. In Jury Instruction 25 the Court instructed the jury that "the Internal Revenue Service... is an agency of the United States." That instruction was incorrect, as Schiff pointed out to the Court at a jury instruction conference in chambers. Congress never passed a law establishing the IRS as an agency of the federal government; so the IRS cannot be "an agency of the United States" as the Court charged in this instruction. Congress merely created the office of Commissioner of Internal Revenue as an office within the Treasury Department when it passed the Revenue Act of 1862 - and that is as far as it got.

Schiff objected to this instruction, and giving it did not amount to "harmless error" because it invalidates Jury Instruction 24. Defendants could not have been guilty of "impeding, impairing obstructing and defeating the Internal Revenue Service on ascertaining, computing assessing and collecting taxes in violation of 18 USC 371" as stated in Jury Instruction 24, because (a) the IRS does not exist as a federal agency and (b) Congress never gave the IRS or the Commissioner any authority to "ascertain, compute, assess or collect" income taxes as charged in Jury Instruction 24. All such authority (in the 1954 Code) was given only to the Secretary of the Treasury, who was also authorized to delegate such authority, pursuant to 26 USC 7701(12), to "any officer, employee or agency of the Treasury" but he never did so.

For the Secretary to have legally delegated his authority to enforce the income tax to the Commissioner (who could then redelegate his authority to lower level Treasury employees in his Department) the Secretary would have had to (i) issue such an order and (ii) publish it in the Federal Register, so the public would be made aware of it, and could act accordingly; for §1505 of Title 44 requires that "every document" having "general applicability and legal effect" be published in the Federal Register. But no such delegation order has ever been published in the Federal Register.

Obviously, the issuance of such a delegation order would have widespread consequences and "legal effect" upon the American public. It would subject the public to the authority of thousands of federal employees to whom the law itself does not subject them. Obviously an order which would have such a sweeping impact on the public would have to be published in the Federal Register as required by law. But it was not.

For the Government to claim, in response to this objection, that any such delegation order is an internal Treasury Department document, so it would not need to be published, is totally without merit. If this were true, then the authority of IRS personnel would apply only to Treasury Department personnel, not to the general public. But since it is the claim of the Government (and the District Court) that the authority of the IRS extended to the Defendants they would have had to be officially notified of that fact by the publication of such a delegation order in the Federal Register. Because it was not published the authority of the IRS over the Defendants is without "legal effect", thus nullifying all the charges in Schiff's indictment. In addition, the claim in Jury Instruction #20 regarding delegation of authority, such as "The actual task of collecting the taxes, however, has been delegated to the local IRS directors" and "The delegation of authority down the chain of command, from the secretary to the Commissioner of Internal Revenue, to local IRS employees, constitutes a valid delegation by the Secretary to the Commissioner and a redelegation by the Commissioner to the delegated officers and employees" are all without merit. As explained above, in order for the Commissioner to have an authority capable of being "redelegated" his original delegation of authority would have to have been published in the Federal Register; but it was not. Therefore, all claims in Jury Instruction 20 with respect to the alleged authority of the IRS based on its receiving "redelegations" of authority from the Secretary have no legal substance and are without merit.

Therefore, Jury Instructions 20, 24 and 25 instructed the jury contrary to law, and, as such, giving such instructions amounted to plain error and the error was not "harmless." The challenged instructions gave the jury a totally erroneous understanding of the legal authority of the IRS and the Defendant's conviction must, accordingly, be reversed on this ground.

5. The Court Gave an Erroneous Charge with Respect to the Meaning of "Income"

In Jury Instruction #44, the Court charged the jury that "Gross income includes the following..." The Court then listed such items as compensation for service, interest, rent and dividends; the implication being that such items are made specifically taxable by the 1954 Code.

However, no such wording appears in Section 61 of the 1954 Code, though such wording did appear in the repealed Section 22 of the 1939 Code. So rather than charge the jury on the basis of the law as it appeared in the 1954 Code, the Court charged the jury on the basis of the law as it appeared in the 1939 Code.

Section 61 of the 1954 Code is captioned "Gross income defined." It then goes on to "define" it by saying "Gross income means all income from whatever source derived." Therefore, since Section 61 "defines" "Gross income" with the word "income", one has to know the meaning of "income" in order to know the meaning of "gross income." But since the Code does not define "income", it therefore does not define "gross income" despite the claim in the caption of Section 61.

In Eisner v Macomber, 252 US 189, 206 the Supreme Court explained why the definition of "income" does not appear in the Code: Congress has no authority to define the meaning of "income." In Eisner the Court said:

In order, therefore, that the clause cited from Article I of the Constitution may have proper force and effect... it becomes essential to distinguish between what is and is not "income"... Congress cannot by any definition it may adopt conclude the matter, since it cannot by legislation alter the Constitution. (Emphasis added)
Therefore, to understand the meaning of "income" we must look outside the Code. In adopting the 1954 Code both the House (in House Report 1337) and the Senate (in Senate Report 1622, excerpts from which are shown in Schiff's "Excerpts of Record" pages 15 and 16) stated that "income" is used in Section 61 of the 1954 Code in its "constitutional sense."

Schiff, in his proposed jury instructions, requested that the Court instruct the jury that "income" as used in Section 61 of the Internal Revenue Code is used in its "constitutional sense" in accordance with the intent of Congress as expressed in those Congressional reports. However, the Court refused to do so, and instead of charging the jury correctly as to the meaning of "income" (in conformity with these reports) it incorrectly charged the jury in violation of these reports and in violation of a number of Supreme Court decisions, as follows.

In Pollock v Farmers Loan & Trust Co 158 US 601, 637 (1895) the Supreme Court held the Income Tax Act of 1894 "unconstitutional and void because not apportioned." (See page 637 of that decision, included as page 17 in the accompanying "Excerpts of Record.") In so doing the Court also said that income taxes that "fall on the income of real estate and personal property" are "unconstitutional and void" unless apportioned.

On page 18 of Defendant's "Excerpts of Record" is the latest excerpt from Shepard's citations. It shows that the Pollock decision has never been reversed, overturned or repealed, and thus it still remains the "law of the land." A law that the Court's Jury Instruction 44 blatantly violated.

Therefore, when the income tax of 1913 came before the Supreme Court in Brushaber v Union Pacific Railroad 240 US 1 (1915), the Supreme Court fashioned a different meaning for "income"; one that would not conflict with the meaning given it in the Pollock decision, which the Brushaber Court said it was not "challenging."

The Brushaber Court pointed, somewhat obscurely, to the new meaning for "income" when it stated (at page 17) that:

The whole purpose of the Amendment was to relieve all income when imposed from apportionment from a consideration of the source whence the income was derived. (Emphasis added.)
So a tax on income did not have to be apportioned if the "source" of that income was not "considered" and thus not taxed. However, this only occurs when an income tax is imposed on corporate profits since, in that case, the sources that generate the profit are not "considered" and are not separately taxed.

This of course is the 16th Amendment meaning of "income" as referred to in those Congressional Reports as well as the meaning of "income" in the "constitutional sense." For example: in Stratton's Independence Limited v F W Howbert 231 US 399 (1913), the Supreme Court said that the Corporation Excise Tax of 1909 was "not an income tax, but an excise upon the conduct of business in a corporate capacity, measuring, however, the amount of the tax by the income of the corporation." Thus the Supreme Court used the words "income" and corporate "profit" interchangeably, since the amount of the tax was actually based on the corporation's "profit", not on its "income".

The decision in Merchant's Loan & Trust v Smietanka, 255 US 509, 518 makes clear that "income" in all of the Income Tax Acts of Congress meant the same thing as in the Corporate Excise Tax Act of 1909, since the Court held:

There would seem to be no room to doubt that the word [income] must be given the same meaning in all of the Income Tax Acts of Congress that was given to it in the Corporation Tax Act and what that meaning is has now become definitely settled by decisions of this Court.
That "income" in our revenue laws means the same thing as it did in the Corporation Excise Tax of 1909 was also held in Southern Pacific v Lowe 247 US 330 (1918); Burnet v Harmel 287 US 103, 108 (1932); Bowers v Kerbaugh-Empire Co 271 US 887 (1926) and Doyle v Mitchell 247 US 179 (1918).

Extensive excerpts from all these decisions were included in numerous memoranda filed by Defendant; see Docket Numbers 15, 66, 78 and 107.

Therefore, in charging the jury that such items as compensation for service (ie, wages), interest, rent and dividends were directly taxable as "income", the Court was instructing the jury that income from real estate and personal property were taxable as "income" (even if not apportioned) in direct violation of the Pollock decision.

A tax on rent is obviously a tax on income from real estate. A tax on interest is a direct tax on the money (personal property) that generated the interest. A tax on dividends is a direct tax on the stock (personal property) that generated the dividends. And a direct tax on compensation (ie wages) is a direct tax on the labor that generated that compensation [8].

Therefore, Jury Instruction 44 was given in violation of both bedrock Pollock and Brushaber decisions, all of the Supreme Court decisions cited above, as well as both of the Congressional Reports referred to earlier. Thus the jury was misled concerning the legal meaning of "income", a proper understanding of which was crucial to a proper understanding of the counts pusuant to which the defendant was charged. Since the jury had no such understanding, its entire verdict based on its false understanding of the legal meaning of "income" must be vacated.

6. The Court Erred in Not Giving the Bishop Instruction

In United States v Bishop 412 US 346, 361 (1973), the Supreme Court stated:
The requirement of an offense committed wilfully is not met, therefore, if a taxpayer has relied in good faith on a prior decision of this Court...
However the District Court refused to give such a jury instruction even though the Court knew, based on the contents of over a dozen pre-trial motions filed by the Defendant, the the defendant relied on a number of Supreme Court decisions (as reflected in this Supplemental Appeal Brief) in forming his understanding of the federal income tax.

For the Court not to have given such an instruction based on the Supreme Court holding in Bishop (because it might help the Defendant being found Not Guilty) was characteristic of how Defendant's trial was conducted.

In any case, the Court refused to instruct the jury concerning a significant aspect of "willfullness" which was particularly applicable to the Defendant. This denied Schiff the due process of law guaranteed to him by our Fifth Amendment, and consequently his conviction should also be reversed based on the Court's refusal to give this exceedingly material instruction.

Based on all of the above, this Honorable Appeals Court cannot allow the Defendant's conviction to stand and said conviction must be reversed as to all counts as a matter of law.

Respectfully submitted by
Irwin Schiff / pro persona 08537-014
Federal Correctional Institution
PO Box 2000 Unit 5752
Fort Dix, NJ 08640


1. As of this date, January 9th 2007, I still have not received the trial transcripts. So I can not cite the transcript page where these statements were made, but I will furnish it to the Court at a later date Return

2. In the case of Sections 1, 61, 63 and 6012, not only do all these Code Sections not reside in the same chapter of Title 26, they do not all reside even in the same Subtitle! Return

3. Since there were so many facets of this trial, I doubt if any of the jury understood what a tax "deficiency" was! Return

4. In Phillip v C.I.R., 1986 TC 433, the court held that dummy returns had no legal substance and in Viara v C.I.R., 444 F 2d 770, 777, the court stated "Accordingly it has been held that a return filed unsigned is no return at all; Dixon v C.I.R., 28 TC 338 (1957)." Return

5. Why would government waste time and energy recording that on 5/20/1985, Schiff owed exactly nothing in income taxes for that year? Return

6. Actually, this amount represents Schiff's alleged "total tax" for 1979 and not a deficiency. And the US Tax Court had no authority to redetermine Schiff's "total tax." Return

7. Despite this, the government has seized hundreds of thousands of dollars of Schiff's property (allegedly Schiff's property) in connection with his allaged tax liabilities for the years 1979-1985, without ever having sent Schiff a notice and demand for payment as required by 26 USC 6303. Return

8. In Butcher's Union v Crescent, 111 US 746 (1884) the Supreme Court held that a person's labor is his/her property. Return