SUPREME COURT CASES:
1818: U.S. v. Bevans, 16 U.S.336. Establishes two separate
jurisdictions within the United States Of America: 1. The
"federal zone" and 2. "the 50 States". The I.R.C. only has
jurisdiction within the "federal zone".
"The exclusive jurisdiction which the United States have in
forts and dock-yards ceded to them, is derived from the express
assent of the states by whom the cessions are made. It could be
derived in no other manner; because without it, the authority of
the state would be supreme and exclusive therein," 3 Wheat., at
1883: Butchers' Union Co. v. Crescent City Co., 111 U.S. 746.
Defines labor as property, and the most sacred kind of property..
"Among these unalienable rights, as proclaimed in the Declaration
of Independence is the right
of men to pursue their happiness, by which is meant, the
right any lawful business
or vocation, in any manner not inconsistent with the equal rights
of others, which may increase their prosperity or develop their
faculties, so as to give them their highest enjoyment...It has been
well said that, THE PROPERTY WHICH EVERY MAN HAS IS HIS
OWN LABOR, AS IT IS THE ORIGINAL FOUNDATION OF ALL OTHER PROPERTY
SO IT IS THE MOST SACRED AND INVIOLABLE..."
1894: Caha v. United States, 152 U.S. 211. Restricts jurisdiction
of the federal government inside the states.
“The law of Congress in respect to those matters do not extend
into the territorial limits of the states, but have force only in
the District of Columbia, and other places that are within the exclusive
jurisdiction of the national government.”
1895: Pollack v. Farmer's Loan and Trust Company, 157 U.S. 429, 158
U.S. 601. Prohibits direct taxes on the income of individuals.
1900: Knowlton v. Moore, 178 U.S. 41. Defines the meaning
of "direct taxes".
“Direct taxes bear immediately upon persons, upon the possession
and enjoyment of rights; indirect taxes are levied upon the happening
of an event as an exchange.”
1901: Downes v. Bidwell, 182 U.S. 244. Establishes that constitutional
limits on the Congress do
not apply within the "federal zone" and described where they
"CONSTITUTIONAL RESTRICTIONS AND LIMITATIONS [Bill of Rights]
WERE NOT APPLICABLE
to the areas of lands, enclaves, territories, and possessions over
which Congress had EXCLUSIVE LEGISLATIVE JURISDICTION"
1906: Hale v. Henkel, 201 U.S. 43. Defined the distinction
between natural persons and corporations as it pertains to 5th Amendment
protections within the U.S. Constitution.
“…we are of the opinion that there is a clear distinction
in this particular between an individual and a corporation, and
that the latter has no right to refuse to submit its books and papers
for an examination at the suit of the state. The individual may
stand upon his constitutional rights as a citizen. He is entitled
to carry on his private business in his own way. His power to contract
is unlimited. He owes no duty to the state or to his neighbors to
divulge his business, or to open his doors to an investigation,
so far as it may tend to criminate him. He owes no such duty to
the state, since he receives nothing therefrom, beyond the protection
of his life and property. His rights are such as existed by the
law of the land long antecedent to the organization of the state,
and can only be taken from him by due process of law, and in accordance
with the Constitution. Among his rights are a refusal to incriminate
himself, and the immunity of himself and his property from arrest
or seizure except under a warrant of the law. He owes nothing to
the public so long as he does not trespass upon their rights.
Upon the other hand, the corporation is a creature of the
state. It is presumed to be incorporated for the benefit of the
public. It receives certain special privileges and franchises, and
holds them subject to the laws of the state and the limitations
of its charter. Its powers are limited by law. It can make no contract
not authorized by its charter. Its rights to
[201 U.S. 43, 75]
act as a corporation are only preserved to it so long as
it obeys the laws of its creation. There is a reserved right in
the legislature to investigate its contracts and find out whether
it has exceeded its powers. It would be a strange anomaly to hold
that a state, having chartered a corporation to make use of certain
franchises, could not, in the exercise of its sovereignty, inquire
how these franchises had been employed, and whether they had been
abused, and demand the production of the corporate books and papers
for that purpose. The defense amounts to this: That an officer of
a corporation which is charged with a criminal violation of the
statute, may plead the criminality of such corporation as a refusal
to produce its books. To state this proposition is to answer it.
While an individual may lawfully refuse to answer incriminating
questions unless protected by an immunity statute, it does not follow
that a corporation, vested with special privileges and franchises,
may refuse to show its hand when charged with an abuse of such privileges.
1911: Flint v. Stone Tracy Co., 220 U.S. 107. Defined
excise taxes as taxes laid on corporations and corporate privileges,
not in natural persons.
"Excises are taxes laid upon the manufacture, sale or consumption
of commodities within the country, upon licenses to pursue certain
occupations and upon corporate privileges...the requirement to pay
such taxes involves the exercise of
[220 U.S. 107, 152] privileges, and the element of
absolute and unavoidable demand is lacking...Conceding the power
of Congress to tax the business activities of private corporations..
the tax must be measured by some standard...It is therefore well
settled by the decisions of this court that when the sovereign authority
has exercised the right to tax a legitimate subject of taxation
as an exercise of a franchise or privilege, it is no objection that
the measure of taxation is found in the income produced in part
from property which of itself considered is nontaxable."
1914: Weeks v. U.S., 232 U.S. 383. Established that
illegally obtained evidence may not be used by the court or admitted
into evidence. This case is very useful in refuting the use by
the IRS of income tax returns that were submitted involuntarily (note
that these returns must say "submitted under compulsion in violation
of 5th Amendment rights" or some such thing at the bottom.
"The effect of the 4th Amendment is to put the courts
[232 U.S. 383, 392]
of the United States and Federal officials, in the exercise
of their power and authority, under limitations and restraints as
to the exercise of such power and authority, and to forever secure
the people, their persons, houses, papers, and effects, against
all unreasonable searches and seizures under the guise of law. This
protection reaches all alike, whether accused of crime or not, and
the duty of giving to it force and effect is obligatory upon all
intrusted under our Federal system with the enforcement of the laws.
The tendency of those who execute the criminal laws of the country
to obtain conviction by means of unlawful seizures and enforced
confessions, the latter often obtained after subjecting accused
persons to unwarranted practices destructive of rights secured by
the Federal Constitution, should find no sanction in the judgments
of the courts, which are charged at all times with the support of
the Constitution, and to which people of all conditions have a right
to appeal for the maintenance of such fundamental rights.
The case in the aspect in which we are dealing with it involves
the right of the court in a criminal prosecution to retain for the
purposes of evidence the letters and correspondence of the accused,
seized in his house in his absence and without his authority, by
a United States marshal holding no warrant for his arrest and none
for the search of his premises. The accused, without awaiting his
trial, made timely application to the court for an order for the
return of these letters, as well or other property. This application
was denied, the letters retained and put in evidence, after a further
application at the beginning of the trial, both applications asserting
the rights of the accused under the 4th and 5th Amendments to the
Constitution. If letters
and private documents can thus be seized and held and used in evidence
against a citizen accused of an offense, the protection of the 4th
Amendment, declaring his right to be secure against such searches
and seizures, is of no value, and, so far as those thus placed are
concerned, might as well be stricken from the Constitution.
The efforts of the courts and their officials to bring the guilty
to punishment, praiseworthy as they are, are not to be aided by
the sacrifice of those great principles established be years of
endeavor and suffering which have resulted in their embodiment in
the fundamental law of the land. The United States marshal could
only have invaded the house of the accused when armed with a warrant
issued as required by the Constitution, upon sworn information,
and describing with reasonable particularity the thing for which
the search was to be made.
Instead, he acted without sanction of law, doubtless prompted by
the desire to bring further proof to the aid of the government,
and under color of his office undertook to make a seizure of private
papers in direct violation of the constitutional prohibition against
such action. Under such circumstances, without sworn information
and particular description, not even an order of court would
[232 U.S. 383, 394]
have justified such procedure; much less was it within the
authority of the United States marshal to thus invade the house
and privacy of the accused. In Adams v. New York,
192 U.S. 585 , 48 L. ed. 575, 24 Sup. Ct. Rep. 372, this court
said that the 4th Amendment was intended to secure the citizen in
person and property against unlawful invasion of the sanctity of
his home by officers of the law, acting under legislative or judicial
sanction. This protection is equally extended to the action of the
government and officers of the law acting under it. Boyd Case,
116 U.S. 616 , 29 L. ed. 746, 6 Sup. Ct. Rep. 524. To sanction
such proceedings would be to affirm by judicial decision a manifest
neglect, if not an open defiance, of the prohibitions of the Constitution,
intended for the protection of the people against such unauthorized
1916: Brushaber vs. Union Pacific Railroad, 240 U.S. 1.
Established that the 16th Amendment had no affect on the constitution,
and that income taxes could only be sustained as excise taxes and not
as direct taxes.
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 general requirement that all direct taxes be apportioned;
This result, instead of simplifying the situation and making
clear the limitations of 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…
…Moreover in addition the Conclusion reached in the Pollock
Case did not in any degree involve holding that income taxes generically
and necessarily came within the class of direct taxes on property,
but on the contrary recognized the fact that taxation on income
was in its nature an excise entitled to be enforced as such unless
and until it was concluded that to enforce it would amount to accomplishing
the result which the requirement as to apportionment of direct taxation
was adopted to prevent, in which case the duty would arise to disregard
form and consider substance alone and hence subject the tax to the
regulation as to apportionment which otherwise as an excise would
not apply to it.
…the Amendment demonstrates that no such purpose was intended
and on the contrary shows that it was drawn with the object of maintaining
the limitations of the Constitution and harmonizing their operation.”
…the [16th] Amendment contains nothing repudiating
or challenging the ruling in the Pollock Case that the word
direct had a broader significance since it embraced also taxes levied
directly on personal property because of its ownership, and therefore
the Amendment at least impliedly makes such wider significance a
part of the Constitution -- a condition which clearly demonstrates
that the purpose was not to change the existing interpretation
except to the extent necessary to accomplish the result intended,
that is, the prevention
of the resort to the sources from which a taxed income was derived
in order to cause a direct tax on the income to be a direct tax
on the source itself and thereby to take an income tax
out of the class of excises, duties and imposts and place it in
the class of direct taxes...
Indeed in the light of the history which we have given and
of the decision in the Pollock Case and the ground upon which
the ruling in that case was based, there is no escape from the Conclusion
that the Amendment was drawn for the purpose of doing away for
the future with the principle upon which the Pollock Case was decided,
that is, of determining whether a tax on income was direct not by
a consideration of the burden placed on the taxed income upon which
it directly operated, but by taking into view the burden which resulted
on the property from which the income was derived, since in
express terms the Amendment provides that income taxes, from whatever
source the income may be derived, shall not be subject to the regulation
1916: Stanton v. Baltic Mining, 240 U.S. 103. Declared that
the 16th Amendment conferred no new powers of taxation to the U.S. government,
but simply prevented income taxes from being taken out of the category
of indirect (excise) taxes to which they inherently belonged.
"..by the previous ruling it was settled that the provisions
of the Sixteenth Amendment
conferred no new power
of taxation but simply prohibited the previous complete and
plenary power of income taxation possessed by Congress from the
beginning from being taken out of the category of indirect taxation
to which it inherently belonged and being placed in the category
of direct taxation subject to apportionment by a consideration
of the sources from which the income was derived, that is by testing
the tax not by what it was -- a tax on income, but by a mistaken
theory deduced from the origin or source of the income taxed. "
1918: Peck v. Lowe, 247 U.S. 165. Stated that the 16th Amendment
does not extend the taxing power to new or excepted subjects, but removed
the need to apportion direct taxes on income.
The plaintiff is a domestic corporation chiefly engaged in
buying goods in the several states, shipping them to foreign countries
and there selling them. In 1914 its net income from this business
was $30,173.66, and from other sources $12,436.24. An income tax
for that year, computed on the aggregate of these sums, was assessed
against it and paid under compulsion. It is conceded that so much
of the tax as was based on the income from other sources was valid,
and the controversy is over so much of it as was attributable to
the income from shipping goods to foreign countries and there selling
The tax was levied under the Act of October 3, 1913, c. 16,
11, 38 Stat. 166, 172, which provided for annually subjecting every
domestic corporation to the payment of a tax of a specified per
centum of its 'entire net income arising or accruing from all sources
during the preceding calendar year.' Certain fraternal and other
corporations, as also income from certain enumerated sources, were
specifically excepted, but none of the exceptions included the plaintiff
or any part of its income. So, tested merely by the terms of the
act, the tax collected from the plaintiff was rightly computed on
its total net income. But as the act obviously could not impose
a tax forbidden by the Constitution, we proceed to consider whether
the tax, or rather the part in question, was forbidden by the constitutional
provision on which the plaintiff relies.
The Sixteenth Amendment, although referred to in argument,
has no real bearing and may be put out of view. As pointed out in
recent decisions, it does not extend the taxing power to new or
excepted subjects, but merely removes all occasion, which otherwise
might exist, for an apportionment among the states of taxes [247
U.S. 165, 173] laid on income,
whether it be derived from one source or another. Brushaber v. Union
Pacific R. R. Co., 240 U.S. 1, 17-19, 36 Sup. Ct. 236, Ann. Cas.
1917B, 713, L. R. A. 1917D, 414; Stanton v. Baltic Mining Co., 240
U.S. 103, 112-113, 36 Sup. Ct. 278.
1920: Evens v. Gore, 253 U.S. 245. Overturned by O'Malley
v. Woodrough (307 U.S. 277). Court ruled that income taxes on federal
judges were unconstitutional.
"After further consideration, we adhere to that view and accordingly
hold that the Sixteenth Amendment does not authorize or support the
tax in question. " [A direct tax on salary income of a federal judge]
1920: Eisner v. Macomber, 252 U.S. 189. Defined income within
the meaning of the 16th Amendment as "profit". Prohibited direct,
unapportioned taxation of income of a stockholder.
The Sixteenth Amendment
must be construed in connection with the taxing clauses of the original
Constitution and the effect attributed to them before the amendment
was adopted. In Pollock v. Farmers' Loan & Trust Co.,
158 U.S. 601 , 15 Sup. Ct. 912, under the Act of August 27,
1894 (28 Stat. 509, 553, c. 349, 27), it was held that taxes upon
rents and profits of real estate and upon returns from investments
of personal property were in effect direct taxes upon the property
from which such income arose, imposed by reason of ownership; and
that Congress could not impose such taxes without apportioning them
among the states according to population, as required by article
1, 2, cl. 3, and section 9, cl. 4, of the original Constitution.
Afterwards, and evidently in recognition of the limitation
upon the taxing power of Congress thus determined, the Sixteenth
Amendment was adopted, in words lucidly expressing the object to
'The Congress shall have power to lay and collect taxes on
incomes, from whatever source derived, without apportionment among
[252 U.S. 189, 206] the
several states, and without regard to any census or enumeration.'
held, this did not extend the taxing power to new subjects,
but merely removed the necessity which otherwise might exist
for an apportionment among the states of taxes laid on income.
Brushaber v. Union Pacific R. R. Co.,
240 U.S. 1 , 17-19, 36 Sup. Ct. 236, Ann. Cas. 1917B, 713,
L. R. A. 1917D, 414; Stanton v. Baltic Mining Co.,
240 U.S. 103 , 112 et seq., 36 Sup. Ct. 278; Peck & Co.
247 U.S. 165, 172 , 173 S., 38 Sup. Ct. 432.
A proper regard for its genesis, as well as its very clear
language, requires also that this amendment shall not be extended
by loose construction, so as to repeal or modify, except as applied
to income, those provisions of the Constitution that require an
apportionment according to population for direct taxes upon property,
real and personal. This limitation still has an appropriate and
important function, and is not to be overridden by Congress or disregarded
by the courts.
After examining dictionaries in common use (Bouv. L. D.; Standard
Dict.; Webster's Internat. Dict.; Century Dict.), we find little
to add to the succinct definition adopted in two cases arising under
the Corporation Tax Act of 1909 (Stratton's Independence v. Howbert,
231 U.S. 399, 415 , 34 S. Sup. Ct. 136, 140 [58 L. Ed. 285];
Doyle v. Mitchell Bros. Co.,
247 U.S. 179, 185 , 38 S. Sup. Ct. 467, 469 [62 L. Ed. 1054]),
'Income may be defined as the gain derived from capital, from labor,
or from both combined,' provided it be understood to include profit
gained through a sale or conversion of capital assets, to which
it was applied in the Doyle Case,
247 U.S. 183, 185 , 38 S. Sup. Ct. 467, 469 (62 L. Ed. 1054).
Brief as it is, it indicates the characteristic and distinguishing
attribute of income essential for a correct solution of the present
controversy. The government, although basing its argument upon the
definition as quoted, placed chief emphasis upon the word 'gain,'
which was extended to include a variety of meanings; while the significance
of the next three words was either overlooked or misconceived. 'Derived-from-
capital'; 'the gain-derived-from-capital,' etc. Here we have the
essential matter: not a gain accruing to capital; not a growth or
increment of value in the investment; but a gain, a profit, something
of exchangeable value, proceeding from the property, severed from
the capital, however invested or employed, and coming in, being
'derived'-that is, received or drawn by the recipient (the taxpayer)
for his separate use, benefit and disposal- that is income derived
from property. Nothing else answers the description.
Thus, from every point of view we are brought irresistibly
to the conclusion that neither under the Sixteenth Amendment nor
otherwise has Congress power to tax without apportionment a true
stock dividend made lawfully and in good faith, or the accumulated
profits behind it, as income of the stockholder. The Revenue Act
of 1916, in so far as it imposes a tax upon the stockholder because
of such dividend, contravenes the provisions of article 1, 2, cl.
3, and article 1, 9, cl. 4, of the Constitution, and to this extent
is invalid, notwithstanding the Sixteenth Amendment.
1922: Bailey v. Drexel Furniture Co., 259 U.S. 20.
Prohibited Congress from legislating or controlling benefits that employers
provide to their employees. A major blow against socialism in
“Out of a proper respect for the acts of a co-ordinate branch
of the government, this court has gone far to sustain taxing acts
as such, even though there has been ground for suspecting, from
the weight of the tax, it was intended to destroy its subject. But
in the act before [259 U.S. 20, 38] us
the presumption of validity cannot prevail, because the proof of
the contrary is found on the very face of its provisions.
Grant the validity of this
law, and 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 which 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 socalled tax upon departures 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. “
1924: Cook v. Tait, 265 U.S. 47. The Supreme Court ruled that
Congress has the power to tax the income received by a native citizen
of the United States domiciled abroad from property situated abroad
and that the constitutional prohibition of unapportioned direct taxes
within the states of the union does not apply in foreign countries.
- 1930: Lucas v. Earl, 281 U.S. 111.
The Supreme Court ruled that wages and compensation for personal services
were not to be taxed in their entirety, but instead, the gain or profit
derived indirectly from them.
1935: Railroad Retirement Board v. Alton Railroad Company, 295 U.S.
330. The Supreme Court ruled that Congress that it has no
constitutional authority whatsoever to legislate for the social welfare
of the worker. The result was that when Social Security was instituted,
it had to be treated as strictly voluntary.
"The catalog of means and actions which might be imposed upon
an employer in any business, tending to the comfort and satisfaction
of his employees, seems endless.
Provisions for free medical attendance and nursing, for clothing,
for food, for housing, for the education of children, and a hundred
other matters might with equal propriety be proposed as tending
to relieve the employee of mental strain and worry.
Can it fairly be said that the power of Congress to regulate
interstate commerce extends to the prescription of any or all of
Is it not apparent that they are really and essentially related
solely to social welfare of the worker, and therefore remote from
any regulation of commerce as such? We think the answer is
plain. These matters obviously lie outside the orbit of Congressional
1938: Hassett v. Welch, 303 U.S. 303. Ruled that disputes
over uncertainties in the tax code should be resolved in favor of the
“In view of other settled rules of statutory construction,
which teach that... if doubt exists as to the construction of a
taxing statute, the doubt should be resolved in favor of the
1939: O'Malley v. Woodrough, 307 U.S. 277. Overturned portions
Evens v. Gore, 253 U.S. 245, but not the part about the 16th Amendment.
“However, the meaning which Evans v. Gore, supra, imputed
to the history which explains Article III, 1 was contrary to the
way in which it was read by other English-speaking courts.
The decision met wide and steadily growing disfavor from legal scholarship
and professional opinion. Evans v. Gore, supra, itself was rejected
by most of the courts before whom the matter came after that decision”
1945: Hooven & Allison Co. v. Evatt, 324 US 652. Ruled that
there are three distinct and separate definitions for the term "United
States". The income tax only applies to one of the three definitions!
"The term 'United States' may be used in any one of several
senses. It may be merely the name of a sovereign occupying the position
analogous to that of other sovereigns in the family of nations.
It may designate the territory over which the sovereignty of the
United States ex- [324 U.S. 652, 672]
tends, or it may be the collective name of the states which
are united by and under the Constitution."
1959: Flora v. United, 362 US 145. Ruled that our tax system
is based on voluntary assessment and payment, not on force or coercion.
“Our system of taxation is based upon voluntary assessment
and payment, not upon distraint.”
1961: Jamesv. United States, 366 US 213, p. 213, 6L Ed 2d 246.
Income that is taxed under the 16th Amendment must derive from a "source".
Also established that embezzled money is taxable as income.
"…the Sixteenth Amendment, which grants Congress the power
"to lay and collect taxes on incomes, from whatever
Helvering v. Clifford, 309 US 331, 334; Douglas v. Willcuts, 296
US 1,9. It has long been settled that Congress’ broad statutory
definitions of taxable income were intended "to use the full measure
of taxing power." The Sixteenth Amendment is to be taken as written
and is not to be extended beyond the meaning clearly indicated
by the language used." Edwards v. Cuba R. Co. 268 US 628,
631 [From separate opinion by Whittaker, Black, and Douglas, JJ.]
1970: Brady v. U.S., 397 U.S. 742 at 748. Supreme
Court ruled that:
"Waivers of Constitutional Rights not only must be voluntary,
they must be knowingly intelligent acts, done with sufficient awareness
of the relevant circumstances and consequences."
1975: Garner v. United States, 424 U.S. 648. Supreme Court
ruled that income taxes constitute the compelled testimony of a witness:
“The information revealed in the preparation and filing of
an income tax return is, for the purposes of Fifth Amendment analysis,
the testimony of a witness.”
“Government compels the filing of a return much as it compels,
for example, the appearance of a ‘witness’ before a grand jury.”
1978: Central Illinois Public Service Co. v. United States, 435 U.S.
21. Established that wages and income are NOT equivalent as
far as taxes on income are concerned.
"Decided cases have made the distinction between wages and
income and have refused to equate the two in withholding or similar
controversies. Peoples Life Ins. Co. v. United States, 179 Ct. Cl.
318, 332, 373 F.2d 924, 932 (1967); Humble Pipe Line Co. v. United
States, 194 Ct. Cl. 944, 950, 442 F.2d 1353, 1356 (1971); Humble
Oil & Refining Co. v. United States, 194 Ct. Cl. 920, 442 F.2d 1362
(1971); Stubbs, Overbeck & Associates v. United States, 445 F.2d
1142 (CA5 1971); Royster Co. v. United States, 479 F.2d, at 390;
Acacia Mutual Life Ins. Co. v. United States, 272 F. Supp. 188 (Md.
1985: U.S. v. Doe, 465 U.S. 605. The production of evidence
or subpoenad tax documents cannot be compelled.
“We conclude that the Court of Appeals erred in holding that
the contents of the subpoenaed documents were privileged under the
Fifth Amendment. The act of producing the documents at issue in
this case is privileged and cannot be compelled without a statutory
grant of use immunity pursuant to 18 U.S.C. 6002 and 6003.”
1991: Cheek v. United States, 498 U.S. 192. Held that if the
defendant has a subjective good faith belief no matter how unreasonable,
that he or she was not required to file a tax return, the government
cannot establish that the defendant acted willfully in not filing an
income tax return. In other words, that the defendant shirked
a legal duty that he knew existed.
1992: United States v. Burke, 504 U.S. 229, 119 L Ed 2d 34, 112 S Ct.
1867. Court held that income that is taxed under the 16th
Amendment must come from a "source".
Congress's intent through § 61 of the Internal Revenue Code
(26 USCS § 61(a))--which provides that gross income means all
income from whatever source derived, subject to
only the exclusions specifically enumerated elsewhere in
the Code...and § 61(a)'s statutory precursors..."
- 1995: U.S. v. Lopez, 000 U.S. U10287.
Establishes strict limits on the constitutional power and jurisdiction
of the federal government inside the 50 States.
"We start with first principles. The Constitution creates
a Federal Government of enumerated powers. See U.S. Const., Art.
I, 8. As James Madison wrote, "[t]he powers delegated by the proposed
Constitution to the federal
government are few and defined. Those which are to remain in the
State governments are numerous and indefinite." The Federalist No.
45, pp. 292-293 (C. Rossiter ed. 1961).
This constitutionally mandated division of authority "was adopted
by the Framers to ensure protection of our fundamental liberties."
Gregory v. Ashcroft,
501 U.S. 452, 458 (1991) (internal quotation marks omitted).
"Just as the separation and independence of the coordinate branches
of the Federal Government serves to prevent the accumulation of
excessive power in any one branch, a healthy balance of power between
the States and the Federal Government will reduce the risk of tyranny
and abuse from either front." Ibid.
The Constitution delegates to Congress the power "[t]o regulate
Commerce with foreign Nations, and among the several States, and
with the Indian Tribes." U.S. Const., Art. I, 8, cl. 3. The Court,
through Chief Justice Marshall, first defined the nature of Congress'
commerce power in Gibbons v. Ogden, 9 Wheat. 1, 189-190 (1824):
undoubtedly, is traffic, but it is something more: it is intercourse.
It describes the commercial intercourse between nations, and parts
of nations, in all its branches, and is regulated by prescribing
rules for carrying on that intercourse."
The commerce power "is the power to regulate; that is, to
prescribe the rule by which commerce is to be governed. This power,
like all others vested in Congress, is complete in itself, may be
exercised to its utmost extent, and acknowledges no limitations,
other than are prescribed in the constitution." Id., at 196. The
Gibbons Court, however, acknowledged that limitations on the commerce
power are inherent in the very language of the Commerce Clause.
"It is not
intended to say that these words comprehend that commerce, which
is completely internal, which is carried on between man and man
in a State, or between different parts of the same State, and which
does not extend to or affect other States. Such a power would be
inconvenient, and is certainly unnecessary.
as the word `among' is, it may very properly be restricted to that
commerce which concerns more States than one. . . . The enumeration
presupposes something not enumerated; and that something, if we
regard the language or the subject of the sentence, must be the
exclusively internal commerce of a State." Id., at 194-195.
For nearly a century thereafter, the Court's Commerce Clause
decisions dealt but rarely with the extent of Congress' power, and
almost entirely with the Commerce Clause as a limit on state legislation
that discriminated against interstate commerce. See, e.g., Veazie
v. Moor, 14 How. 568, 573-575 (1853) (upholding a state-created
steamboat monopoly because it involved regulation of wholly internal
commerce); Kidd v. Pearson, 128 U.S. 1, 17, 20-22 (1888) (upholding
a state prohibition on the manufacture of intoxicating liquor because
the commerce power "does not comprehend the purely domestic commerce
of a State which is carried on between man and man within a State
or between different parts of the same State"); see also L. Tribe,
American Constitutional Law 306 (2d ed. 1988). Under this line of
precedent, the Court held that certain categories of activity such
as "production," "manufacturing," and "mining" were within the province
of state governments, and thus were beyond the power of Congress
under the Commerce Clause. See Wickard v. Filburn,
317 U.S. 111, 121 (1942) (describing development of Commerce
Consistent with this structure, we have identified three broad
categories of activity that Congress may regulate under its commerce
power. Perez v. United States, supra, at 150; see also Hodel v.
Virginia Surface Mining & Reclamation Assn., supra, at 276-277.
First, Congress may regulate the use of the channels of interstate
commerce. See, e.g., Darby,
312 U.S., at 114 ; Heart of Atlanta Motel, supra, at 256 ("`[T]he
authority of Congress to keep the channels of interstate commerce
free from immoral and injurious uses has been frequently sustained,
and is no longer open to question.'" (quoting Caminetti v. United
States, 242 U.S. 470, 491 (1917)). Second, Congress is empowered
to regulate and protect the instrumentalities of interstate commerce,
or persons or things in interstate commerce, even though the threat
may come only from intrastate activities. See, e.g., Shreveport
Rate Cases, 234 U.S. 342 (1914); Southern R. Co. v. United States,
222 U.S. 20 (1911) (upholding amendments to Safety Appliance Act
as applied to vehicles used in intrastate commerce); Perez, supra,
at 150 ("[F]or example, the destruction of an aircraft (18 U.S.C.
32), or . . . thefts from interstate shipments (18 U.S.C. 659)").
Finally, Congress' commerce authority includes the power to regulate
those activities having a substantial relation to interstate commerce,
Jones & Laughlin Steel,
301 U.S., at 37 , i.e., those activities that substantially
affect interstate commerce. Wirtz, supra, at 196, n. 27.
FEDERAL CIRCUIT COURT CASES:
U.S. v. Tweel, 550 F.2d
297, 299-300 (1977)
"Silence can only be equated with fraud when there is a legal
or moral duty to speak, or when an inquiry left unanswered would
be intentionally misleading... We cannot condone this shocking conduct...If
that is the case we hope our message is clear. This sort of deception
will not be tolerated and if this is routine it should be corrected
Lavin v. Marsh,
644 F.2nd 1378, 9th Cir., (1981)
“Persons dealing with government are charged with
knowing government statutes and regulations, and they assume the
risk that government agents may exceed their authority and provide
v. Federal Reserve Bank of San Francisco, 650 F.2d 1093, 9th
“All persons in the United States are chargeable with knowledge
of the Statutes-at-Large…. It is well established that anyone who
deals with the government assumes the risk that the agent acting
in the government’s behalf has exceeded the bounds of his authority”
Economy Plumbing and Heating v. U.S., 470 F.2d 585 (Ct. Cl. 1972)
“Revenue Laws relate to taxpayers [officers, employees, and
instrumentalities of the Federal Government] and not to non-taxpayers
[American Nationals not subject to the exclusive jurisdiction of
the Federal Government]. The latter are without their scope.
No procedures are prescribed for non-taxpayers and no attempt is
made to annul any of their Rights or Remedies in due course of law.
With them [non-taxpayers] Congress does not assume to deal and they
are neither of the subject nor of the object of federal revenue
v. Rasmussen, 281 F. 236,
“The revenue laws are a code or a system in regulation of
tax assessment and collection. They relate to taxpayers, and not
to non-taxpayers. The latter are without their scope. No procedures
are prescribed for non-taxpayers, and no attempt is made to annul
any of their rights and remedies in due course of law. With them
Congress does not assume to deal, and they are neither the subject
nor the object of the revenue laws.”
Redfield v. Fisher,
292 P. 813, 135 Or. 180, 294 P.461, 73 A.L.R. 721 (1931)
“The individual, unlike the corporation, cannot be taxed for
the mere privilege of existing. The corporation is an artificial
entity which owes its existence and charter powers to the state;
but the individuals' rights to live and own property are natural
rights for the enjoyment of which an excise cannot be imposed.”
U.S. v. Ballard, 535 F2d 400, cert denied, 429 U.S. 918, 50 L.Ed.2d
283, 97 S.Ct. 310 (1976)
"income" is not defined in the Internal Revenue Code
The opinion is set
forth in a footnote at page 160 et seq., of 3 Cranch.
Printed in 157 U.S.
at page 701.