Social Security Website
Social Security Act-SSA Website
Social Security: Mark of the Beast-book
Resignation of Compelled Social Security Trustee, Form #06.002 (OFFSITE LINK)-SEDM
Why You Aren't Eligible for Social Security, Form #06.001 (OFFSITE LINK)-SEDM
Socialism: The New American Civil Religion, Form #05.016 (OFFSITE LINK)-SEDM
5 U.S.C. §553(a)(2): Rule making
U.S. Code Title 5 PART I CHAPTER 5 SUBCHAPTER II § 553
5 U.S. Code § 553 - Rule making
(a)This section applies, according to the provisions thereof, except to the extent that there is involved—
(1)a military or foreign affairs function of the United States; or
(2)a matter relating to agency management or personnel or to public property, loans, grants, benefits [e.g. Social Security], or contracts.
[EDITORIAL: "benefits" are property subject to federal regulation as property coming under Article 4, Section 3, Clause 2 of the Constitution. "Rules" always relate to government property, offices, grants, etc and CANNOT deal with ABSOLUTELY owned private property. The SSN is what the Federal Trade Commission calls a "franchise mark" and SS is a franchise. Click here (Form #05.030) for details on "franchises"]
42 U.S.C. §1717: Assignment of benefits; execution, levy, etc., against benefits
TITLE 42 > CHAPTER 12 > SUBCHAPTER II > § 1717
§ 1717. Assignment of benefits; execution, levy, etc., against benefits
The right of any person to any benefit under subchapter I of this chapter shall not be transferable or assignable at law or in equity except to the United States, and none of the moneys paid or payable (except money paid hereunder as reimbursement for funeral expenses or as reimbursement with respect to payments of workmen’s compensation or in the nature of workmen’s compensation benefits), or rights existing under said subchapter, shall be subject to execution, levy, attachment, garnishment, or other legal process or to the operation of any bankruptcy or insolvency law.
License Tax Cases, 72 U.S. 462, 18 L.Ed. 497, 5 Wall. 462, 2 A.F.T.R. 2224 (1866)
“Thus, Congress having power to regulate commerce with foreign nations, and among the several States, and with the Indian tribes, may, without doubt, provide for granting coasting licenses, licenses to pilots, licenses to trade with the Indians, and any other licenses necessary or proper for the exercise of that great and extensive power; and the same observation is applicable to every other power of Congress, to the exercise of which the granting of licenses may be incident. All such licenses confer authority, and give rights to the licensee.
But very different considerations apply to the internal commerce or domestic trade of the States. Over this commerce and trade Congress has no power of regulation nor any direct control. This power belongs exclusively to the States. No interference by Congress with the business of citizens transacted within a State is warranted by the Constitution, except such as is strictly incidental to the exercise of powers clearly granted to the legislature. The power to authorize a business within a State is plainly repugnant to the exclusive power of the State over the same subject. It is true that the power of Congress to tax is a very extensive power. It is given in the Constitution, with only one exception and only two qualifications. Congress cannot tax exports, and it must impose direct taxes by the rule of apportionment, and indirect taxes by the rule of uniformity. Thus limited, and thus only, it reaches every subject, and may be exercised at discretion. But, it reaches only existing subjects. Congress cannot authorize a trade or business within a State in order to tax it.”
[License Tax Cases, 72 U.S. 462, 18 L.Ed. 497, 5 Wall. 462, 2 A.F.T.R. 2224 (1866) ]
Flemming v. Nestor, 363 U.S. 603 (1960)
“We must conclude that a person covered by the Act has not such a right in benefit payments… This is not to say, however, that Congress may exercise its power to modify the statutory scheme free of all constitutional restraint.”
[Flemming v. Nestor, 363 U.S. 603 (1960)]
U.S. v. Butler, 297 U.S. 1 (1936)
"A tax, in the general understanding of the term and as used in the constitution, signifies an exaction for the support of the government. The word has never thought to connote the expropriation of money from one group for the benefit of another."
[U.S. v. Butler, 297 U.S. 1 (1936)]
United States v. Lee, 455 U.S. 252 (1982): Amish Farmer tries to stop paying SS
Because the social security system is nationwide, the governmental interest is apparent. The social security system in the United States serves the public interest by providing a comprehensive insurance system with a variety of benefits available to all participants, with costs shared by employers and employees. 7 The social security system is by far the largest domestic governmental program in the United States today, distributing approximately $11 billion monthly to 36 million Americans. 8 The design of the system requires support by mandatory contributions from covered employers and employees. This mandatory participation is indispensable to the fiscal vitality of the social security system. "[W]idespread individual voluntary coverage under social security . . . would undermine the soundness of the social security program." S. Rep. No. 404, 89th Cong., 1st Sess., pt. 1, p. 116 (1965). Moreover, a comprehensive national social security system providing for voluntary participation would be almost a contradiction in terms and difficult, if not impossible, to administer. Thus, the Government's interest in assuring [455 U.S. 252, 259] mandatory and continuous participation in and contribution to the social security system is very high. 9
[. . .]
The remaining inquiry is whether accommodating the Amish belief will unduly interfere with fulfillment of the governmental interest. In Braunfeld v. Brown, 366 U.S. 599, 605 (1961), this Court noted that "to make accommodation between the religious action and an exercise of state authority is a particularly delicate task . . . because resolution in favor of the State results in the choice to the individual of either abandoning his religious principle or facing . . . prosecution." The difficulty in attempting to accommodate religious beliefs in the area of taxation is that "we are a cosmopolitan nation made up of people of almost every conceivable religious preference." Braunfeld, supra, at 606. The Court has long recognized that balance must be struck between the values of the comprehensive social security system, which rests on a complex of actuarial factors, and the consequences of allowing religiously based exemptions. To maintain an organized society that guarantees religious freedom to a great variety of faiths requires that some religious practices yield to the common good. Religious beliefs can be accommodated, see, e. g., Thomas, supra; Sherbert, supra, but there is a point at which accommodation would "radically restrict the operating latitude of the legislature." Braunfeld, supra, at 606. 10
Helvering v. Davis, 301 U.S. 619 (1937)
Chas. C. Steward Machine Co. v. Davis, 301 U.S. 548 (1937)
"We learn that employment for lawful gain is a 'natural' or 'inherent' or 'inalienable' right, and not a 'privilege' at all. But natural rights, so called, are as much subject to taxation as rights of less importance. 6 An excise is not limited to vocations or activities [301 U.S. 548, 581] that may be prohibited altogether. It is not limited to those that are the outcome of a franchise. It extends to vocations or activities pursued as of common right. What the individual does in the operation of a business is amenable to taxation just as much as what he owns, at all events if the classification is not tyrannical or arbitrary. 'Business is as legitimate an object of the taxing power as property.' City of Newton v. Atchison, 31 Kan. 151, 154, 1 P. 288, 290, 47 Am.Rep. 486 (per Brewer, J.). Indeed, ownership itself, as we had occasion to point out the other day, is only a bundle of rights and privileges invested with a single name. Henneford v. Silas Mason Co., Inc. (March 29, 1937) 300 U.S. 577 , 57 S.Ct. 524, 527. 'A state is at liberty, if it pleases, to tax them all collectively, or to separate the faggots and lay the charge distributively.' Id. Employment is a business relation, if not itself a business. It is a relation without which business could seldom be carried on effectively. The power to tax the activities and relations that constitute a calling considered as a unit is the power to tax any of them. The whole includes the parts. Nashville, C. & St. L. Ry. Co. v. Wallace, 288 U.S. 249, 267 , 268 S., 53 S.Ct. 345, 349, 350, 87 A.L.R. 1191
"The subject-matter of taxation open to the power of the Congress is as comprehensive as that open to the power of the states, though the method of apportionment may at times be different. 'The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excises.' Article 1, 8. If the tax is a direct one, it shall be apportioned according to the census or enumeration. If it is a duty, impost, or excise, it shall be uniform throughout the United States. Together, these classes include every form of tax appropriate to sovereignty. Cf. Burnet v. Brooks, 288 U.S. 378, 403 , 405 S., 53 S.Ct. 457, 464, 465, 86 A.L.R. 747; Brushaber v. Union Pacific R.R. Co., 240 U.S. 1, 12 , 36 S.Ct. 236, L.R.A.1917D, 414, Ann.Cas.1917B, 713. Whether the tax is to be [301 U.S. 548, 582] classified as an 'excise' is in truth not of critical importance. If not that, it is an 'impost' (Pollock v. Farmers' Loan & Trust Co., 158 U.S. 601, 622 , 625 S., 15 S.Ct. 912; Pacific Insurance Co. v. Soule, 7 Wall. 433, 445), or a 'duty' (Veazie Bank v. Fenno, 8 Wall. 533, 546, 547; Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429, 570 , 15 S.Ct. 673; Knowlton v. Moore, 178 U.S. 41, 46 , 20 S.Ct. 747). A capitation or other 'direct' tax it certainly is not. 'Although there have been, from time to time, intimations that there might be some tax which was not a direct tax, nor included under the words 'duties, imposts, and excises,' such a tax, for more than 100 years of national existence, has as yet remained undiscovered, notwithstanding the stress of particular circumstances has invited thorough investigation into sources of revenue.' Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429, 557 , 15 S.Ct. 673, 680. There is no departure from that thought in later cases, but rather a new emphasis of it. Thus, in Thomas v. United States, 192 U.S. 363, 370 , 24 S.Ct. 305, 306, it was said of the words 'duties, imposts, and excises' that 'they were used comprehensively to cover customs and excise duties imposed on importation, consumption, manufacture, and sale of certain commodities, privileges, particular business transactions, vocations, occupations, and the like.' At times taxpayers have contended that the Congress is without power to lay an excise on the enjoyment of a privilege created by state law. The contention has been put aside as baseless. Congress may tax the transmission of property by inheritance or will, though the states and not Congress have created the privilege of succession. Knowlton v. Moore, supra, 178 U.S. 41 , at page 58, 20 S.Ct. 747. Congress may tax the enjoyment of a corporate franchise, though a state and not Congress has brought the franchise into being. Flint v. Stone Tracy Co., 220 U.S. 107, 108 , 155 S., 31 S.Ct. 342, Ann.Cas.1912B, 1312. The statute books of the states are strewn with illustrations of taxes laid on [301 U.S. 548, 583] occupations pursued of common right. 7 We find no basis for a holding that the power in that regard which belongs by accepted practice to the Legislatures of the states, has been denied by the Constitution to the Congress of the nation."
[Chas. C. Steward Machine Co. v. Davis, 301 U.S. 548 (1937)]
Carmichael v. Southern Cole and Coke Co, 301 U.S. 495 (1937)
"There remain for consideration the contentions that the state act is invalid because its enactment was coerced by the adoption of the Social Security Act, and that it involves an unconstitutional surrender of state power. Even though it be assumed that the exercise of a sovereign power by a state, in other respects valid, may be rendered invalid because of the coercive effect of a federal statute enacted in the exercise of a power granted to the national government, such coercion is lacking here. [301 U.S. 495, 526] It is unnecessary to repeat now those considerations which have led to our decision in the Chas. C. Steward Machine Co. Case, that the Social Security Act has no such coercive effect. As the Social Security Act is not coercive in its operation, the Unemployment Compensation Act cannot be set aside as an unconstitutional product of coercion. The United States and the State of Alabama are not alien governments. They coexist within the same territory. Unemployment within it is their common concern. Together the two statutes now before us embody a cooperative legislative effort by state and national governments for carrying out a public purpose common to both, which neither could fully achieve without the cooperation of the other. The Constitution does not prohibit such cooperation."
[Carmichael v. Southern Cole and Coke Co, 301 U.S. 495 (1937)]
United States Railroad Retirement Board v. Fritz, 449 U.S. 166, 101 S.Ct. 453, 66 L.Ed.2d. 368 (1980)
"The initial issue presented by this case is the appropriate standard of judicial review to be applied when social and economic legislation enacted by Congress is challenged as being violative of the Fifth Amendment to the United States Constitution. There is no claim here that Congress has taken property in violation of the Fifth Amendment, since railroad benefits, like social security benefits, are not contractual and may be altered or even eliminated at any time. Hisquierdo v. Hisquierdo, 439 U.S. 572, 575, 99 S.Ct. 802, 805, 59 L.Ed.2d 1 (1979); Flemming v. Nestor, 363 U.S. 603, 608-611, 80 S.Ct. 1367, 1371-1372, 4 L.Ed.2d 1435 (1960)."
[EDITORIAL: Title VIII imposes an "excise" tax on employers, to be paid "with respect to having individuals in their employ," measured on the wages, and an "income tax on employees," measured on their wages, to be collected by their employers by deduction from wages. These taxes are not applicable to certain kinds of employment, including agricultural labor, domestic service, service for the national or state governments, and service performed by persons who have attained the age of 65 years.]
Rowan Cos. v. United States, 452 U.S. 247, 255-56 (1991)
Notwithstanding this acknowledgment, the Government contends that petitioner should have included the value of the meals and lodging in "wages" for purposes of FICA and FUTA. It relies on Treas. Reg. §§ 31.3121 (a)-1 (f) 252*252 (FICA) and 31.3306 (b)-1 (f) (FUTA), 26 CFR §§ 31.3121 (a)-1 (f) and 31.3306 (b)-1 (f) (1980), that provide:
"Ordinarily, facilities or privileges (such as entertainment, medical services, or so-called `courtesy' discounts on purchases), furnished or offered by an employer to his employees generally, are not considered as remuneration for employment if such facilities or privileges are of relatively small value and are offered or furnished by the employer merely as a means of promoting the health, good will, contentment, or efficiency of his employees. The term `facilities or privileges,' however, does not ordinarily include the value of meals or lodging furnished. for example, to restaurant or hotel employees, or to seamen or other employees aboard vessels, since generally these items constitute an appreciable part of the total remuneration of such employees."If valid, these regulations dictate that the value of the meals and lodging provided by petitioner to its employees on offshore rigs was includable in "wages" as defined in FICA and FUTA, even though excludable from "wages" under the substantially identical definition in § 3401 (a) for income-tax withholding.[9]
We consider Treasury Regulations valid if they "implement the congressional mandate in some reasonable manner." United States v. Correll, 389 U. S. 299, 307 (1967); accord, Commissioner v. Portland Cement Co. of Utah, 450 U. S. 156, 253*253 169 (1981). In National Muffler Dealers Assn. v. United States, 440 U. S. 472, 477 (1979), we stated: "In determining whether a particular regulation carries out the congressional mandate in a proper manner, we look to see whether the regulation harmonizes with the plain language of the statute, its origin, and its purpose." Harmony between statutory language and regulation is particularly significant in this case. Congress itself defined the word at issue—"wages"—and the Commissioner interpreted Congress' definition only under his general authority to "prescribe all needful rules." 26 U. S. C. § 7805 (a). Because we therefore can measure the Commissioner's interpretation against a specific provision in the Code, we owe the interpretation less deference than a regulation issued under a specific grant of authority to define a statutory term or prescribe a method of executing a statutory provision. Compare Commissioner v. Portland Cement Co. of Utah, supra, at 165; Fulman v. United States, 434 U. S. 528, 533 (1978); Batterton v. Francis, 432 U. S. 416, 424-425, and nn. 8-9 (1977). Where the Commissioner acts under specific authority, our primary inquiry is whether the interpretation or method is within the delegation of authority.
Among other considerations relevant to the validity of Treasury Regulations, we inquire whether the regulation "is a substantially contemporaneous construction of the statute by those presumed to have been aware of congressional intent." National Muffler Dealers Assn. v. United States 440 U. S., at 477; and "[i]f the regulation dates from a later period, the manner in which it evolved merits inquiry." Ibid. We also consider, if pertinent, "the consistency of the Commissioner's interpretation, and the degree of scrutiny Congress has devoted to the regulation during subsequent re-enactments of the statute." Ibid. In this case, we hold that Treas. Reg. §§ 31.3121 (a)-1 (f) and 31.3306 (b)-1 (f) are invalid, for they fail to implement the congressional mandate in a consistent and reasonable manner.
254*254 A
Congress chose "wages" as the base for measuring employers' obligations under FICA, FUTA, and income-tax withholding. In Central Illinois Public Service Co. v. United States, 435 U. S. 21 (1978), we considered Congress' use of the concepts of "income" and "wages" for the purpose of income-tax withholding. The question was whether an employer should have included in "wages" for income-tax withholding the reimbursements it had given employees for lunch expenses on company travel that had not required overnight stays. We held that the employer was not required to include the reimbursements in "wages", even though the reimbursements constituted "income" to the employees.[10] This holding relied on the recognition that "[t]he two concepts—income and wages—obviously are not necessarily the same. Wages usually are income, but many items qualify as income and yet clearly are not wages." Id., at 25 (footnote omitted). In short, "wages" is a narrower concept than "income," see ibid., and the fact that the reimbursements were "income" to the employees did not necessarily mean that the employer had to include them in "wages" for income-tax withholding.
Petitioner contends that its position in this case follows from our reasoning in Central Illinois. Because "wages" is a narrower concept than "income" for the purposes of income-tax withholding, it is argued that the value of the meals and lodging in this case—which the Government acknowledges is not "income"—therefore cannot be "wages" under FICA and FUTA. Petitioner's argument rests on the assumption that Congress intended the term "wages" to have 255*255 the same meaning for purposes of FICA, FUTA, and income-tax withholding. We now consider whether petitioner's assumption is correct.
B
Congress enacted the predecessor provisions of FICA and FUTA as Titles VIII and IX of the Social Security Act of 1935, ch. 531, 49 Stat. 636, 639. It chose "wages" as the base for taxation of employers, § 804, 49 Stat. 637; § 901, 49 Stat. 639, and it defined "wages." § 811 (a), 49 Stat. 639; § 907 (b), 49 Stat. 642. Congress originated the present income-tax withholding system in § 172 of the Revenue Act of 1942, 56 Stat. 884. See Central Illinois Public Service Co. v. United States, supra, at 26-27. It again chose "wages" as the base, 56 Stat. 888, and defined "wages" in substantially the same language that it used in FICA and FUTA, id., at 887. When Congress revised the withholding system by replacing § 172 with the Current Tax Payment Act of 1943, 57 Stat. 126, it retained the definition of "wages." Ibid. In view of this sequence of consistency, the plain language of the statutes is strong evidence that Congress intended "wages" to mean the same thing under FICA, FUTA, and income-tax withholding.
The legislative histories of the Acts establishing income-tax withholding support the conclusion to be drawn from the plain language. These histories reveal a congressional concern for "the interest of simplicity and ease of administration." S. Rep. No. 1631, 77th Cong., 2d Sess., 165 (1942) (Revenue Act of 1942). See Central Illinois Public Service Co. v. United States, supra, at 31. They also reveal that one of the means Congress chose in order to promote simplicity was to base withholding upon the same measure— "wages"—as taxation under FICA and FUTA. Thus, whereas the withholding system proposed by the House provided for withholding upon dividends and bond interest in addition to wages, H. R. Rep. No. 2333, 77th Cong., 2d Sess., 256*256 125 (1942), the system proposed by the Senate and enacted in § 172 limited withholding to wages. S. Rep. No. 1631, supra, at 165. "This was a standard that was intentionally narrow and precise." Central Illinois Public Service Co. v. United States, supra, at 31. Section 172 also specified that remuneration for certain services was excepted from "wages." According to the Senate Report, "[t]hese exceptions [for income-tax withholding] are identical with the exceptions extended to such services for Social Security tax purposes and are intended to receive the same construction and have the same scope." S. Rep. No. 1631, supra, at 166.
When Congress replaced § 172, the House devoted much attention to the specified exceptions from "wages," H. R. Rep. No. 268, 78th Cong., 1st Sess., pt. 1, p. 14 (1943); H. R. Rep. No. 401, 78th Cong., 1st Sess., pt. 1, pp. 22-23 (1943), but it left the essential definition of "wages" unchanged. H. R. Rep. No. 268, supra, at 14. The Senate modified the bill proposed by the House, and reported: "[T]he methods of collection, payment, and administration of the withholding tax have been coordinated generally with those applicable to the Social Security tax imposed on employees under section 1400 of the code. This proposal has been made in order to facilitate the work of both the Government and the employer in administering the withholding system." S. Rep. No. 221, 78th Cong., 1st Sess., 17 (1943); see also H. R. Conf. Rep. No. 510, 78th Cong., 1st Sess., 28 (1943).[11]
257*257 In sum, Congress intended in both the Revenue Act of 1942 and the Current Tax Payment Act of 1943 to coordinate the income-tax withholding system with FICA and FUTA. In both instances, Congress did so to promote simplicity and ease of administration. Contradictory interpretations of substantially identical definitions do not serve that interest. It would be extraordinary for a Congress pursuing this interest to intend, without ever saying so, for identical definitions to be interpreted differently.
Despite the plain language of Congress' definition of "wages" and this legislative history, the Government contends that FICA and FUTA compose a distinct system of taxation to which the rules of income taxation, such as the exclusion of the value of meals and lodging from "income" under the convenience-of-the-employer rule in § 119, do not apply. In support, the Government recites congressional Committee Reports indicating that Congress enacted the Social Security Act to "relieve the existing distress and . . . to reduce destitution and dependency in the future," H. R. Rep. No. 615, 74th Cong., 1st Sess., 3 (1935). See also S. Rep. No. 628, 74th Cong., 1st Sess., 2 (1935). These Reports also state that "[w]ages include not only the cash payments made to the employee for work done, but also compensation for services in any other form, such as room, board, etc." H. R. Rep. No. 615, supra, at 32 (Title VIII (FICA)); accord, id., at 36 (Title IX (FUTA)); S. Rep. No. 628, supra, at 44 (FICA), 49 (FUTA). The Government concludes that Congress intended to impose the taxes under FICA and FUTA upon a broad range of remuneration in order to accomplish the Act's purposes.
We are not persuaded by this contention. The reference by Congress to "room, board, etc." as examples of "wages" under Titles VIII and IX is ambiguous. It does not necessarily 258*258 mean that Congress intended to tax remuneration in kind without regard to principles developed under income taxation, such as the convenience-of-the-employer rule.[12] This rule first appeared in 1919, O. D. 265, 1 Cum. Bull. 71, and was well established by 1935. See Commissioner v. Kowalski, 434 U. S., at 84-87. There is no evidence in the Committee Reports cited by the Government that Congress intended to exclude this established rule from determinations under Titles VIII and IX or to create a different rule to govern "room, board, etc." We therefore think that the reference in the Committee Reports to "room, board, etc." lends no support to the validity of the Treasury Regulations on which the Government relies.[13]
The Government further contends, however, that a line of Treasury Regulations and rulings unbroken since 1940 refutes petitioner's view that Congress intended a consistent interpretation of the term "wages." It also contends that we may infer congressional endorsement of these Treasury Regulations and rulings from Congress' re-enactment of FICA, FUTA, and the income-tax withholding provisions in the Internal Revenue Code of 1954. We now address these contentions.
C
The history of the Treasury Regulations and rulings interpreting Congress' definition of "wages" in FICA and FUTA 259*259 is far from consistent. The Commissioner's contemporaneous construction of Titles VIII (FICA) and IX (FUTA) of the Social Security Act of 1935 was that the convenience-of-the-employer rule applied to the computation of "wages." Treas. Regs. 90, Art. 207 (1936) (Title IX); Treas. Regs. 91, Art. 14 (1936) (Title VIII).[14] Pursuant to Treas. Regs. 90, Art. 207, the Service ruled in 1937 that "supper money" paid to employees working overtime for the convenience of the employer was excludable from "wages" under both Titles. S. S. T. 110, 1937-1 Cum. Bull. 441. Again in 1938, the Service ruled in S. S. T. 302, 1938-1 Cum. Bull. 457, that free lunches provided by an employer for its own convenience were excludable from "wages" under Title IX. See also S. S. T. 383, 1940-1 Cum. Bull. 210-211.
The position taken in the Treasury Regulations and rulings subsequently changed, but without explanation. In 1939, Congress passed the Social Security Act Amendments of 1939, ch. 666, 53 Stat. 1360, that amended some of the specified exclusions from "wages" under FICA and FUTA but left unchanged the definition of "wages." Compare §§ 603, 614, 53 Stat. 1382, 1392, with §§ 1426 (a), 1607 (b), Internal Revenue Code of 1939, 26 U. S. C. §§ 1426 (a), 1607 (b) (1952 ed.). In 1940, however, the Commissioner issued Treas. Regs. 106, § 402.227 (FICA), and Treas. Regs. 107, § 403.227 (FUTA). These Regulations, which were virtually 260*260 identical to the present Treasury Regulations at issue in this case, excluded the convenience-of-the-employer rule from the computation of "wages" under FICA and FUTA. No reasons were stated for this change. Pursuant to the new Regulations, the Service ruled in 1940 that the value of meals and lodging furnished to the crew operating a steamship was includable in "wages" under FICA and FUTA. S. S. T. 386, 1940-1 Cum. Bull. 211-212. In 1944, the Commissioner stated in Mim. 5657, 1944 Cum. Bull. 551, that the value of meals and lodging furnished by an employer was includable in "wages," and the Commissioner added without explanation that "[i]t is immaterial, for the purposes of such taxes, whether the quarters or meals are furnished for the convenience of the employer."
The Government contends that the 1940 Regulations and the rulings issued pursuant to them acquired "the effect of law" when Congress re-enacted FICA and FUTA without substantial change in the Internal Revenue Code of 1954. United States v. Correll, 389 U. S., at 305; Cammarano v. United States, 358 U. S. 498, 510-511 (1959). In its view, the 1936 Treasury Regulations and the rulings under them were short-lived and therefore are inconsequential. See National Muffler Dealers Assn. v. United States, 440 U. S., at 485-486.[15]
We are unconvinced. Despite Treas. Regs. 106 and 107 and the rulings issued under them, the rule of S. S. T. 302 issued in 1938—that the value of meals provided for the convenience of the employer is excludable from "wages"—remained in effect until after 1954. In 1957, the Service ruled 261*261 that S. S. T. 302 did not apply to the provision of meals to restaurant employees, but it also stated that S. S. T. 302 was otherwise "still in full force and effect." Rev. Rul. 57-471. 1957-2 Cum. Bull. 632. The Service did not explain why it took this position as to S. S. T. 302. It is thus clear that as late as 1957—17 years after Treas. Regs. 106 and 107 were adopted—the Service itself was inconsistent in construing the term "wages." Indeed, it was not until 1962 that the Commissioner finally disavowed S. S. T. 302 in Rev. Rul. 62-150, 1962-2 Cum. Bull. 213.[16] It therefore assumes a great deal to argue that in 1954, when FICA and FUTA were re-enacted, Congress implicitly approved these Treasury Regulations.[17] The Commissioner himself had offered no explanation by 1954 262*262 as to why the contemporaneous regulations of 1936 were changed in 1940 or why inconsistent rulings still were being issued. Indeed, the Government in this case has not yet offered an explanation.
The history of the Treasury Regulations and rulings interpreting Congress' definition of "wages" in FICA and FUTA therefore lends only the most ambiguous support to the view that Congress intended to approve different interpretations of "wages" when it re-enacted the Internal Revenue Code in 1954. The differing interpretations were not substantially contemporaneous constructions of the statutes, and nothing in the manner in which the interpretations changed is probative of congressional endorsement. Nor is there evidence of any particular consideration of these regulations by Congress during re-enactment.
263*263 III
We conclude that Treas. Reg. §§ 31.3121 (a)-1 (f) and 31.3306 (b)-1 (f) fail to implement the statutory definition of "wages" in a consistent or reasonable manner. The plain language and legislative histories of the relevant Acts indicate that Congress intended its definition to be interpreted in the same manner for FICA and FUTA as for income-tax withholding. The Treasury Regulations on which the Government relies fail to do so, and their inconsistent and unexplained application undermine the contention that Congress nonetheless endorsed them. As Congress did intend a consistent interpretation of its definition, these Treasury Regulations also are inconsistent with the Court's reasoning in Central Illinois.
We therefore hold that the Regulations are invalid, and that the Service erred in relying upon them to include in the computation of "wages" the value of the meals and lodging that petitioner provided for its own convenience to its employees on offshore oil rigs. The judgment of the Court of Appeals is reversed.
It is so ordered.
SOCIAL SECURITY AND TAX WITHHOLDING ARE VOLUNTARY WITHIN THE 50 STATES
The Social Security Act, which is part of Title 42 of the United States Code, was enacted in 1935 as a U.S. government sponsored, voluntary pension program for the benefit of individuals who wished to VOLUNTARILY participate in the program. The Act is administered by the Social Security Administration which handles the administration and payment of benefits under the provisions of the law.
The tax upon which the old age benefits is based is collected by the Internal Revenue Service under the provisions of Title 26 of the United States Code, otherwise known as the Internal Revenue Code (IRC).
Monies collected by the IRS are not sent to the Social Security Administration to fund their administrative and disbursement activities but rather end up in the general fund along with other taxes collected. An accounting "gimmick" is created to lead the public to believe that the monies paid in are held in a "trust fund".
There is no provision in the United States Constitution for the federal government to be in the insurance business. Although it may be technically correct that a so-called "trust fund" exists, the truth is that it contains no monies or other assets, only governmental I.O.U.'s promising to pay money to itself.
Social Security is NOT a contract as some allege, but a political promise upon which Congress could renege at any time. Monies disbursed by SSA must be appropriated by Congress each year as needed. Since no contractual obligation exists for the payment of any benefits, technically the benefits could be terminated at any time if Congress did not appropriate the funds.
This A.L.E.R.T. deals primarily with those statutes relative to the imposition and collection of the tax. References to Code sections are those found within Title 26 of the United States Code, which is a codification of the Statutes at Large as enacted by the Congress of the United States. All Code sections shown herein are copied directly from Title 26, United States Code precisely as printed therein.
All Internal Revenue taxes, including the personal and corporate income taxes, self-employment taxes, as well as the so‑called Social Security tax, are imposed and collected under Title 26, United States Code, also known as the Internal Revenue Code (IRC).
The Social Security tax is imposed by the Code sections in chapter 21, subtitle C of the IRC titled: "FEDERAL INSURANCE CONTRIBUTIONS ACT".
Before examining the actual wording contained in these sections, it is important to understand that courts have repeatedly held that a statute means only that which is stated in the statute and nothing more.
Southerland's Rules of Statutory Construction, an authoritative legal guidebook, under section 66.01 titled "Strict Construction of Statutes Creating Tax Liabilities" explains the limited application of tax laws. The guidebook refers to the U.S. Supreme Court decision of Gould v. Gould, 245 U.S. 151, which states:
"In the interpretation of statutes levying taxes it is the established rule not to extend their provisions by implication beyond the clear import of the language used, or to enlarge their operation so as to embrace matters not specifically pointed out. In case of doubt, they are construed most strongly against the government and in favor of the citizen."
So the Supreme Court tells us that IRC sections mean only that which is stated; nothing else can be added to that which is stated in the Code section.
With this Supreme Court ruling in mind, lets look at the wording of sections 3101(a) and 3111(a) which are imposition statutes for the (so-called Social Security) FICA tax -- section 3101(a) applying to employEES and 3111(a) to employERS respectively.
(CAPITALIZATION for emphasis is added to certain phrases, Code sections and court decisions in this article.)
Sec. 3101. Rate of Tax.
(a) Old-Age, survivors, and disability Insurance. In addition to other taxes, there is hereby imposed on the income of every individual a tax EQUAL TO THE FOLLOWING PERCENTAGES OF THE WAGES (as defined In section 3121(a)) received by him with respect to employment (as defined in section 3121(b))-
Sec. 3111. Rate of Tax.
(a) Old-age, survivors, and disability insurance. In addition to other taxes, there Is hereby imposed on every employer an excise tax, with respect to having individuals in his employ, EQUAL TO THE FOLLOWING PERCENTAGES OF THE WAGES (as defined In section 3121(a)) paid by him with respect to employment (as defined In section 3121(b))-
The popular mistaken belief is that the FICA tax, which is imposed on the income of "employees" under section 3101(a), is a "wage" tax. However, a reading of section 3101(a) shows clearly that the tax is not, in fact, a WAGE tax but rather is imposed on "income" which is MEASURED by "wages". Hence, the FICA tax is simply another INCOME tax.
However what is of vital importance in both these sections is the limited application of the terms "wages" (as defined in section 3121(a)) and "employment" (as defined in section 3121(b)). The definitions of these terms create a TERRITORIAL limitation on the application of the tax as we will see.
Section 3121 states:
Sec. 3121. Definitions.
(a) Wages. For purposes of this chapter, the term "wages" means all remuneration for EMPLOYMENT, including the cash value of all remuneration (including benefits) paid in any medium other than cash; except that such term shall not include –
Note that the term "wages" identifies monies paid for the activity identified by the term "employment" which is defined in section 3121(b) the essential part of which is reproduced as follows:
Sec. 3121 (b). Employment.
For purposes of this chapter, the term "employment" means any service, of whatever nature, performed (A) by an EMPLOYEE for the person employing him, irrespective of the citizenship or residence of either,
(I) WITHIN THE UNITED STATES, or
(II) on or in connection with an American vessel or American aircraft under a contract of service which is entered into WITHIN THE UNITED STATES or during the performance of which and while the employee Is employed on the vessel or aircraft It touches at a port in THE UNITED STATES....
As shown, the term "employment" means a service performed by one Identified by the term "employee" within the "United States ...". United States is also a term used in this chapter as defined in section 3121(e)(2)
Sec. 3121(e)(2).
For purposes of this chapter --
(2) United States. The term "United States" when used in a geographical sense includes the Commonwealth of Puerto Rico, the Virgin Islands, Guam and American Samoa.
The definition of the term "United States" lists those areas in which the activity described by the term "employment" takes place. The definition lists ONLY the Commonwealth of Puerto Rico, the Virgin Islands, Guam and American Samoa as the areas in which the tax imposed by this chapter applies. Before examining the provisions of this law, it is essential to understand the use of words as "terms' when used in laws.
When words are used as legal terms in order to establish their clear and unambiguous meanings, precise definitions of those terms are always included in the law. These definitions explain the exact meanings of terms used in the IRC. As quoted earlier in this article, the Supreme Court in the decision of Gould v. Gould established that, in taxing statutes, definitions of terms used in the statutes cannot be expanded by implication. Nothing can be added to the definition of a term; it means only that which is stated, regardless of any belief to the contrary.
At first, it may be hard to believe that the definition of the term "United States" could be limited to mean ONLY the four island possessions of Puerto Rico, the Virgin Islands, Guam and American Samoa. But that is exactly what this definition means because statutes mean ONLY that which is stated, nothing more, as set forth by the Supreme Court in Gould v. Gould, already discussed. Also, there are other decisions where the U.S. Supreme Court has addressed the principle of the limited meaning of statues.
The U.S. Court of Appeals (9th Circuit) explained two such decisions as follows:
"We begin our interpretation by reading the statutes and regulations for their plain meaning. The plain meaning rule has its origin in U.S. v. Missouri Pacific Railroad, 278 U.S. 269 (1929). There the Supreme Court stated that "where the language of an enactment is clear and construction according to its terms does not lead to absurd or impracticable consequences, the WORDS EMPLOYED ARE TO BE TAKEN AS THE FINAL EXPRESSION OF THE MEANING INTENDED" ... The principle was more recently affirmed in Dickinson v. New Banner Institute, Inc., 460 U.S. 103,103 S.C. 986, 74 L.Ed.2d 845 (1983), rehearing denied, 461 U.S. 911,103 S.C. 1887,76 LEd.2d 815 (1983), where the Court stated, "In determining the scope of a statute, one is to look first at its language. If the language is unambiguous, ... IT IS TO BE REGARDED AS CONCLUSIVE UNLESS THERE IS A CLEARLY EXPRESSED LEGISLATIVE INTENT TO THE CONTRARY." United States v. Varlet, 780 F2d 758 on P.761 (9th Cir.) (1986)
Also, Code section 3121(e)(2) uses the term "includes" which, in law, is a word of CONFINEMENT and not EXPANSION. This is exactly what the U.S. Supreme Court said in the decision of Montello Salt v. Utah, 221 U.S. at page 455 wherein they stated:
"'Include' or the participial form thereof, is defined 'to comprise within'; 'to hold'; 'to contain'; 'to shut up'; and synonyms are 'contain'; 'enclose'; 'comprise'; comprehend'; 'embrace'; 'involve"'.
This U.S. Supreme Court decision and others in support of its ruling that "includes" is a word of limitation also support the Court's decision in Gould v. Gould that there can be no broadening of the statute by implication. Legislative drafters in the Internal Revenue Service who write the tax bills know very well this "plain meaning rule" of statutory interpretation.
If the term "United States" could constitutionally include the 50 STATES OF THE UNION, they would have specifically included them. As an example of this, Code section 4612, which relates to a tax on crude oil, defines the term "United States" as: "the FIFTY STATES, the District of Columbia, the Commonwealth of Puerto Rico, any possession of the United States, the Commonwealth of the Northern Mariana Islands and the trust territory of the Pacific Islands."
This shows that when the term "United States" means the fifty states of the union, it says so. Consequently, it is very clear that the term "United States", when used to describe the areas where the "Social Security" tax applies, means, and IS LIMITED TO, the four island possessions which are the only areas listed in the term's definition. Therefore, according to the wording of the law itself, the FICA tax does not apply within the fifty states of the Union.
This makes sense when one understands the limitations of the direct taxing authority of the Federal government as contained in the Constitution under Article I, Section 2, Clause 3 and Article I, Section 9, Clause 4, both of which prohibit any Federal direct tax within the states of the union other than those laid on the 50 state governments in proportion to their respective populations.
The FICA tax is administered by the IRS as if it were a direct tax on individuals. To be constitutional, any direct tax on individuals must be imposed by law ONLY OUTSIDE the 50 states of the Union: i.e., only in the four listed island possessions despite the IRS' deception of the public into falsely believing the tax applies WITHIN the 50 states of the union.
IRC section 7655 also supports the limited meaning of the term "United States" as respects both the self‑employment tax imposed in chapter 2 of the IRC as well as the FICA tax imposed in chapter 21. Section 7655 states:
Sec. 7655. Cross references.
(a) Imposition of tax in possessions. For provisions imposing tax in POSSESSIONS, see -
(1) Chapter 2, relating to self-employment tax;
(2) Chapter 21, relating to the tax under the Federal Insurance Contributions Act.
Clearly this section also shows the application of both the self‑employment tax and the FICA tax imposed under chapters 2 and 21 to be limited to "possessions" (Puerto Rico, Virgin Islands, Guam, and America Samoa, as listed in IRC section 3121(e)(2) defining the TERM "United States").
26 U.S.C. SECTION 1402(d) -- THE KEY TO UNDERSTANDING
THE GEOGRAPHICAL LIMITATIONS OF CHAPTER 24 –-
WITHHOLDING OF TAX
In the Code, there are many definitions that are limited in their applications by words such as "for purposes of this chapter", "for purposes of this sub-chapter" and "for purposes of this sub-part". In contrast, section 1402 contains definitions of terms upon which there are NO SUCH LIMITATIONS upon their application, so the definitions therein apply THROUGHOUT the ENTIRE IRC. Section 1402(d) states as follows
Sec. 1402(d). Employee and wages.
The term "employee" and the term "wages" shall have the same meaning as when USED in chapter 21 (sec. 3101 and following, relating to Federal Insurance Contributions Act).
Note the absence in this Code definition of any words of limitation such as "for purposes of this chapter" or "for purposes of this subchapter". This definition means, therefore, that WHENEVER AND WHEREVER the terms "employee" and "wages" are used ANYWHERE throughout the IRC, their applications are limited to those people involved in activities within the four island possessions ONLY, the same as in chapter 21, the FICA tax chapter.
The Internal Revenue Code chapter which relates to withholding is chapter 24, titled "COLLECTION OF INCOME TAX AT SOURCE". It Is extremely important to note that this chapter contains NO section imposing any tax. Rather, the entire chapter is written to establish and authorize provisions for withholding of tax merely as a method for the payment of taxes which may be imposed in OTHER sections of the IRC.
Whenever a tax is imposed, there is always a section containing words such as "there is hereby imposed a tax ...". But in chapter 24, no such wording exists in any section; so clearly the entire chapter merely sets forth the PROCEDURES FOR COLLECTING TAXES IMPOSED ELSEWHERE in the IRC by the withholding methods described in the Code sections of the chapter. Provisions of this withholding chapter are applicable only to "employees" as defined in Code sections 1402(d) shown above and 3401(c) reproduced here:
Sec. 3401(c). Employee.
For purposes of this chapter, the term "employee" includes an officer, employee, or elected official of the United States, a State, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing. The term "employee" also includes an officer of a corporation.
It is revealing that this definition INCLUDES the term "State" which is defined in Code section 7701(a)(10) as the District of Columbia (ONLY) Remember that "includes," as a word used in laws, is a word of CONFINEMENT, not of ENLARGEMENT according to the Supreme Court in Montello Salt v. Utah as discussed earlier. Hence this definition limits the application of the term "employee" to those working for the Federal government, for the District of Columbia, for U.S. possessions, and officers or a government owned corporation.
Section 3401(d) identifies the "employer" as one for whom the "employee" works. This means that the meaning of the term "employer" is limited to those entitles listed in section 3401(c) -- the U.S. government, District of Columbia, etc. The term does NOT apply to any non‑government employer or business. On the basis of these definitions alone, most of the nation's population is not subject to the withholding provisions in this chapter.
In addition to those limitations on the application of the term "employee" shown above, section 1402(d) LIMITS the application of the term "employee" and the term "wages" to activities within the four island possessions ONLY. Therefore, the withholding provisions of chapter 24 can apply only to those working for the Federal government or the District of Columbia, etc. within these four island possessions -- not within the fifty states of the union.
IRC section 3402(a)(1) contains tricky wording which could readily lead businesses and individuals into erroneously believing that they are required to deduct and withhold taxes from the pay of those they hire. It is worded as follows:
Section 3402. Income tax collected at source.
(a) Requirement of withholding.
(1) In general. Except as otherwise provided in this section, every employer making payment of wages shall deduct and withhold upon such wages a tax determined in accordance with tables or computational procedures prescribed by the Secretary. Any tables or procedures prescribed under this paragraph shall-...
Note that this section 3402(a)(1) says that the "employer" (Federal government, District of Columbia, etc.) shall deduct and withhold from "wages" a tax determined in accordance with the Secretary's tables and computational procedures. We previously showed that the meaning of the term "wages" is limited by section 1402(d) to payments for activities occurring within the four island possessions ONLY, the same as provided in chapter 21 imposing the so-called Social Security (FICA) tax. These "tables and procedures" are authorized to be provided by the Secretary under section 3402(p)(3):
Sec. 3402(p)(3). Authority for other voluntary withholding.
The Secretary is authorized by regulations to provide for withholding-
(A) from remuneration for services performed by an employee for the employee's employer which (without regard to this paragraph) does not constitute wages, and
(B) from any other type of payment with respect to which the Secretary finds that withholding would be appropriate under the provisions of this chapter, IF THE EMPLOYER AND EMPLOYEE, OR THE PERSON MAKING AND THE PERSON RECEIVING SUCH OTHER TYPE OF PAYMENT AGREE TO SUCH WITHHOLDING. Such agreement shall be in such form and manner as the Secretary may by regulations prescribe. For purposes of this chapter (and so much of subtitle F as relates to this chapter), remuneration or other payments with respect to which such agreement is made shall be treated AS IF THEY WERE WAGES PAID BY AN EMPLOYER TO AN EMPLOYEE to the extent that such remuneration is paid or other payments are made during the period for which the agreement is In effect.
Note that the Secretary is authorized to provide for withholding by issuing tables computational procedures and other instructional material on withholding that apply ONLY to those who have VOLUNTARILY AGREED to withholding. An agreement exists only when an individual who is hired voluntarily REQUESTS that money be deducted and withheld from his pay for payment of taxes and the one for whom he works completes the agreement by his VOLUNTARY act of collecting money as an unpaid tax collector for the government.
Despite the general mistaken belief that the deduction and withholding of money for taxes is required by law, a simple reading of this Code section shows that such is not the case. Mandatory withholding would conflict with two key provisions in the U.S. Constitution: the Fifth Amendment right to due process states that no person shall be deprived of property (having his pay withheld) without due process of law (a ruling by a court) and the Thirteenth Amendment prohibition against slavery or involuntary servitude, such as being forced to be an unpaid worker (slavery) or an unpaid Federal tax collector.
The use of the words "the person making" and "the person receiving such other type of payment" relates to non-federal employers and employees who voluntarily "agree to such withholding". Federal regulation Number 31.3402(p)(1) states:
Sub-Section 31.3402(p)-1 Voluntary withholding agreements. (T.D. 7096, filed 3-17-71; amended by TD 7577, filed 12‑19‑78).
(a) In general. An employee and his employer MAY enter into an AGREEMENT under section 3402(p) to provide for the withholding OF INCOME TAX upon payments of amounts described in paragraph (b)(1) of Sub-Section 31.3401(a)-3, made after December 31, 1970. An agreement MAY be entered into under this section only with respect to amounts which are includible in the gross income of the employee under section 61, and must be applicable to all such amounts paid by the employer to the employee. The amount to be withheld PURSUANT TO AN AGREEMENT under section 3402(p) shall be determined under the rules contained in section 3402 and the regulations thereunder.
(b) Form and duration of agreement.
(1)
(i) Except as provided in subdivision (ii) of this subparagraph, AN EMPLOYEE WHO DESIRES TO ENTER INTO AN AGREEMENT under section 3402(p) SHALL FURNISH to his employer Form W-4 (Employee's Withholding Allowance Certificate) executed in accordance with the provisions of section 3402(f) and the regulations thereunder. The furnishing of such Form W-4 shall constitute a REQUEST FOR WITHHOLDING.
(ii) in the case of AN EMPLOYEE WHO DESIRES TO ENTER INTO AN AGREEMENT under section 3402(p) with his employer, if the employee performs services (in addition to those to be the subject of the AGREEMENT the remuneration for which is subject to mandatory income tax withholding by such employer, or IF the employee wishes to specify that the AGREEMENT terminate on a specific date, the employee shall furnish the employer with a REQUEST for withholding which shall be signed by the employee, and shall contain -
(a) The name, address, and social security number of the employee making the REQUEST,
(b) The name and address of the employer,
(c) A statement that the employee DESIRES WITHHOLDING of Federal income tax, and, if applicable, of qualified State individual income tax (see paragraph (d)(3)(i) of Sub-Section 301.6361-! of this chapter (Regulations on Procedure and Administration)), and
(d) If the employee desires that the AGREEMENT terminate on a specific date, the date of termination of the AGREEMENT. If accepted by the employer as provided In subdivision (iii) of this subparagraph, the REQUEST shall be attached to, and constitute part of, the employee's Form W-4. An employee who furnishes his employer A REQUEST FOR WITHHOLDING under this subdivision shall also furnish such employer with Form W-4 if such employee does not already have a Form W-4 in effect with such employer.
(iii) No REQUEST for withholding under section 3402(p) shall be effective as an AGREEMENT between an employer and employee UNTIL THE EMPLOYER ACCENTS THE REQUEST BY COMMENCING TO WITHHOLD from the amounts with respect to which the request was made.
Note the wording in sub-sections (b)(1)(ii) and (iii) of this regulation: "...an employee who desires to enter into an agreement" and "REQUEST for withholding", "DESIRES withholding" and "mutually agree upon", all of which clearly and unambiguously show the VOLUNTARY nature of the entire withholding system. The significance of a Form W-4 "Employee's Withholding Allowance Certificate" is clearly explained in this regulation which states:
"The furnishing of such Form W-4 shall constitute a REQUEST FOR WITHHOLDING,"
The printed heading on the Form W-4 confirms the voluntary nature of withholding; it states "Employee's Withholding ALLOWANCE Certificate". If withholding were mandatory, why would the form be called an "Allowance" Certificate? To "allow" means to "permit' -- if the law REQUIRED the withholding of tax from your pay, no PERMISSION or request form would be needed! To have a non-deceptive, clear-meaning heading, the words could be rearranged to "Employee's Certificate ALLOWING Withholding".
Regulation Section 31.3402(p)(2). states:
Sec. 3402(p)(2). An AGREEMENT under section 3402(p) shall be effective for such period as the employer and employee MUTUALLY AGREE upon. However, EITHER THE EMPLOYER OR THE EMPLOYEE MAY TERMINATE THE AGREEMENT PRIOR TO THE END OF SUCH PERIOD BY FURNISHING A SIGNED WRITTEN NOTICE TO THE OTHER. Unless the employer and employee AGREE to an earlier termination date, the notice shall be effective with respect to the first payment of an amount in respect of which the AGREEMENT is in effect which is made on or after the first "status determination date" (January 1, May 1, July 1, and October 1 of each year) that occurs at least 30 days after the date on which the notice Is furnished. If the employee executes a new Form W-4, the request upon which an AGREEMENT under section 3402(p) is based shall be attached to. and constitute a part of, such new Form W-4.
This regulation states that the AGREEMENT "shall be effective for such period as the employer and employee MUTUALLY AGREE UPON", and that either the employer or the employee "MAY TERMINATE THE AGREEMENT prior to the end of such period by furnishing a signed written notice to the other." Therefore it is obvious that the withholding must be REQUESTED by the employee, must be AGREED TO by the employer, and MAY BE TERMINATED BY EITHER BY GIVING WRITTEN NOTICE TO THE OTHER. The regulations merely state that the notice terminating withholding must be a signed, written notice -- no particular form is ever required!
HOW NON-GOVERNMENT EMPLOYERS
ARE DECEIVED AND INTIMIDATED
Because employers have possession and control over their employees' earnings before the money is paid over to the employees, the key to the operation of the withholding scam is the deception and intimidation of the employers to withhold money from their employees' pay even if their employees object to the withholding.
Most employers, as well as their accountants and attorneys, have never studied the IRC carefully enough to understand its complexity. They are not aware of the geographical and other limitations in the Social Security (FICA) tax and upon the withholding provisions in chapter 24 of the IRC. They do not understand (as explained earlier in this article) that the FICA tax and the withholding provisions apply only within Puerto Rico, the Virgin Islands, Guam and American Samoa; that under chapter 24 withholding is not mandatory for either the employer or the employee, and that the withholding provisions apply ONLY to cases where BOTH the employer and the employee voluntarily agree to the withholding.
If a non-government employer considers NOT withholding when his employees demand their full pay and consults his accountant, tax lawyer or the IRS about the matter, his attention is usually called to IRC section 3403. This section is a psychological bombshell designed to intimidate the non-government employer into ignoring and defying any employee's refusal to agree to withholding. IRC section 3403 states:
Sec. 3403. Liability for tax.
The employer shall be liable for the payment of the tax REQUIRED TO BE DEDUCTED AND WITHHELD UNDER THIS CHAPTER, and shall not be liable to any person for the amount of any such payment.
This section usually erroneously convinces non‑government employers that they are personally liable to pay to the IRS the amount the withholding tables specify EVEN IF THEY DO NOT WITHHOLD THE MONEY FROM THEIR EMPLOYEES PAY.
Non-government employers rarely understand that the term "employer" used in this section does not apply to them because the term "employer" as defined in the withholding provisions, means ONLY FEDERAL GOVERNMENT RELATED AGENCIES AND INSTRUMENTALITIES (listed in section 3401(c) quoted earlier in this article).
Even then, withholding applies ONLY within the four island possessions and then only when there is a VOLUNTARY MUTUAL AGREEMENT for withholding requested by the "employee" and agreed to by the "employer". Because of these facts there is no way a non-government employer within the 50 states can be required to withhold tax under chapter 24. He cannot be "LIABLE" for payment of the tax unless he voluntarily acts as an unpaid tax collector for the government.
SUMMARY
The provisions of the Constitution cited heretofore under Article 1, Section 2, Clause 3 and Article 1, Section 9, Clause 4 prohibit any Federal direct tax on the people or their property within the states of the union. If it were constitutionally lawful for the Federal government to impose upon us a direct tax on our wages in the fifty states of the union without being in conflict with these constitutional limitations why would all the above cited sections clearly show the VOLUNTARY nature of all withholding?
Why, in fact, would the Federal government not have a clear and unambiguous single section in the IRC which would simply say that all of us who work for a living in this country are required to give Big Brother whatever portion of our earnings it decides to take? If such a law were constitutional, it would surely be included in the IRC. Why all the convoluted, complicated provisions showing geographical and other limitations and voluntary "requests" for withholding?
The answer is clear: No such simple taxing statute is possible because it is constitutionally prohibited to lay a Federal direct tax on the fruits of our labor inside the fifty states of the union. All the provisions of the IRC and the implementing regulations am strictly limited in order to be in conformity with these constitutional limitations.
As shown herein, the FICA tax imposed on workers under the provisions of section 3101 is a territorial income tax which applies ONLY in the four island possessions. The regulations implementing the withholding provisions in the IRC clearly show that all withholding is voluntary for all individuals, both government employees, (under 3402(p)(l)(A) and non-government (under 3402(p)(3)) workers. In order to institute withholding, a voluntary REQUEST must be made by the employee and ACCEPTANCE must be made by the employer.
After studying these Code sections carefully, and understanding that they say what they mean and mean what they say, the complexity of the Code becomes much easier to unravel. Terms such as "United States", as defined in section 3121(e)(2), show the restricted meaning of "United States" in chapter 21 to mean the four island possessions only.
A student of the Code will find at FIVE other definitions of the term "United States" therein: Sections 638(1), 927(d)(3), 3306(j)(2), 4612(a)(4) and 7701(a)(9), also define the term "United States" for RESTRICTED USE in various parts of the IRC.
Each definition is different in one or more ways from the others as to the geographical boundaries included in the meaning of the term. But as discussed previously, when a particular Code section intends to include "the fifty states" in its definition, it says so -- as in section 4612(a)(4). But the term "United States" as defined in section 3121(e)(2) limits this FICA tax to the four island possessions.
Because of the dispersed placement of Code sections defining COMMON, EVERYDAY WORDS THAT ARE USED AS LEGAL TERMS in the IRC, most people who read the Code without thorough study are unaware of the unique Code definitions of these terms. These definitions limit the applications of the tax laws so that they do not conflict with the Fifth or Thirteenth Amendment or with the constitutional prohibition against unapportioned direct taxes in the fifty states.
The highly paid and well-trained attorneys who write the tax bills which are given to Congress for enactment are not dummies -- they know very well the necessity of drafting these statutes in conformity with these Constitutional limitations forbidding direct taxation of the people within the fifty states.
But, through careful framing of statutes and the use of confusing and misleading words, terms and definitions, they make the IRC almost impossible to understand without deep study. Such actions perpetuate the intentionally created false popular belief that the Federal government has the constitutional authority to tax us directly in these 50 united States.
But once these Code sections are carefully analyzed, one is reminded of the old adage: "Oh what a tangled web we weave when first we practice to deceive!"
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