Rise Expected in Tax Protest Cases Because of Crackdown
Every Saturday night, Bill Jenkins settles in behind the microphone at KABC radio to explore with his listeners the world of extraterrestrials, reincarnation and what he generally refers to as “metaphysical stuff.”
One subject the talk show host and network reporter never broaches on his show, called “Open Mind,” is income taxes. But his opinions on taxes have nonetheless attracted a different kind of audience: state tax investigators in Van Nuys.
“The act of paying taxes is a violation of the Constitution,” contends Jenkins, a tall, well-tanned 50-year-old from Mission Hills.
California, Jenkins reasons, has no right to demand income taxes from him because the 16th Amendment to the U.S. Constitution, which opened the door for a federal income tax, was never ratified. Jenkins insists that certified documents in his possession prove that not a single state actually ratified the amendment, including Kentucky, where the secretary of state allegedly lied when he told Congress that the Legislature had done so.
‘It’s the Same Thing’
Sound like a unique argument?
Not to officials at the state Franchise Tax Board in Van Nuys, which has corresponded with thousands of tax protesters over the past several years.
“I used to enjoy going to listen to them, but it’s gotten so monotonous,” said Roland J. Clark, the tax compliance supervisor in Van Nuys. “It’s the same thing over and over.”
Jenkins and his wife, Evelyn, represent one of the 20 or so criminal tax protester cases originating from the Van Nuys office that are either pending or have been resolved since last July. The Van Nuys office is investigating an equal number that likely will result in criminal charges.
Officials in the Van Nuys office are bracing for a much larger increase in tax protest cases later this year as a result of a stepped-up state effort to crack down on all types of tax resisters on the heels of the tax amnesty program.
‘Anxious for a Fight’
The Jenkinses have been charged with failing to file state income tax returns in 1979, 1980 and 1981 on income exceeding $140,000. A Van Nuys Municipal Court judge is expected to set a trial date next month.
“We’re ready, willing and anxious for a fight,” said Jenkins, who will be primarily relying on his 16th Amendment defense.
Even though the San Fernando Valley has never been known as a hotbed of tax protest in Southern California--that distinction belongs to Orange County--the Valley’s tax office always has been kept busy by a steady stream of protesters.
The volume has remained constant even as the tax protest movement has lost members in Southern California in recent years and has seen the momentum move to more virgin territory in Northern California, authorities said.
The Valley has even nurtured sporadic bursts of large-scale tax insurgence.
Several years ago, for instance, more than 4,000 Teamsters at Universal Studios began altering the number of exemptions on their W-4 forms, Clark said, so that no money was being withheld from their pay for taxes. Typically they were claiming 15 or more exemptions, Clark said.
State investigators traced the sudden militancy to meetings sponsored by a tax protest group that hoped to win converts among the blue-collar studio workers. Meetings of this sort are often the way anti-tax groups fatten their ranks. People get swept up in the organizers’ rhetoric and are encouraged when no one immediately discovers they are breaking the law, tax investigators say.
“The sad part about it is people do get away with it for a while, but when we catch up with you it’s devastating,” said Janie Cordray, spokeswoman for the Franchise Tax Board in Los Angeles.
At Universal, a cashier tried to defuse the workers’ anti-tax enthusiasm by posting stories of tax-evasion arrests and convictions on a wall that workers had to pass when picking up their paychecks. The collection eventually swelled to 1,400 articles.
Few at Universal Prosecuted
In the end, the state prosecuted few Universal workers. With Universal’s cooperation and the state’s ability to attach wages and assets, the movement shriveled, only to appear elsewhere.
Southern California Rapid Transit District bus drivers working out of the Valley and Lockheed employees in Palmdale also began falsifying information on their W-4 forms, investigators said. Their rebellions eventually fizzled too.
However, the resentment over taxes at Universal and Lockheed apparently did not die entirely. A Lockheed employee now faces charges of failing to file his state income tax returns from 1980 to 1983, and charges of failing to file returns are pending against a Universal employee.
Tax board members say they have arranged for state police to arrest the Universal employee at work in hopes of deterring the defendant’s co-workers.
The Lockheed employee, Ronald W. Griffith of Panorama City, is a member of Your Heritage Protection Assn., which has taken a beating from authorities lately. The Internal Revenue Service sued 500 to 600 association members and has prosecuted 30 members, including its leader, Armen B. Condo, who once described himself as “ the major threat to the income tax system.”
Headquarters Closed
The IRS also won an injunction against the group prohibiting it from encouraging anyone to disobey tax laws and in November closed the group’s Garden Grove headquarters, said Robert Giannangeli, the IRS spokesman in Los Angeles.
In the latest count by the IRS, 58,040 tax protesters were identified nationwide, while California officials have spotted 9,000 protesters within its borders. However, 1,600 California protesters caved in and paid their back taxes during the state tax amnesty program that ended in March.
After the heyday of the tax protesters in the late 1970s and early 1980s, state officials said they believe the number has stabilized and possibly declined. After many prosecutions, including those of key players in Southern California, the movement has lost its momentum, said Lee Bunyard, manager of the investigations program in Sacramento. There is an increasing interest in the movement, however, in Central and Northern California.
There are dozens of constitutional arguments that tax renegades like to hang their hats on, federal and state investigators say. The 16th Amendment argument is the one most in vogue. Protesters also use the Fifth Amendment, which protects against self-incrimination, as an excuse for not filling out their tax returns. One that is being used less frequently lately is that federal reserve notes are not legal tender because they are not backed by gold and silver.
“All have been shot down by the courts,” Giannangeli said.
Quick Verdicts
Tax agents like to boast that trials usually are cut and dried and that the government always wins.
“Usually it takes (a jury) 20 or 30 minutes,” Clark said. “They get their coffee, they pick their foreman and reach a decision.”
Jenkins, however, predicts that his 16th Amendment defense will be successful. The broadcaster vowed he would take the case to the U.S. Supreme Court if necessary, while promising his will be a “very, very important case.”
Although Jenkins said he had intentionally avoided talking about taxes on his radio show, it was his job as a political commentator at the radio station in 1978 that got him interested in researching tax laws.
It is the zeal of the tax protester--many prefer to be called patriots--that makes them sitting ducks, tax investigators say. These people typically write to tax offices, as Jenkins did, to inform them they are not going to be filing their returns. Then they bombard the tax office with stacks of documents explaining their positions.
Clark reached a truce of sorts with one of the tax protesters who has regularly visited the Van Nuys office. One day before the visitor started arguing his case, Clark said, “Let’s consider it said and go.” The man agreed and left.
Word reaching Sacramento indicates that tax protesters are finding new, more creative ways to attempt to not pay taxes.
“We’ve been hearing rumors a lot of people are dropping out of sight,” Bunyard said. He declined to elaborate beyond saying some tax renegades could be disappearing from payrolls. “There may be new ploys they are trying,” he said.
