Tax Protester History in The United States - Prohibition On IRS Use of The Designation

Prohibition On IRS Use of The Designation

In 1998, the U.S. Congress passed a prohibition on the use of the term "illegal tax protester" by officers and employees of the Internal Revenue Service. The prohibition stemmed from complaints about the excessive use of the term not only to describe persons who raised frivolous theories, but against any persons who protested the amount of their tax assessment. Specifically, section 3707 of the Internal Revenue Service Restructuring and Reform Act of 1998 states that IRS personnel:

(1) shall not designate taxpayers as illegal tax protesters (or any similar designation); and

(2) in the case of any such designation made on or before the date of the enactment of this Act --

(A) shall remove such designation from the individual master file; and

(B) shall disregard any such designation not located in the individual master file."

Following this ban, some agents have resorted to euphemisms like "Constitutionally challenged" to replace the banned designation. Further, subsection (b) of section 3707 specifically authorized IRS personnel to use the term "nonfiler" to describe certain taxpayers.

This prohibition has had no bearing on the courts, which continue to use the term. For instance, in Hattman v. Commissioner, a per curiam opinion issued in September 2005 (and joined by future Supreme Court Justice Samuel Alito), the United States Court of Appeals for the Third Circuit stated:

It is readily apparent that Hattman's appeal and "petitions" in this Court, as well as his petition for redetermination filed in the Tax Court, are nothing other than the thinly veiled arguments of a tax protester. These types of tax protester arguments have been rejected as patently frivolous, and require no additional analysis here.

Ironically, the Congressional Committee Report on the legislation that introduced the prohibition on the use of the term by the IRS used the term "tax protester" in a different section to describe frivolous anti-tax arguments that should be given no weight. In a section of the report discussing the burden of proof in tax hearings, the Committee stated that although the IRS carries the burden of overcoming evidence that a tax assessed is not owed, "Implausible factual assertions, frivolous claims, or tax protestor-type arguments are not credible evidence."