00-0802

Income Tax

Signed 4/16/02

 

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

 

PETITIONER, ) FINDINGS OF FACT,

) CONCLUSIONS OF LAW,

Petitioner, ) AND FINAL DECISION

)

v. ) Appeal No. 00-0802

) Account No. #####

AUDITING DIVISION OF )

THE UTAH STATE TAX ) Tax Type: Income Tax

COMMISSION, ) Tax Year: Multiple

)

Respondent. ) Judge: Davis

_____________________________________

 

Presiding:

G. Blaine Davis, Administrative Law Judge

 

Appearances:

For Petitioner: PETITIONER

For Respondent: Mr. Tim Bodily, Assistant Attorney General

Ms. Becky McKenzie, from the Auditing Division

Ms. Amy Gillette, from the Auditing Division

 

 

STATEMENT OF THE CASE

This matter came before the Utah State Tax Commission for a Formal Hearing on October 4, 2001. Based upon the evidence and testimony presented at the hearing, the Tax Commission hereby makes its:

FINDINGS OF FACT

1. The tax in question is income tax.

2. The years in question are 1992, 1993, 1995, and 1996.

3. For the years 1992 and 1993, Petitioner filed a federal income tax return, but did not file an income tax return with the State of Utah.

4. For the years 1995 and 1996, Petitioner did not file a tax return with either the federal government or the State of Utah.

5. For all of the years at issue, Petitioner lived and worked within the State of Utah and was domiciled in the State of Utah. For the years 1995 and 1996, Petitioner's wife also worked within the State of Utah.

6. The only response given by Petitioner as to why he did not file is his allegation that he does not fit under the definitions of the Internal Revenue Code as being required to file a tax return.

7. For the years 1992 and 1993, Respondent made adjustments based upon information received from the Internal Revenue Service. That information indicated that for 1992 Petitioner had federal adjusted gross income of $$$$$. Based thereon, Respondent made an assessment of $$$$$ in tax, $$$$$ in penalty, and $$$$$ in interest as of the time of the assessment, on April 7, 2000.

8. For 1993, the information indicated Petitioner had federal adjusted gross income of $$$$$. Based there, Respondent made an assessment of $$$$$ of income tax, $$$$$ of penalty, and $$$$$ of interest as of the date of assessment, April 7, 2000.

9. For 1995, Respondent also made adjustments based upon information received from the Internal Revenue Service, which showed Petitioner had federal adjusted gross income of $$$$$. Based thereon, Respondent made an assessment of income tax of $$$$$, plus penalty of $$$$$, and interest to the date of assessment, April 7, 2000, of $$$$$.

10. For 1996, Respondent also made an assessment based upon information received from the Internal Revenue Service, and determined Petitioner had federal adjusted gross income of $$$$$. Based thereon, Respondent assessed income tax of $$$$$, penalty of $$$$$, and interest to the time of assessment, April 7, 2000, of $$$$$.

11. Petitioner did not submit any evidence to establish his claim that he was not required to file a tax return, except legal arguments, which were without merit.

APPLICABLE LAW

The state of Utah imposes income tax on individuals who are residents of the state in Utah Code Ann. §59-10-104 as follows:

". . . a tax is imposed on the state taxable income, as defined in Section 59-10-112, of every resident individual . . ."

 

State taxable income is defined in Utah Code Ann. §59-10-112 as follows:

"State taxable income in the case of a resident individual means his federal taxable income (as defined by Section 59-10-111) . . ."

 

Federal taxable income is defined in Utah Code Ann. §59-10-111 as follows:

"Federal taxable income" means taxable income as currently defined in Section 63, Internal Revenue Code of 1986.

 

Taxable income is defined in the Internal Revenue Code at 23 USC 63 as:

"Except as provided in subsection (b), for purposes of this subtitle, the term "taxable income" means gross income minus the deductions allowed by this chapter (other than the standard deduction)."

 

Gross income is defined in the Internal Revenue Code at 23 USC 61(a) as:

"Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items:

(1) Compensation for services, including fees, commissions, fringe benefits, and similar items; . . ."

 

The requirement to file a federal income tax return is established by IRC.§6012.

 

Utah Code Ann. §59-10-502, provides in relevant part:

 

"An income tax return with respect to the tax imposed by this chapter shall be filed by:

(1) Every resident individual, estate, or trust required to file a federal income tax return for the taxable year; . . . ."

 

Utah code Ann. §59-1-401(5)(a) provides as follows:

Additional penalties for underpayments of tax are as provided in Subsection (5)(a)(i) through (iv).

. . . .

CONCLUSIONS OF LAW

1. Wages are taxable income.

2. The audit assessment of additional tax, penalty and interest based on Petitioner's corrected taxable income is appropriate.

DISCUSSION

Petitioner raises several arguments alleging that he has no Utah income tax liability, despite the fact the he lived in Utah and earned wages in Utah. His arguments are clearly without merit and, as Petitioner would have been aware had he truly researched the issues that he argues, these issues have been heard and rejected numerous times by the state and federal court systems as well as the Utah State Tax Commission.

For example, Petitioner argues that the Tax Commission cannot assess individual income tax until the federal taxable income has been determined and assessed by the IRS. Similar arguments were considered, and rejected, in two cases before the Utah Supreme Court.[1] These two cases also support Respondent's contention that Respondent has the authority to make the assessment against Petitioner, which is the issue of this appeal. In fact, Petitioner has presented no case that supports his contentions that the Utah State Tax Commission lacks authority to make the assessment at issue or enforce the assessment, or that he has not been provided sufficient due process at the administrative level.

Petitioner's claim that he had no taxable income for 1998 is clearly without merit.[2] See also Granzow v. C.I.R., 739 F 2d 265, 267 (7th Cir. 1984), "It is well settled that wages received by taxpayers constitute gross income within the meaning of Section 61(a) of the Internal Revenue Code . . . and that such gross income is subject to taxation." Petitioner received compensation for his services. The Internal Revenue Code is very clear on this issue. According to the Internal Revenue Code at 26 USC 61(a), "[c]ompensation for services" is federal taxable income.[3] Utah taxable income is based on federal taxable income and Petitioner's wages are clearly compensation for service, are included in Petitioner's federal taxable income and, in turn, his state taxable income. In addition, if Petitioner had read Newman v. Schiff, 778 F 2d 460 (Eighth Cir. 1985) he would know which Internal Revenue Code provision mandated payment of taxes or as Petitioner framed the issue, provides the liability section which he alleges is missing.[4]

DECISION AND ORDER

Based upon the foregoing, the Tax Commission sustains the audit assessment of income tax, penalties, and interest at the statutory rate. It is so ordered.

DATED this 16th day of April , 2002.

 

 

 

_______________________________

G. Blaine Davis

Administrative Law Judge

 

BY ORDER OF THE UTAH STATE TAX COMMISSION:

The Commission has reviewed this case and the undersigned concur in this decision.

DATED this 16th day of April , 2002.

 

 

 

Pam Hendrickson R. Bruce Johnson

Commission Chair Commissioner

 

 

 

Palmer DePaulis Marc B. Johnson

Commissioner Commissioner

 

 


[1] A similar assertion was considered and rejected by the Utah Supreme Court in Nelson v. Auditing Div., 903 P.2d 939 (Utah 1995) and Jensen v. State Tax Commission, 835 P.2d 965 (Utah 1992).

 

[2] See United States v. Koliboski, 732 F.2d 1328 (7th Cir. 1984). The court stated "the defendant's entire case at trial rested on his claim that he in good faith believed that wages are not income for taxation purposes. Whatever his mental setate, he, of course, was wrong, as all of us already are aware. Nonetheless, the defendant still insists that no case holds that wages are income. Let us now put that to rest: WAGES ARE INCOME."

 

[3] See also United States v. Mann, 884 F.2d 532 (10th Cir. 1989). In that case, Mann offered many theories as to why he was not required to file income tax returns. The court stated, "His many theories include the asserted beliefs that 1) the United States Supreme Court has declared that the sixteenth amendment applies only to corporations, 2) the Internal Revenue Service (IRS) has no jurisdiction over him, 3) he is not a "person" within the meaning of 26 I.R.C. §7203, 4) wages are not income, 5) federal reserve notes are not legal tender, and 6) the income tax is voluntary." The court in Mann responded to these assertions as follows: "The government's expert on tax law, Mr. Chancellor, testified that the representation . . . that the sixteenth amendment applies only to corporations - is untrue. . . We agree and add that each of the views offered by Mann, whether found in his published materials or articulated additionally at trial, falls somewhere on a continuum between untrue and absurd."

 

[4] It is worth noting that Mr. Schiff, of Newman v. Schiff, was convicted for criminal violations of the federal income tax laws and those convictions were affirmed by the United States Court of Appeals in U.S. v. Schiff, 800 F.2d 930 (2d Cir. 1986) and U.S. v. Schiff, 875 F.2d 228 (2d Cir. 1989).