Appendix A: Letter to John Knox and Memorandum of Law
Edited in honor of his passing by Mitch Modeleski
c/o USPS P. O. Box 6189
San Rafael, California
Postal Code 94903-0189/TDC
September 23, 1991
Mr. John Knox, Director
Texas Hill County Patriots
Kerrville, Texas Republic
Postal Code 78028/TDC
I am writing to thank you for the time you spent explaining to me
your in-depth understanding of federal jurisdiction at the recent
Denver Conference on tax and monetary reform.
By listening to you and Walt Myers debate the question in the
hotel lobby, I came to believe that you have done a great deal of
good research, John. I was very rewarded by my decision to stay
and pick your brains after Walt walked away.
I am also writing this letter to remind you of your offer to send
me copies of the legal briefs you mentioned during our conversa-
tion. Enclosed are 20 FRN's to this end.
I am slowly collecting substantive papers on the questions of
federal jurisdiction, the definitions of "United States", their
implications for Congressional taxing powers and statutes, and
their implications for the American economy in general.
It is most intriguing, for example, that Alaska became a State
when it was admitted to the Union, and yet the United States
Codes had to be changed because Alaska was defined in those Codes
as a "state" before admission to the Union, but not afterwards.
This apparent anomaly is perfectly clear once the legal and
deliberately misleading definition of "state" is understood.
Even though my own research has only scratched the surface of
this question, I now have ample reasons to believe that the
fluctuating definitions of "United States" in Title 26 are
likewise intentional and may constitute the essential core of a
system of deliberate legal deception that was fastened upon our
entire nation by the year 1913.
Notably, Mr. Brushaber was identified in his court documents as a
New York Citizen. The Union Pacific Railroad Company was
incorporated by Congress. Accordingly, Brushaber was a State
Citizen identified as a nonresident alien and taxed upon unearned
income that derived from a domestic corporation. He was alien to
the jurisdiction of the corporate United States, and nonresident
within that jurisdiction because he resided within New York
State. He derived income from a domestic corporation, because
the Union Pacific Railroad Company was incorporated by Congress,
i.e., in the District of Columbia.
If the Union Pacific Railroad Company had not been incorporated
by Congress, it would have been a foreign corporation (i.e.,
foreign to the federal, corporate United States). If Brushaber
had resided in the District of Columbia or in some other federal
enclave or possession under exclusive jurisdiction of Congress,
he would have been a resident alien. If he had been born inside
this exclusive jurisdiction, or if he had been naturalized, he
would have been a United States citizen, not an alien, regardless
of where he resided. Note that I have been careful to
distinguish a "United States citizen" from a "Citizen of the
United States"; the former is a person under the jurisdiction of
Congress, while the latter is not.
It is quite stunning how the carefully crafted definitions of
"United States" do appear to unlock a horribly complex statute,
and also expose perhaps the greatest fiscal fraud that has ever
been perpetrated upon any people at any time in the history of
I will anxiously look forward to receiving the legal papers which
we discussed in Denver.
Thanks very much, John, for your significant contributions to our
important and difficult search for the truth in this matter.
/s/ Mitch Modeleski, Founder
Account for Better Citizenship
copies: interested colleagues
John H. Knox
In Propria Persona
c/o 111 Stephanie Street
Kerrville, Texas Republic
Postal Code 78028/tdc
UNITED STATES DISTRICT COURT FOR
THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO, TEXAS
JOHN H. KNOX and LOIS C. KNOX )
) Case No. SA-89-CA-1308
vs. ) (Consolidated with
THE UNITED STATES, )
HERMAN SILGUERO and )
DOROTHY SILGUERO, )
MEMORANDUM IN SUPPORT OF REQUEST
FOR THE DISTRICT COURT TO CONSIDER THE T.R.O.
AND INJUNCTION DENIED BY THE MAGISTRATE
Plaintiffs in the above entitled action are NONRESIDENT
ALIENS with respect to the "United States" as those terms are
defined in 26 U.S.C., and have had no income effectively
connected to a trade or business within the "United States".
They COME NOW to file this their Memorandum in Support of a
Request for the District Court to Consider the Temporary
Restraining Order and the Motion for Injunction and, in support,
to show the Court as follows:
1. The issues as to whether there are different meanings
for the term "United States", and whether there are three
different "United States" operating within the same geographical
area, and one "United States" operating outside the Constitution
over its own territory (in which it has citizens belonging to
said "United States"), were settled in 1901 by the Supreme Court
in the cases of De Lima vs Bidwell, 182 U.S. 1 and Downes vs
Bidwell, 182 U.S. 244. In Downes supra, Justice Harlan dissented
The idea prevails with some -- indeed, it found expression
in arguments at the bar -- that we have in this country
substantially or practically two national governments; one,
to be maintained under the Constitution, with all its
restrictions; the other to be maintained by Congress
outside and independently of that instrument, by exercising
such powers as other nations of the earth are accustomed to
[Downes supra, page 380, emphasis added]
He went on to say, on page 382:
It will be an evil day for American liberty if the theory of
a government outside of the supreme law of the land finds
lodgment in our constitutional jurisprudence. No higher
duty rests upon this court than to exert its full authority
to prevent all violation of the principles of the
[Downes supra, page 382, emphasis added]
2. This theory of a government operating outside the
Constitution over its own territory, with citizens of the "United
States" belonging thereto under Article 4, Section 3, Clause 2
(4:3:2) of the Constitution, was further confirmed in 1922 by the
Supreme Court in Balzac vs Porto Rico, 258 U.S. 298 (EXHIBIT #4),
wherein that Court affirmed, at page 305, that the Constitution
does not apply outside the limits of the 50 States of the Union,
quoting Downes supra and De Lima supra; that, under 4:3:2, the
"United States" was given exclusive power over the territories
and the citizens of the "United States" residing therein.
3. The issue arose again in 1944, in the case of Hooven &
Allison Co. vs Evatt, Tax Commissioner of Ohio, 324 U.S. 652,
wherein the U.S. Supreme Court stated as follows at page 671-672
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
extends,  or it may be the collective name of the
states which are united by and under the Constitution.1
[brackets, numbers and emphasis added]
1. See Langdell, "The Status of our New Territories," 12
Harvard Law Review 365, 371; see also Thayer, "Our New
Possessions," 12 Harvard Law Review 464; Thayer, "The
Insular Tariff Cases in the Supreme Court," 15 Harvard Law
Review 164; Littlefield, "The Insular Cases," 15 Harvard
Law Review 169, 281.
Quoting Fourteen Diamond Rings vs United States, 183 U.S. 176;
cf. De Lima vs Bidwell, 182 U.S. 1; Dooley vs United States, 182
U.S. 222; Faber vs United States, 221 U.S. 649; cf. Huus vs New
York & P.R.S.S. Co., 182 U.S. 392; Gonzales vs Williams, 192
U.S. 1; West India Oil Co. vs Domenech, 311 U.S. 20.
The Court, in Hooven supra, indicated that this was the last time
it would address the issue; it would just be judicially noticed.
4. The issue arose in Brushaber vs Union Pacific Railroad
Company, 240 U.S. 1. In that case, the high Court affirmed that
the "United States" could levy a tax on the income of a
nonresident alien when that income derived from sources WITHIN
the "United States" (i.e. its territorial jurisdiction).
5. Based upon the decision in Brushaber supra, the
Commissioner of Internal Revenue, with the approval of the
Secretary of the Treasury, promulgated the Court's decision as
Treasury Decision 2313 (see EXHIBIT #1). T.D. 2313 declared that
Frank R. Brushaber was a NONRESIDENT ALIEN with respect to the
"United States". T.D. 2313 also declared that the Union Pacific
Railroad Company was a DOMESTIC CORPORATION with respect to the
"United States" (i.e. its territorial jurisdiction).
6. The Complaint (EXHIBIT #2) filed by Mr. Brushaber shows
that he was a nonresident of the "United States", residing
instead in the State of New York, in the borough of Brooklyn, and
a Citizen thereof, with his principal place of business in the
borough of Manhattan. He owned stocks and bonds issued by the
Union Pacific Railroad Company, upon which a cash dividend was
declared to him by said company, a domestic corporation of the
"United States". Union Pacific was chartered by an Act of
Congress for the territory of the federal state of Utah, in order
to build a railroad and telegraph line and other purposes. It is
a matter of public record that the Union Pacific Railroad Company
was a domestic "United States" corporation, of the federal state
of Utah, residing in the District of Columbia, with its principal
place of business in Manhattan, New York. It was created by an
Act of the "United States" Senate and House of Representatives
(under their exclusive authority, granted by the Constitution for
the United States at 1:8:17) on July 1, 1862 by the 37th
Congress, 2nd Session, as recorded in the Statutes At Large,
December 5, 1859 to March 3, 1863 at Chapter CXX, page 489
(EXHIBIT #3). Considering the foregoing evidence of the
diversity of citizenship of the two parties, it is clear that Mr.
Brushaber was a "nonresident alien with respect to the United
States", who had income from sources within said "United States".
His income derived from the Union Pacific Railroad Company, a
corporate citizen created by Congress and residing WITHIN the
"United States" (i.e. the District of Columbia). (See EXHIBIT #3)
... [A] domestic corporation is an artificial person whose
residence or domicile is fixed by law within the territorial
jurisdiction of the state which created it. That residence
cannot be changed temporarily or permanently by the
migrations of its officers or agents to other jurisdictions.
So long as it is an existing corporation its residence,
citizenship, domicile, or place of abode is within the state
which created it. It cannot reside or have its domicile
elsewhere; neither can it in legal contemplation be absent
from the state of its creation.
[Fowler vs Chillingworth, 113 So. 667, 669 (1927)]
7. Related cases are Hylton vs United States, 3 U.S. (3
Dall.) 171 (1796): Hylton was a Congressman; his salary was
income from sources WITHIN the "United States". See also
Springer vs U.S., 102 U.S. 586 (1881): Springer, a Virginia
Citizen, operated a carriage business in the District of
8. The first paragraph of the Secretary's Treasury
Decision (EXHIBIT #1) is quoted here as follows:
Taxability of interest from bonds and dividends on stock of
domestic2 corporations owned by nonresident aliens, and the
liabilities of nonresident aliens under Section 2 of the act
of October 3, 1913.
To collectors of internal revenue:
Under the decision of the Supreme Court of the United
States in the case of Brushaber vs Union Pacific Railway
[sic] Co., decided January 24, 1916, it is hereby held that
income accruing to nonresident aliens in the form of
interest from the bonds and dividends on the stock of
domestic corporations is subject to the income tax imposed
by the act of October 3, 1913.
[footnote and emphasis added]
9. The above decision by the Secretary of the Treasury
determined that a tax on income derived from rents, sales of
property, wages, professions, or a trade or business WITHIN the
"United States", was applicable to such "income" when payable to
a nonresident alien, i.e. a Union State Citizen.
2. "Domestic" in the "United States" statutes means inside
D.C., the possessions, territories, and enclaves of the
"United States", i.e. federal states of which there are 14.
10. All income tax provisions under 26 U.S.C., subtitle A
(an excise tax on "income"), are divided between sources WITHIN
and WITHOUT the "United States". They are imposed upon the
worldwide income of citizens of the "United States" and aliens
residing therein, and upon nonresident aliens (of all kinds)
receiving income from sources WITHIN said "United States" and
WITHIN the other parts of the American Empire which fall WITHIN
the exclusive legislative jurisdiction of the Congress of the
"United States", pursuant to 1:8:17 and 4:3:2.
CONSTITUTIONAL AUTHORITY GRANTED TO CONGRESS
11. The Constitution gives to Congress the power to act for
the 50 Union States as an international representative and to do
so without (outside) the boundaries of each of those 50 States.
These powers are expressed in Article 1, Section 8, Clauses 1
thru 16 (1:8:1-16).
12. The Constitution gave to Congress a seat of government,
known as the District of Columbia. In time, Congress created a
government for the "District", and this "District" became a
federal state by definition. (For the other federal "states" of
the "United States", see EXHIBIT #5.) However, this "state"
(D.C.) is not "united" by or under the Constitution for the
United States of America. D.C. has never joined the Union.
13. Furthermore, the Constitution granted to Congress the
authority to govern the "District", just as the Legislatures of
each of the several States of the Union govern their States
within the geographical limits of those States. As Congress
began to legislate for the "District", under authority of 1:8:17
and 1:8:18, the difference between the citizens of the "District"
and the Citizens3 of the Union became apparent, in that the
citizens of the "District" did not possess the right of suffrage
or other rights (see Balzac supra, De Lima supra, and Downes
supra) and therefore were not recognized as a part of the
Sovereignty of "We the People". The Constitution for the United
States of America provided no means of taxing these "District"
citizens of the "United States". A method of forming municipal
governments and of exercising taxing power over these citizens
within the territories of the "United States" was decided by The
Insular Cases (see the Bidwell cases, supra). "The Constitution
was made for States, not territories," wrote Daniel Webster.
"... [T]he Constitution of the United States as such does not
extend beyond the limits of the States which are united by and
under it ....", wrote author Langdell in "The Status of Our New
Territories", 12 Harvard Law Review 365, 371.
3. Please note that the U.S. Constitution always denoted
Citizen and Person in capital letters until the 14th
Amendment, wherein citizen and person were not capitalized.
14. The distinction between "citizens of the United States"
and "Union State Citizens" has been fully recognized by the
Congress and the Courts as follows:
We have in our political system a government of the United
States and a government of each of the several States. Each
one of these governments is distinct from the others, and
each has citizens of its own who owe it allegiance, and
whose rights, within its jurisdiction, it must protect.
[United States vs Cruikshank, 92 U.S. 588, 590 (1875)]
The Federal Government is a "state".
[Enright vs U.S., D.C.N.Y., 437 F.Supp 580, 581]
Foreign State. A foreign country or nation. The several
United States are considered "foreign" to each other except
as regards their relations as common members of the Union.
[Black's Law Dictionary, Sixth Edition, page 1407]
15. Congress identifies these citizens of the "District" as
"individuals" or citizens who reside in the "United States" and
who are subject to the direct control of Congress in its local
taxing and other municipal laws.
16. In De Lima supra, the U.S. Attorney defined federal
taxes with the following words, at page 99-108:
Federal taxation is either general or local. Local taxes
are levied under Article 1, Section 8, Paragraph 1. Local
taxes are for the support of territorial or non-state
Congress imposed a federal excise tax on the "income" of these
citizens or "individuals" at 26 U.S.C., Section 1, as a local
Such taxes are not for the common welfare of the United
States, but are to defray the expense of the government of
the locality, and in the dual position which Congress
occupies in our system, as Federal Government and as local
government for the territory of the United States not ceded
into States of the Union, it has the power to tax for local
[De Lima supra, page 99]
Hence the term "from sources WITHIN the United States".
General taxes are of two kinds, direct; and what, for
brevity may be called indirect, meaning thereby duties,
imposts, and excises. Direct taxes must be laid on all the
[De Lima supra, page 100]
17. A Citizen of one of the 50 States, residing therein, is
a nonresident alien with respect to this local taxing power of
Congress (see Brushaber supra). Outside the geographical area of
the "United States" (as that term is defined at 26 C.F.R.
1.911-2(g)), Congress lacks power to support the local government
by imposing a tax on the incomes of nonresident aliens (ones
outside the locality, i.e. Citizens of the 50 States) UNLESS they
reside within that jurisdiction by residence, or UNLESS the
source of their income is situated WITHIN that geographical
territory. Any income arising from sources therein must be
withheld at the source by the "withholding agent" (see T.D. 2313,
26 C.F.R. 871, and 26 U.S.C. 1461), unless the recipient is
engaged in a trade or business therein. For a full discussion of
this local taxation, see pages 55 and 99-108 of De Lima supra.
For confirmation of the domestic municipal jurisdiction of the
"United States", see Downes supra at pages 383-388.
18. Congress has control of these "individuals", whether
they "reside" WITHIN the "United States" (i.e. territorial
states, see EXHIBIT #5) or WITHOUT the "United States". These
"individuals" (i.e. born within the jurisdiction of Congress,
such as a citizen born in the District of Columbia or in one of
the territories), whether they reside within "United States"
territories, without the "United States" in the "foreign
countries" (as defined at 26 C.F.R. 1.911-2(h)), or abroad, are
still liable for the federal income tax unless they abrogate that
citizenship by naturalization or otherwise. (See 26 C.F.R.
871-5, -6 and -12 and 1.932-1). However, at 26 U.S.C. 911(a)(1),
Congress has exempted from taxation all "foreign earned income"
of these citizen individuals, except for Puerto Ricans (see 26
C.F.R. 1.932-1(b), IRS Form 2555).
19. Another type of nonresident aliens are those citizens
of contiguous countries such as Mexico, Canada and other foreign
countries. These foreigners, residents or nonresidents (as the
case may be), are subject to the tax on incomes received from any
place in the American Empire, i.e. in these united States and in
the "United States". A Union State Citizen, previously
nonresident, may lose his nonresident status by residing within
the territorial sovereignty of the "United States" for 183 days
(26 C.F.R. 1.871-7(d)(2)) and thereby becomes subject to the
local tax on incomes received from sources within and without the
"United States" (i.e. worldwide income).
THE INCOME TAX IS A LOCAL TAX
IMPOSED WITHIN THE "UNITED STATES".
PLAINTIFFS ARE STRANGERS TO THIS LOCALITY.
THE DEFINITIONS IN 26 U.S.C.:
THE INTERNAL REVENUE CODE
20. The definitions used in 26 U.S.C. are very clear in
defining "State" and "United States". In every definition that
uses the word "include", only the words that follow are defining
the term. For example:
21. 26 U.S.C. 3121(e)(1) State. -- The term "State"
includes the District of Columbia, the Commonwealth of Puerto
Rico, the Virgin Islands, Guam, and American Samoa.
22. 26 U.S.C. 7701(a)(9) United States. -- The term
"United States" when used in a geographical sense includes only
the States and the District of Columbia.
23. The federal government has used these definitions
correctly, but IRS agents seem to assume that they mean the 50
States of the Union (America) when they look at the word "States"
in 26 U.S.C. 7701(a)(9). You cannot use the common, everyday
meaning of the terms "United States" or "State" when talking
about the tax laws and many other laws that are enacted under the
local, municipal authority of the "United States" government.
24. Another example is the Omnibus Acts at 86th Congress,
1st Session, Volume 73, 1959, and 2nd Session, Volume 74, 1960,
Public Laws 86-70 and 86-624. These Acts reveal the crafty way
in which the federal government uses correct English and how
Congress changes the meanings of words by using its own
definitions. For example, all the United States Code definitions
had to be changed to allow Alaska and Hawaii to join the Union of
States united under the Constitution. When Alaska joined the
Union, Congress added a new definition of "States of the United
States". This definition had never appeared before, to wit:
Sec. 48. Whenever the phrase "continental United States" is
used in any law of the United States enacted after the date
of enactment of this Act, it shall mean the 49 States on the
North American Continent and the District of Columbia,
unless otherwise expressly provided.
[cf. 1 USCS 1, "Other provisions:"]
Where is it otherwise expressly provided? Answer:
Sec. 22. (a) Section 2202 of the Internal Revenue Code of
1954 (relating to missionaries in foreign service), and
sections 3121(e)(1), 3306(j), 4221(d)(4), and 4233(b) of
such code (each relating to a special definition of "State")
are amended by striking out "Alaska,".
(b) Section 4262(c)(1) of the Internal Revenue Code of 1954
(definition of "continental United States") is amended to
read as follows: "(1) Continental United States. -- The
term 'continental United States' means the District of
Columbia and the States other than Alaska."
When Hawaii was admitted to the Union, Congress again changed the
above definition, to wit:
Sec. 18. (a) Section 4262(c)(1) of the Internal Revenue
Code of 1954 (relating to the definition of "continental
United States" for purposes of the tax on transportation of
persons) is amended to read as follows: "(1) Continental
United States. -- The term 'continental United States' means
the District of Columbia and the States other than Alaska
WHAT ARE THE STATES OTHER THAN ALASKA AND HAWAII?
25. They certainly cannot be the other 48 States united by
and under the Constitution, because Alaska and Hawaii just joined
them, RIGHT? The same definitions apply to the Social Security
Acts. So, what is left? Answer: the District of Columbia,
Puerto Rico, Guam, Virgin Islands, etc. These are the States OF
(i.e. belonging to) the "United States" and which are under its
sovereignty. Do not confuse this term with States of the Union,
because the word "of" means "belonging to" in this context.
26. Congress can also change the definition of "United
States" for two sentences and then revert back to the definition
it used before these two sentences. This is proven in Public Law
86-624, page 414, under School Operation Assistance in Federally
Affected Areas, section (d)(2):
The fourth sentence of such subsection is amended by
striking out "in the continental United States (including
Alaska)" and inserting in lieu thereof "(other than Puerto
Rico, Wake Island, Guam, or the Virgin Islands)" and by
striking out "continental United States" in clause (ii) of
such sentence and inserting in lieu thereof "United States
(which for purposes of this sentence and the next sentence
means the fifty States and the District of Columbia)". The
fifth sentence of such subsection is amended by striking out
"continental" before "United States" each time it appears
therein and by striking out "(including Alaska)".
27. This one section, all by itself, contains all the
evidence you need, by words of construction, to prove that the
term "United States" on either side of these sentences did not
mean the 50 States united by and under the Constitution. If that
is not conclusive to you, then see the following:
26 C.F.R. 31.3121(e)-1 State, United States, and citizen.
(a) When used in the regulations in this subpart, the term
"State" includes [in its restrictive form] the District of
Columbia, the Commonwealth of Puerto Rico, the Virgin
Islands, the Territories of Alaska and Hawaii before their
admission as States, and (when used with respect to services
performed after 1960) Guam and American Samoa.
(b) When used in the regulations in this subpart, the term
"United States", when used in a geographical sense, means
the several states, (including the Territories of Alaska and
Hawaii before their admission as States), the District of
Columbia, the Commonwealth of Puerto Rico, and the Virgin
Islands. When used in the regulations in this subpart with
respect to services performed after 1960, the term "United
States" also includes [in its expansive form] Guam and
American Samoa when the term is used in a geographical
sense. The term "citizen of the United States" includes [in
its restrictive form] a citizen of the Commonwealth of
Puerto Rico or the Virgin Islands, and, effective January 1,
1961, a citizen of Guam or American Samoa.
Please note the bolded terms. In paragraph (a), Alaska and
Hawaii only fit the definition of "State" before joining the
Union. That means the definition of "State" was never meant to
be the 48 now 50 States of the Union unless distinctly expressed.
If paragraph (b) confuses you, the following is submitted:
28. The word "geographical" was never used in tax law until
Alaska and Hawaii joined the Union, and it is not defined in the
Internal Revenue Code. So, we must use the definition found in
the Standard Random House Dictionary:
ge.o.graph.i.cal 1. of or pertaining to geography 2. of
or pertaining to the natural features, population,
industries, etc., of a region or regions
29. Were you born in the "United States"? The preposition
"in" shows that the "United States" in this question is a place,
a geographical place named "United States". It is singular, even
though it ends in "s". It also can be plural when referring to
the Union States which are places which exist by agreement.
Every human in a nation is a natural Citizen of a place called a
nation, if he was born in that nation. Those same people must be
naturalized (born again) if they want to become a citizen of
another nation. Original citizenship exists because of places,
not agreements. This is jus soli, the law of the place of one's
birth (see Black's Law Dictionary, Sixth Edition).
30. Here are two questions, your own answers to which will
solve the dilemma. In a geographical sense, where is the State
of Texas located on the continent? In a geographical sense,
where is the "United States" (Congress) located on the continent?
31. Now, since typewriters were purchased from the areas
that just joined the Union, namely Alaska and Hawaii, according
to Title 1, Congress had to use a term that is NOT used in the
Internal Revenue Code, in order to buy the same typewriters from
the same geographical area:
Sec. 45. Title I of the Independent Offices Appropriation
Act, 1960, is amended by striking out the words "for the
purchase within the continental limits of the United States
of any typewriting machines" and inserting in lieu thereof
"for the purchase within the STATES OF THE UNION AND THE
DISTRICT OF COLUMBIA OF ANY TYPEWRITING MACHINES".
And, for declarations made under the penalties of perjury, the
statute at 28 U.S.C. 1746 separately defines declarations made
WITHIN and WITHOUT the "United States" as follows:
If executed WITHOUT the United States: I declare ... under
the laws of the United States of America that the foregoing
is true and correct.
If executed WITHIN the United States, its territories,
possessions, or commonwealths: I declare ... that the
foregoing is true and correct.
The latter clause above is the penalty clause that is found on
IRS Form 1040 and similar IRS forms.
And, 28 U.S.C. 1603(a)(3) states as follows:
(3) which is neither a citizen of a State of the United
States as defined in section 1332(c) and (d) of this title
Section 1332(d). The word "States", as used in this section,
includes the Territories, the District of Columbia, and the
Commonwealth of Puerto Rico.
Examples of Two Definitions
of the term "United States" in 26 U.S.C.
32. 26 U.S.C. 7701(a)(9):
(9) United States. -- The term "United States" when used in
a geographical sense includes only the States and the
District of Columbia.
33. 26 U.S.C. 4612(a)(4)(A):
(A) In general. -- The term "United States" means the 50
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.
34. The Supreme Court stated in Hepburn & Dundas vs Ellsey,
6 U.S. 445, 2 Cranch 445, 2 L.Ed 332, that the District of
Columbia is not a "State" within the meaning of the Constitution.
Therefore, it is apparent that the meaning of the term "States"
in the first definition above can only mean the territories and
possessions belonging to the "United States", because of the
specific mention of the District of Columbia and the specific
absence of the 50 States (inclusio unius est exclusio alterius).
The District of Columbia is not a "State" within the meaning of
the Constitution (see Hepburn supra). Therefore, the 50 States
are specifically excluded from this first definition of the term
35. Congress has no problem naming the "50 States" when it
is legislating for them, so, in the second definition of the term
"United States" above, Congress expressly mentions them, and
there is no misunderstanding. If a statute in 26 U.S.C. does not
have a special "word of art" definition for the term "United
States", then the First Definition of the term "United States" is
always used (see above) because of the general nature of that
term as defined by Congress.
36. When citizens or residents of the first "United States"
are without the geographical area of this first "United States",
their "compensation for personal services actually rendered" is
defined as "foreign earned income" in 26 U.S.C., Section 911(b)
and 911(d)(2), as follows:
911(b) Foreign Earned Income. -- ...
(d)(2) Earned Income. --
(A) In general. -- The term "earned income" means wages,
salaries, or professional fees, and other amounts received
as compensation for personal services actually rendered, but
does not include that part of the compensation derived by
the taxpayer for personal services rendered by him to a
corporation which represents a distribution of earnings or
profits rather than a reasonable allowance as compensation
for the personal services actually rendered.
37. A citizen or resident of the first "United States" does
not pay a tax on his "compensation for personal services actually
rendered" while residing outside of the first "United States",
because Congress has exempted all such compensation from taxation
under 26 U.S.C., Section 911(a)(1), which reads as follows:
911(a) Exclusion from Gross Income. -- ... [T]here shall be
excluded from the gross income of such individual, and
exempt from taxation ... (1) the foreign earned income of
such individual ....
38. When residing without (outside) this "United States",
the citizen or resident of this "United States" pays no tax on
"foreign earned income", but is required to file a return,
claiming the exemption (see IRS Form 2555).
39. 26 C.F.R., Section 871-13(c) allows this citizen to
abandon his citizenship or residence in the "United States" by
40. 26 C.F.R., Section 1.911-2(g) defines the term "United
States" as follows:
(g) United States. The term "United States" when used in a
geographical sense includes any territory under the
sovereignty of the United States. It includes the states4,
[Puerto Rico, Guam, Mariana Islands, etc.] the District of
Columbia, the possessions and territories of the United
States, the territorial waters of the United States, the air
space over the United States, and the seabed and subsoil of
those submarine areas which are adjacent to the territorial
waters of the United States and over which the United States
has exclusive rights, in accordance with international law
4. This term "state" evidently does not embrace one of the 50
States (where I am a free inhabitant), united by the
Constitution, because they are separate governments or
foreign states with respect to the "United States" (i.e.
D.C., its territories, possessions and enclaves).
None of the 50 united States comes under the sovereignty of the
"United States", and subsection (h) defines the 50 States united
by the Constitution as "foreign countries":
(h) Foreign country. The term "foreign country" when used
in a geographical sense includes any territory under the
sovereignty of a government other than that of the United
[26 C.F.R. 1.911-2(h)]
All of the 50 States are foreign with respect to each other and
are under the sovereignty of their respective Legislatures,
except where a power has been expressly delegated to Congress.
The Citizens of each Union State are foreigners and aliens with
respect to another Union State, unless they establish a residence
therein under the laws of that Union State. Otherwise, they are
nonresident aliens with respect to all the other Union States.
41. The regulations at 26 C.F.R., Section 1.1-1(a) state,
in pertinent part:
(a) General Rule. (1) Section 1 of the Code imposes an
income tax on the income of every individual who is a
citizen or resident of the United States and, to the extent
provided by Section 871(b) or 877(b), on the income of a
nonresident alien individual.
26 U.S.C., Section 1 imposes a tax on "taxable income" as
follows, in pertinent part:
There is hereby imposed on the taxable income of ... every
married individual ... who makes a single return jointly
with his spouse under section 6013 ....
42. The regulations promulgated to explain 26 U.S.C.,
Section 1 are found in 26 C.F.R., Section 1.1-1, and state in
(a) General Rule. (1) Section 1 of the Code imposes an
income tax on the income of every individual who is a
citizen or resident of the United States and, to the extent
provided by Section 871(b) or 877(b), on the income of a
nonresident alien individual.
Please note that the term "taxable income" is not used as such in
the above statute because the "income" of those classes of
individuals mentioned is taxable as "taxable income".
Section 1.871 Classification and manner of taxing alien
(a) Classes of aliens. For purposes of the income tax,
alien individuals are divided generally into two classes,
namely, resident aliens and nonresident aliens. ...
(b) Classes of nonresident aliens. --
(1) In general. For purposes of the income tax,
nonresident alien individuals are divided into the following
(i) Nonresident alien individuals who at no time during the
taxable year are engaged in a trade or business in the
(ii) Nonresident alien individuals who at any time during
the taxable year are, or are deemed under Section
1.871-9 to be, engaged in a trade or business in the
United States, and
(iii) NOT APPLICABLE (concerns residents of Puerto Rico)
43. 26 C.F.R., Section 871-13 states as follows:
(a) In general. (1) An individual who is a citizen or
resident of the United States at the beginning of the
taxable year but a nonresident alien at the end of the
taxable year, or a nonresident alien at the beginning of the
taxable year but a citizen or resident of the United States
at the end of the taxable year, is taxable for such year as
though his taxable year were comprised of two separate
periods, one consisting of the time during which he is a
citizen or resident of the United States and the other
consisting of the time during which he is not a citizen or
resident of the United States.
It sounds complicated, doesn't it?
44. The federal income tax is a local tax for the "United
States" to support local government and, in order to become
liable to this tax, a State Citizen must be a resident therein
(i.e. a resident alien), or receive income from sources therein,
or be engaged in a trade or business therein.
45. In 26 U.S.C., Section 7701(b)(1)(A) & (B), Congress
defined the statutory difference between "resident alien" and
"nonresident alien" as follows:
(b) Definitions of Resident Alien and Nonresident Alien. --
(1) In general. -- For purposes of this title ...
(A) Resident Alien. -- An alien individual shall be treated
as a resident of the United States with respect to any
calendar year if (and only if) such individual meets
the requirements of clause (i), (ii), or (iii):
(i) Lawfully admitted for permanent residence. -- Such
individual is a lawful permanent resident of the
United States at any time during such calendar
(ii) Substantial presence. -- Such individual meets the
substantial presence test of paragraph (3).
(iii) First year election. -- Such individual makes the
election provided in subparagraph (4).
(B) Nonresident Alien. -- An individual is a nonresident
alien if such individual is neither a citizen of the
United States nor a resident of the United States
(within the meaning of subparagraph (A)).
46. Plaintiffs are not "residents" (as that term is defined
in the above statutes) nor are they citizens of this "United
States". They are nonresident aliens as that term is defined in
subsections (B) and (A)(i), (ii), and (iii), and they have the
same status as the Plaintiff in Brushaber supra.
INDIVIDUALS REQUIRED TO MAKE RETURNS OF INCOME
47. The following individuals are required to make returns
26 C.F.R., Section 1.6012-1. Individuals required to make
returns of income.
(a) Individual citizen or resident. --
(1) In general. ... an income tax return must be filed by
every individual ... if such individual is ...
(i) A citizen of the United States, whether residing
at home or abroad,
(ii) A resident of the United States even though not a
citizen thereof, or
(iii) An alien bona fide resident of Puerto Rico during
the entire taxable year.
48. John and Lois Knox clearly are not defined in the above
statutes, but they are defined in the following statute as ones
who are not required to make a return.
49. 26 C.F.R., Section 1.6013-1 states:
(b) Nonresident Alien. A joint return shall not be made if
either the husband or wife at any time during the taxable
year is a nonresident alien.
Mr. John H. Knox and Mrs. Lois C. Knox are nonresident aliens
with respect to the "United States", with no income derived from
sources within the "United States", except for John's Military
Retirement pay, which is exempt from taxation.
50. 26 C.F.R., Section 871-7 states, in pertinent part, as
Except as otherwise provided in Section 1.871-12, a
nonresident alien individual to whom this section applies is
not subject to the tax imposed by section 1 or section
1201(b)5 but, pursuant to the provision of section 871(a),
is liable to a flat tax of 30 percent upon the aggregate of
the amounts determined under paragraphs (b), (c), and (d) of
this section which are received during the taxable year from
sources within the United States.
51. Please note 26 C.F.R., Section 1.871-4(b), Proof of
residence of aliens, which establishes a key legal presumption:
(b) Nonresidence presumed. An alien by reason of this
alienage, is presumed to be a nonresident alien.
52. Further facts are illustrated by the definition of
"withholding agent" at 26 U.S.C., Section 7701(a)(16):
Withholding agent. -- The term "withholding agent" means any
person required to deduct and withhold any tax under the
provisions of section 1441, 1442, 1443, or 1461.
53. 26 U.S.C., Section 1441 refers to nonresident aliens
who receive income from sources within the "United States", as
set forth in Section 871(a)(1). The other sections do not apply
to the Plaintiffs.
54. Your attention is invited to 26 C.F.R., Section
31.3401(a)(6)-1(b), which states as follows:
5. Capital gains tax.
Remuneration for services performed outside the United
States. Remuneration paid to a nonresident alien individual
... for services performed outside the United States is
excepted from wages and hence is NOT SUBJECT TO WITHHOLDING.
55. As a rule, Military Retirement Pay of a nonresident
alien individual is exempted from the income tax at 26 C.F.R.,
Section 31.3401(a)-1(b)(1)(ii), with the following exception:
Where such retirement pay or disability annuity ... is paid
to a nonresident alien individual, withholding is required
only in the case of such amounts paid to a nonresident alien
individual who is a resident of Puerto Rico.
and at 26 C.F.R., Section 935-1(a)(3):
... [F]or special rules for determining the residence for
tax purposes of individuals under military or naval orders,
see section 514 of the Soldiers' and Sailors' Civil Relief
Act of 19406, 50 App. U.S.C. 574. The residence of an
individual, and, therefore, the jurisdiction with which he
is required to file an income tax return under paragraph (b)
of this section, may change from year to year.
Section 574(1) of The Soldiers' and Sailors' Relief Act states
For the purposes of taxation in respect of the personal
property, income, or gross income of any such person by any
State, Territory, possession, or political subdivision of
any of the foregoing, or the District of Columbia, of which
such person is not a resident or in which he is not
domiciled ... personal property shall not be deemed to be
located or present in or to have a situs for taxation in
such State, Territory, possession or political subdivision,
EXTRAORDINARY AND EXCEPTIONAL CIRCUMSTANCES
56. Plaintiffs herein are at an advanced age of 62 and both
are in ill health, unable to work or to pay the tax or to sue for
a refund. Lois has only one kidney which does not function
properly; complicating this is a lung disease which prevents her
from breathing. She has been totally disabled since 1981, with
no earned income from any source since that time. John has
emphysema and has difficulty breathing upon exercise. They are
6. See Exhibit #6 attached hereto and made a part hereof.
unable to pay the tax and sue for refund without the complete
destruction of their home, which is combined with their business.
The property which is the subject of this case is a one-of-a-kind
property which is, or would be, irreplaceable years down the
road, if a refund suit was won. The property has a value of
$100,0007 and was allegedly sold for the sum of $16,000.00, which
is all that could be recovered in a refund suit as pertains to
said property. This creates an irreparable situation for
Plaintiffs. The tax with penalties and interest claimed by the
government against both Plaintiffs for 1982 is around $19,000.00
and, without the sale of the business property and home, it will
be many years before a tax in this amount can be paid in full.
Plaintiffs will not live long enough to prosecute such a suit.
Equity and justice require some relief in such a situation.
AUTHORITY FOR THE COURT TO ISSUE THE INJUNCTION
57. In Botta vs Scanlon, 288 F.2d 504 (2nd Circuit, 1961),
the Court set forth the general exceptions to the bar at 26
U.S.C., Section 7421, stating (see EXHIBIT #7):
"... [I]t has long been settled that this general
prohibition is subject to exception in the case of an
individual taxpayer against a particular collector where the
tax is clearly illegal or other special circumstances of an
unusual character make an appeal to equitable remedies
appropriate." National Foundry Co. of N.Y. vs Director of
Int. Rev., 2 Cir. 1956, 229 F.2d 149, 151.
The Court then gave a number of examples, as follows:
"(a) Suits to enjoin collection of taxes which are not
due from the plaintiff but, in fact, are due from others.
For example, see Raffaele vs Granger, 3 Cir. 1952, 196 F.2d
620, 622 ....
"(b) Cases in which plaintiff definitely showed that
the taxes sought to be collected were "probably" not validly
due. For example, Midwest Haulers, Inc. vs Brady, 6 Cir.
1942, 128 F.2d 496, and John M. Hirst & Co. vs Gentsch, 6
Cir. 1943, 133 F.2d 247.
"(c) Cases in which a penalty was involved. For
example, Hill vs Wallace, 259 U.S. 44, 42 S.Ct 453, 66 L.Ed
822; Lipke vs Lederer, 259 U.S. 557, 42 S.Ct. 549, 66 L.Ed.
1061; Regal Drug Corporation vs Wardell, 260 U.S. 386, 43
S.Ct 152, 67 L.Ed 318; Allen vs Regents of the University
System of Georgia, 304 U.S. 439, 58 S.Ct 980, 82 L.Ed 1448.
7. The property had a value of $125,000 two years ago, when the
IRS allegedly sold it.
"(d) Cases in which it was definitely demonstrated that
it was not proper to levy the tax on the commodity in
question, such as Miller vs Standard Nut Margarine Company
of Florida, 284 U.S. 498, 52 S.Ct. 260, 76 L.Ed 422.
"(e) Cases based upon tax assessment fraudulently
obtained by the tax collector by coercion. For example,
Mitsukiyo Yoshimura vs Alsup, 9 Cir. 1948, 167 F.2d 104"
(141 F.Supp. at page 338).
 In the present case, if any of the plaintiffs are not
subject to any tax liability, such plaintiff might well be
within the exception stated in 9 Mertens, Law of Federal
Income Taxation, Section 49.213, Chapter 49, page 226, as
" It is equally well setted [sic] that the Revenue laws
relate only to taxpayers. No procedure is prescribed for a
nontaxpayer where the Government seeks to levy on property
belonging to him for the collection of another's tax, and no
attempt has been made to annul the ordinary rights or
remedies of a non-taxpayer in such cases. If the Government
sought to levy on the property of A for a tax liability
owing to B, A could not and would not be required to pay the
tax under protest and then institute an action to recover
the amount so paid. His remedy would be to go into a court
of competent jurisdiction and enjoin the Government from
proceeding against his property." In Tomlinson vs Smith, 7
Cir. 1942, 128 F.2d 808 ... the Court affirmed an order
granting interlocutory injunction and noted the "distinction
between suits instituted by taxpayers and non-taxpayers" (at
Plaintiffs are in no way subjected to any derivative
liability. The procedures set forth in 26 C.F.R. do not
authorize the Secretary or his delegate to manufacture income and
tax it where a Person is without the taxable class. 26 C.F.R.,
Section 871 is unclouded in that, where there is no income from
sources within the "United States" by a nonresident alien, the
choice is delegated to that Person by Congress as to whether a
return is to be filed or not (see 26 C.F.R. 1.871-8). Where the
Secretary determines the existence of taxable income when there
has been no return, he should sign the substitute return and
assume the responsibility for the determination as required by 26
U.S.C. 6020(b)(1). Treasury Decision 2313 explains that the
withholding agent is responsible for withholding the tax from
sources within the "United States", for filing a Form 1040NR and
for paying over the tax withheld from said nonresident alien.
(See Treasury Decision 2313 and 26 C.F.R. 1.1461-3). Therefore,
no penalties should accrue to the Plaintiffs. Lois K. Knox has
no community property interest in John's Military Retirement Pay
and, therefore, no taxable income accrues therefrom.
The fact that the Knoxs were not aware of the above
information from the early years of their lives and they reported
the "earned income" from their labor in the foreign States of the
Union as a local tax of the "United States", does not change
their status as Citizens of the Republic of Union States. Nor
does it change their status from nonresidents aliens to the
"individuals" defined in 26 C.F.R., Section 1.1-1. Nor does it
justify the Secretary's actions taken when he has been repeatedly
informed by the Knoxs of their true status. The Secretary is
required to know the law he is administering, and to do so with
justice and equity within the parameters set forth by Congress.
Arbitrary actions are discouraged by the Executive, the Congress
and the Courts.
WHEREFORE, PREMISES CONSIDERED, Plaintiffs pray that this
Court grant a temporary and permanent injunction against the IRS,
its employees, agents, Commissioner and Attorneys by ordering a
cessation of the levies and seizures against all forms of
property owned by Plaintiffs; that the Court order a return of
property seized in the past, declare the sale of such property
voidable or void, and order a release of all liens filed against
the Plaintiffs. In the alternative, Plaintiffs request that this
case be remanded back to the Administrative Agency for resolution
and arbitration. Plaintiffs further request the Court to grant
such other and further relief in law or in equity as Plaintiffs
may be entitled.
I declare under penalty of perjury, under the laws of the
United States of America, that the foregoing is true and correct,
to the best of my knowledge and belief, per 28 U.S.C. 1746(1).
Executed on this 5th day of September, 1991.
/s/ John H. Knox
[addendum to Knox brief]
ARGUED AND DETERMINED
SUPREME COURT OF JUDICATURE
STATE OF INDIANA
at Indianapolis, November Term, 1878,
in the Sixty-Third Year of the State.
Daly et al. vs The National Life Insurance Company
of the United States of America.
"Foreign Corporation" Defined. -- The statutes of this State
define a foreign corporation to be "a corporation created by or
under the laws of any other state, government, or country," or
one "not incorporated or organized in this State".
Same. -- Insurance Company Created by Act of Congress. -- An
insurance company created by an act of Congress is a foreign
corporation subject to the requirements of the statute of this
State approved June 17th, 1852, "respecting foreign corporations
and their agents in this State." 1 R.S. 1876, p. 373.
Same. -- Congress as a Local Legislature. -- Constitutional Law.
-- An act of Congress creating a private corporation is the act
of Congress as the local Legislature of the District of Columbia;
as Congress can not, under the federal constitution, as the
Congress of the United States, create a private corporation.
[ Next Appendix | Table of Contents ]