Time: Tue Jun 03 06:02:18 1997
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Date: Tue, 03 Jun 1997 06:17:04 -0700
To: (Recipient list suppressed)
From: Paul Andrew Mitchell [address in tool bar]
Subject: SLS: force and effect of regulations in CFR

[This text is formatted in Courier 11, non-proportional spacing.]


TO:       John Voss, Director, N.C.B.A.
          other interested parties

FROM:     John E. Trumane
          Account for Better Citizenship

DATE:     June 9, 1992

SUBJECT:  Do the regulations in 26 CFR
          have the force and effect of law?

The debate  fostered by  the claims  on N.C.B.A.'s $50,000 Reward
appears to have reached the following point of departure:

     Mr. Conklin  has argued that the IRC makes nobody liable for
     federal income taxes.

     This argument was defeated by reference to clear sections of
     the IRC  which make  "withholding agents" liable for federal
     income taxes.

     I do not as yet know if Mr. Conklin is a withholding agent.

     In a private communication, Mr. Conklin has also argued that
     the regulations  in 26  CFR create  no liability  because "a
     regulation cannot  exceed the  limitations  created  by  the

The purpose  of the remainder of this memo is to cite some of the
case law  which is  relevant to the questions of validity, and of
the legal  force and  effect, of  regulations promulgated  by the
Secretary of  the Treasury.  The attached abstracts from American
Jurisprudence reveal  a substantial body of case law which is not
always entirely consistent on this question.  For example:

     A regulation cannot supply omissions of the statute.

                                       [2 Am Jur 2d, Section 289]

     A regulation which fulfills the purpose of the law cannot be
     said to be an addition to the law.

                                             [ibid., Section 300]

The following  are notable  excerpts from  the  attached  Am  Jur
sections that deal with the effect and validity of rules:

     Rules,  regulations,   and   general   orders   enacted   by
     administrative agencies  pursuant to the powers delegated to
     them have the force and effect of law.  [page 119]

     There have  been applied  to administrative  regulations the
     principles that everyone is presumed to know the law or that
     ignorance of  the law is no excuse, and the courts will take
     judicial notice of them.  [page 120]

     ... [T]here  is no  violation of the Federal Constitution in
     an act of Congress which provides for a defense to an action
     under the  statute based  on good  faith reliance  upon  any
     administrative regulation ....  [page 120]

     Administrative regulations are held to be "laws" for various
     purposes, including  jurisdiction  of  courts  and  criminal
     liability.   If  Congress  imposes  criminal  sanctions  for
     disobedience of regulations, it can hardly be contended that
     such regulations  are not  a "law"  for the  purposes of the
     Criminal Code.  [page 121]

     Compliance  with   valid   administrative   regulations   is
     compliance with law, as has been held where it was sought to
     induce actions  contrary to  the regulations  or  to  impose
     liability  for  actions  which  accorded  with  regulations.
     [page 122]

     Valid administrative  rules  or  regulations  are  generally
     regarded as legislative enactments, and have the same effect
     as if  enacted by the legislature.  They have the force of a
     statute and  the same  effect as  if part  of  the  original
     statute.   They  become  integral  parts  of  the  statutes,
     particularly where  they are  legislative in  nature -- that
     is, are called for by the statute itself.  [page 122]

     While in  the strict  sense of  the term  an  administrative
     regulation is  not actually  a "statute"  but is  at most an
     offspring of  a statute,  a regulation may be deemed to come
     within the term "statute."  [page 123]

     ...[R]ules and  regulations will  be upheld  where they  are
     within the statutory authority of the agency and reasonable,
     ... they  must be  sustained unless unreasonable and plainly
     inconsistent with the statute.  [page 123]

     Only  when   discretion  has   been  arbitrarily  exercised,
     resulting  in   injustice  or   unfairness,  do  the  courts
     intervene to  strike down  a rule  promulgated by the proper
     agency designed to give appropriate effect to the provisions
     of the act involved.  [page 124]

     Administrative  regulations   which  go   beyond  what   the
     legislature can  authorize are  void and may be disregarded.
     [page 124]

     Regulations which are legislative in character should not be
     overruled by  the courts unless clearly contrary to the will
     of the legislature.  [page 124]

     Thus there are applicable the rules in regard to presumption
     of validity  and partial or entire invalidity;  and, just as
     in  individual   cases  hardship  and  loss  may  flow  from
     legislative  acts   which   are   nevertheless   valid,   so
     administrative regulations may also operate.  [page 125]

     Administrative rules  and regulations,  to be valid, must be
     within  the  authority  conferred  upon  the  administrative
     agency.   A rule  or regulation  which is  broader than  the
     statute empowering  the making  of rules, or which oversteps
     the boundaries  of interpretation  of a statute by extending
     or restricting  the statute  contrary to its meaning, cannot
     be sustained.  [page 127]

     They are valid and binding only when they are in furtherance
     of the  intention of  the legislature  as evidenced  by  its
     acts, and  a regulation,  valid  when  promulgated,  becomes
     invalid upon the enactment of a statute in conflict with the
     regulation.   However, an administrative regulation will not
     be  considered  as  having  been  impliedly  annulled  by  a
     subsequent  act  of  the  legislature  unless  the  two  are
     irreconcilable, clearly  repugnant, and so inconsistent that
     they cannot have concurrent operation.  [page 127]

     Administrative  regulations   which  go   beyond  what   the
     legislature has  authorized, which  violate the  statute, or
     which are  inconsistent or  out of  harmony with the statute
     conferring the power, have been said to be void.  [page 128]

     ... [A]dministrative  regulations, to be valid, are required
     to be appropriate, reasonable, or not inconsistent with law.
     A rule  or regulation  which is  within the broad rulemaking
     powers commonly conferred on administrative agencies will be
     sustained by the courts.  [page 128]

     ... [A]  regulation which  fulfills the  purpose of  the law
     cannot be  said to be an addition to the law.  Before a rule
     or regulation  may be declared void it must be definitely in
     excess of  the scope  of authority,  or plainly  or palpably
     inconsistent with law.  [page 129]

     ... [A]n  administrative agency  may not  create a  criminal
     offense or  any liability  not sanctioned  by the  lawmaking
     authority, especially  a liability  for a  tax or inspection
     fee.  [page 129]

     ... [I]ssuance  of regulations  is  in  effect  exercise  of
     delegated legislative power.  [page 770]

     Administrative Procedure  Act ...  and Federal  Register Act
     ... set  up procedure  which must  be followed  in order for
     agency rulings to be given force of law.  [page 770]

     Contents of  Federal Register are judicially noticed and may
     be cited by volume and page number.  [page 772]

     ... [F]ederal courts are required to take judicial notice of
     contents of Federal Register.  [page 772]

     Code  of   Federal  Regulations   being  nothing  more  than
     supplemental edition  of Federal Register, court is entitled
     to take  judicial notice  of cited  regulation in  brief  of
     prosecution[,] and  conviction of  defendant thereon  is not
     precluded  by   government's  failure   to  introduce   such
     applicable section in evidence.  [page 772]

     Court was  required to  take judicial  notice of the Federal
     Register and the Code of Federal Regulations.  [page 772]

In closing, the following excerpt from an unpublished treatise by
attorney Lowell  Becraft is  extremely relevant  to the force and
effect of regulations:


          In  5   U.S.C.,  section   301,  heads   of   Executive
     departments  are   given  authority   to  make  and  publish
     regulations.   It has  been previously  demonstrated how the
     current federal  income tax  laws in  question today  relate
     back to  the 1916  income tax  act.   Section 15 of that act
     defined the  terms "State"  and  "United  States"  in  clear
     jurisdictional  terms.    All  income  tax  acts  passed  by
     Congress have  authorized the  Secretary of  the Treasury to
     promulgate regulations,  which he  has done  since the first
     income tax  act in  1913.  All of the income tax regulations
     published since  January 28,  1921, have  defined the people
     subject to the tax as "citizens of the United States subject
     to its  jurisdiction."  Thus, this phrase has been a part of
     the regulations  for some 67 years, and applied to the 1918,
     1921, 1924,  1926, 1928,  1932, 1934, 1936 and 1938 acts, as
     well as the 1939 and 1954 Codes.

          The Secretary of the Treasury and the United States are
     firmly bound  by these  prior regulations  as  well  as  the
     current Treasury  Regulation  1.1-1(c),  which  defined  the
     subject of  the current  tax as  a "citizen  subject to  its
     jurisdiction."   A long  line of  Supreme Court  cases holds
     that an  executive department  head such as the Secretary of
     the Treasury  is bound  by the regulations he so promulgates
     and publishes ....

          And  the  Supreme  Court  has  found  that  regulations
     consistently promulgated in the same language for repeatedly
     re-enacted laws  are very significant.  In Old Colony R. Co.
     v. Commission  of Internal  Revenue, 284  U.S. 552, 52 S.Ct.
     211 (1932), the Supreme Court held that such regulations are
     given an implied legislative approval:

          "The  repeated   re-enactment  of   a  statute  without
          substantial change may amount to an implied legislative
          approval of  a construction placed upon it by executive
          officers," 284 U.S., at 557

                                                 [emphasis added]

This brings us to the following regulation; it mentions liability

     In general,  all citizens  of the  United  States,  wherever
     resident, and  all resident  alien individuals are liable to
     the income  taxes imposed  by the Code whether the income is
     received from sources within or without the United States.

                                                [26 CFR 1.1-1(b)]

                             #  #  #

Paul Andrew, Mitchell, B.A., M.S.    : Counselor at Law, federal witness
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