Joe Banister is a former special agent with the Internal Revenue Service. As a special agent, his chief function was to conduct investigations into alleged criminal violations of the U.S. tax code. According to his supervisors, he performed this task admirably for many years.
In 1999, he resigned from the IRS. Before resigning, he wrote a detailed treatise describing the results of an investigation he conducted into the validity of the income tax code. His treatise reported that the tax laws were voluntary, that no law required the filing of a return or the payment of taxes, and that filing a federal income tax return was a violation of a citizen’s Fifth Amendment right against self-incrimination.
Banister’s treatise was presented to his IRS supervisors together with instructions that it go “straight to the top.” Banister wanted top IRS brass to answer his numerous questions about the legitimacy of the tax code.
Banister didn’t get the answers he sought. Instead, he was asked to resign from the IRS. He did. As a certified public accountant, Banister went into private practice and wrote a book detailing his research and the story behind his resignation.
Became Protesters’ Golden Boy
Banister quickly became the Golden Boy of the tax protester movement. Having crossed over from the “dark side,” he was considered the ultimate in vindication of the claims tax protesters had been making (without success) for decades.
Banister was a featured speaker at seminars and symposia across the nation. Not surprisingly, he was the “star witness” at many of Bob Schulz’s “We the People Foundation” conferences in Washington and elsewhere. Schulz has been fighting the IRS for many years, and believes no law requires citizens to file tax returns. (See “What Really Happened in the Bob Schulz Tax Case,” Budget & Tax News, June 2005.)
As a CPA, Banister represented numerous tax protesters before the IRS and prepared tax returns on their behalf. Among the returns he prepared were amended tax returns for a California business owner by the name of Al Thompson. The returns sought a tax refund based upon the theories advanced by Banister and others, the key one being that the tax laws did not apply to U.S. citizens.
Barred for Claims
This wasn’t the first time Banister made such claims on behalf of his clients. In fact, he did so on so many prior occasions that in January 2004 the IRS’s Office of Professional Responsibility barred him from representing clients before the IRS. The grounds were that Banister was misrepresenting the tax law to his clients and that he failed to file his own personal tax returns.
But there was more to Thompson’s case. As a business owner, he had about 25 employees working for him. He was withholding income and Social Security taxes from their paychecks and making payments to the IRS of those taxes.
In July 2000, Thompson called a meeting with all his employees to explain that he was no longer going to withhold taxes from their paychecks. During the meeting, he explained that his research showed he was not required to comply with the tax code. Joe Banister appeared at the meeting to help Thompson explain the legal reasoning for his position.
Thompson was eventually ordered by a federal judge to pay the employment taxes. Thompson refused. The court then found him in contempt, and he was jailed for about three months. He was later indicted by a federal grand jury for tax evasion, filing false tax returns, and conspiracy to defraud the government. In January 2005, Thompson was found guilty of the charges and sentenced to six years in federal prison.
Indicted for Thompson Role
Banister was indicted for his role in Thompson’s case and was charged with conspiracy and with aiding and assisting in the filing of false tax returns. But unlike his unlucky client, a federal jury acquitted Banister in late June of all the charges.
Tax protesters across the nation are heralding the acquittal as proof that filing taxes is voluntary. But as is true of every criminal prosecution, there is no judicial precedent set by a jury verdict, and the results of one case are absolutely no indication of what will happen in the next one. If this weren’t true, how is it that Thompson now languishes in prison while Banister was acquitted on essentially the same facts?
The answer to this question, and frankly, all questions involving criminal tax prosecutions, turns on the issue of willfulness. Before anyone can be convicted of any criminal tax violation, the IRS must be able to prove in court to the satisfaction of a jury beyond a reasonable doubt that the accused intended to break the law. That is, his actions were deliberate and for the purpose of violating a known legal duty.
The concept of willfulness means the accused did not act on the basis of some good-faith reason, such as lack of understanding, mistake of law, reliance on counsel, or even through negligence. Instead, the person knew what the law required and made a conscious decision to violate it.
Could Not Prove Willfulness
Very simply, the IRS could not prove the element of willfulness in Banister’s case. This is not surprising, given that Banister was a respected federal law enforcement officer with a long history of enforcing the law. Moreover, long before he became involved with Thompson, he presented his written arguments to his supervisors and asked a series of questions based on his research. Rather than even attempt to answer the questions, his IRS bosses asked him to resign.
Banister presented all of these facts and more to Thompson’s employees during the July 2000 meeting. The meeting was videotaped, and the tape found its way into evidence in Banister’s trial. The jury was able to see that as a former IRS special agent and trained CPA, Banister was working in good faith to help his client make what was considered a legitimate claim to the IRS.
Banister was able to persuade the jury that, rather than carrying out a criminal plot to break the law, he merely raised legitimate concerns about the validity of the tax law on behalf of his client and was entitled to have them addressed. The jury believed him.
Does that mean Banister is right and there is no requirement to file tax returns? Not at all. It only means the jury didn’t buy the government’s claim that Banister deliberately and intentionally set out to join a criminal conspiracy to violate the tax code and defraud the IRS.
Must Still Pay Taxes
This distinction may seem subtle, but it is vitally important to understand, because I guarantee you’ll see reports all over the Internet in the coming weeks saying the Banister trial proves there’s no law requiring the filing of a tax return. But if that were true, wouldn’t Thompson also have been acquitted? If the results of Banister’s trial constitute a binding decision that no law requires the filing of a tax return, wouldn’t it naturally follow that Thompson’s conviction must be overturned?
What do you suppose the chances are of that happening?
The fact is, Banister’s defense had little to do with substantive claims about the tax code. His defense was simply that as a tax professional and CPA, he had the right to present the good faith claims of his client and agitate on his behalf in an effort to get the best results. That doesn’t make him a criminal. It makes him an aggressive tax pro.
The jury believed Banister and thus found him not guilty. But don’t make the mistake of believing that because Joe Banister walked, you no longer have a legal duty to file a tax return. Banister’s attorney, Robert Bernhoft, told WorldNetDaily, in a post-trial interview, the not guilty verdict has “no direct bearing on the legitimacy of the 16th Amendment.”
To put it another way, there is no precedent in this case for anybody other than Joe Banister, and for him only to the extent that he no longer faces prison in connection with the Thompson affair. If Banister continues to make these types of claims to the IRS, given that he’s been barred from making them and was tried for these actions, it seems unlikely the “good faith” argument will play as well the second time as it did the first.
Daniel J. Pilla ([email protected]) is a nationally known tax litigation consultant and author of eleven books on IRS abuse prevention and cure, and problems resolution issues. His latest book is The IRS Problem Solver (HarperCollins). His Web site is http://www.taxhelponline.com.