Richards v. Commissioner , 273 F. App'x 728 ( 2008 )


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  •                                                                         FILED
    United States Court of Appeals
    Tenth Circuit
    April 8, 2008
    UNITED STATES COURT OF APPEALS
    Elisabeth A. Shumaker
    FOR THE TENTH CIRCUIT                   Clerk of Court
    CHESTER E. RICHARDS,
    Petitioner-Appellant,
    v.                                                   No. 07-9007
    (United States Tax Court)
    COMMISSIONER OF INTERNAL                         (Tax Ct. No. 9216-05)
    REVENUE,
    Respondent-Appellee.
    ORDER AND JUDGMENT *
    Before LUCERO, HARTZ, and HOLMES, Circuit Judges.
    Chester E. Richards, proceeding pro se, appeals from a decision of the
    United States Tax Court finding that he: (1) had a $6,754 income-tax deficiency
    for the 2001 tax year, (2) should be assessed a $1,582 penalty for filing a late
    return, and (3) should be required to pay a $2,000 penalty to the United States as
    a sanction for making frivolous and groundless arguments to the court.
    *
    After examining the briefs and appellate record, this panel has determined
    unanimously that oral argument would not materially assist the determination of
    this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
    therefore ordered submitted without oral argument. This order and judgment is
    not binding precedent, except under the doctrines of law of the case, res judicata,
    and collateral estoppel. It may be cited, however, for its persuasive value
    consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
    Exercising jurisdiction under 
    26 U.S.C. § 7482
    (a)(1), we AFFIRM. Additionally,
    because Richards has maintained a frivolous appeal before this court, we GRANT
    the motion for sanctions filed by the Commissioner of Internal Revenue
    (“Commissioner”) but limit the requested award to $4,000.
    I
    Richards worked as an electrician in 2001 and earned $48,104 for his
    services. In late October 2003, he filed a Form 1040 applicable to the 2001 tax
    year in which he reported these earnings but deducted an equivalent amount in
    itemized expenses. As a result, he reported zero taxable income and zero income
    tax for the 2001 tax year. In a Form 8275 Disclosure Statement attached to his
    Form 1040, Richards offered a litany of explanations for why his income was not
    taxable, including assertions that he was entitled to “common law immunity”
    from taxation and that he had “a private right to [his] labor.”
    In early 2005, the Internal Revenue Service (“IRS”) notified Richards that
    he was subject to an $11,882 tax deficiency for the 2001 tax year and a $2,864
    penalty for filing a late return. In response to the IRS notification, Richards
    petitioned the United States Tax Court for relief from the amounts alleged to be
    due. Among other things, he claimed that the IRS had miscalculated the amount
    of the deficiency, that Congress could not tax human labor, that tax returns are
    not mandatory, and that the Sixteenth Amendment “must be struck down as
    unconstitutional.” Because Richards asserted in his petition that the IRS had
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    miscalculated the amount of the tax due, the tax court denied a motion to dismiss
    from the Commissioner and set the case over for a bench trial. The court did,
    however, warn Richards that its ruling on the Commissioner’s motion to dismiss
    “should not lead [him] to the conclusion that [he] may have real issues . . . with
    respect to exclusion or nontaxability of 1099 income or wage income . . . .”
    Prior to trial, Richards entered into a stipulation with the IRS in which he
    admitted that, if the court rejected his arguments related to the lawfulness of the
    federal income tax and concluded that his 2001 earnings were subject to federal
    taxation, he would owe a $6,754 tax deficiency for 2001. Richards also submitted
    a pretrial memorandum in which he reiterated many of the arguments contained in
    his petition. He also claimed that Form 1040 was illegal because it failed to
    comply with requirements from the Office of Management and Budget, that he
    was not required to file a Form 1040, and that he was not subject to taxation
    because he lived outside of a “federal zone.”
    At the bench trial, Richards sought leave of the court to permit his “law
    clerk” to sit with him at the counsel table as well as to help elicit Richards’ direct
    testimony. The court denied these requests, and Richards testified to the court in
    narrative form. Richards reiterated several of the arguments in his filings and
    indicated that he does not plan to file any more tax returns unless “he find[s] out
    some way that [he is] liable to pay a tax.” At the conclusion of trial, the
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    Commissioner moved the court to impose sanctions, contending that Richards’
    arguments were frivolous and were intended to delay the proceedings.
    The court sustained the stipulated deficiency. It also concluded that
    Richards was liable for a $1,582 penalty because he had failed to timely file his
    2001 return, and an additional $2,000 penalty because Richards had “assert[ed]
    nothing but frivolous and groundless arguments . . . [as a] protest against the
    Federal income tax system.” Richards thereafter unsuccessfully moved for
    reconsideration of the court’s decision, and this timely appeal followed.
    II
    In his appeal to this court, Richards challenges the merits of the tax court’s
    determinations that he is liable for an income tax deficiency and a late-filing
    penalty. He also disputes the tax court’s decision to impose a $2,000 penalty
    against him, as well as the court’s refusal to allow his “law clerk” to assist him at
    trial. We reject each of his challenges.
    “We review tax court decisions in the same manner and to the same extent
    as decisions of the district courts in civil actions tried without a jury.” Kurzet v.
    Comm’r, 
    222 F.3d 830
    , 833 (10th Cir. 2000) (quoting 
    26 U.S.C. § 7482
    (a)(1)).
    “We review the Tax Court’s factual findings under the clearly erroneous standard
    and review its legal conclusions de novo.” Anderson v. Comm’r, 
    62 F.3d 1266
    ,
    1270 (10th Cir. 1995).
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    A
    Richards focuses the gravamen of his appeal on the same patently frivolous
    arguments that he presented to the tax court. He primarily contends that there is
    no law that makes him liable for filing an income tax return and that the tax court
    therefore erred in finding him liable for a tax deficiency. We have previously
    rejected this same tax-protestor argument, and all of the related contentions
    Richards has raised as to why he should not pay federal income taxes, and we do
    so again today. See, e.g., United States v. Chisum, 
    502 F.3d 1237
    , 1243-44 (10th
    Cir. 2007), cert. denied, 
    128 S. Ct. 1290
     (2008); United States v. Collins,
    
    920 F.2d 619
    , 629-31 (10th Cir. 1990); Lonsdale v. United States, 
    919 F.2d 1440
    ,
    1448 (10th Cir. 1990); Casper v. Comm’r, 
    805 F.2d 902
    , 904 (10th Cir. 1986);
    Charczuk v. Comm’r, 
    771 F.2d 471
    , 472-73 (10th Cir. 1985); cf. United States v.
    Ford, 
    514 F.3d 1047
     (10th Cir. 2008).
    As to the tax court’s decision to impose a penalty for Richards’ untimely
    filing of his 2001 return, we uphold its conclusion. Section 6651(a)(1) of Title 26
    unambiguously provides for a five percent penalty per month for the failure “to
    file any return . . . on the date prescribed.” Richards does not dispute the factual
    basis underlying the imposition of this addition, and we fail to discern any error
    in the tax court’s determination that this penalty was warranted under the terms of
    the statute.
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    Richards’ remaining challenge to the merits of the decision below relates to
    the tax court’s conclusion that a $2,000 penalty was warranted based on Richards’
    frivolous arguments. We review the tax court’s decision to impose sanctions for
    an abuse of discretion. Fox v. Comm’r, 
    969 F.2d 951
    , 953 (10th Cir. 1992).
    Under 
    26 U.S.C. § 6673
    (a)(1), the tax court may impose sanctions of $25,000 or
    less when it appears that the taxpayer has instituted or maintained proceedings
    primarily for purposes of delay, or when the taxpayer’s position in the proceeding
    is frivolous or groundless. See also Fox, 
    969 F.2d at 953
    . Richards appears to
    argue that the penalty assessed by the tax court in this case was inappropriate
    because the final tax deficiency assessed was less than what the IRS initially
    alleged he owed, and that his case therefore was not frivolous. This contention
    lacks merit. By the time of trial, the amount of the deficiency pursued by the
    Commissioner was no longer an issue—Richards and the IRS had already
    stipulated to the amount of the deficiency. The only remaining questions for the
    court to decide, under the terms of the stipulation, related to Richards’ arguments
    that he was not subject to the federal income tax laws. As indicated above,
    Richards’ contentions in that regard were patently frivolous. The tax court
    therefore did not abuse its discretion in ordering him to pay a $2,000 penalty.
    B
    In his final argument related to the proceedings below, Richards claims that
    the district court erred in excluding his “law clerk” from counsel’s table and from
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    “use in court.” On this score, the court did not err. Although a pro se taxpayer
    may be assisted in tax court by a nonlawyer who has filed an application, passed a
    written exam, and been sponsored by at least two tax-court practitioners, see Tax
    Court Rule 200, there is nothing in the record that would indicate that Richards’
    “law clerk” satisfied this rule. 1
    III
    Lastly, the Commissioner moves for sanctions under 
    28 U.S.C. § 1912
    ,
    Federal Rule of Appellate Procedure 38, and 
    26 U.S.C. § 7482
    (c)(4), arguing that
    the instant appeal is frivolous. Richards’ response to the motion for sanctions
    generally rehashes the discredited arguments contained within his opening brief,
    including his assertions that “there is no statutorily-imposed duty to file, to pay
    when filing, or to withhold the income of a natural person.” The Commissioner
    requests sanctions in the amount of $8,000, stating that the government expends
    an average of $11,000 in attorney salaries and other costs to defend against a
    frivolous tax appeal.
    Rule 38 and 
    28 U.S.C. § 1912
     allow a court of appeals “to award just
    damages and single or double costs if the court determines that an appeal is
    frivolous or brought for purposes of delay.” Kyler v. Everson, 
    442 F.3d 1251
    ,
    1253 (10th Cir. 2006) (quotation omitted). Similarly, 
    26 U.S.C. § 7482
    (c)(4)
    1
    To the extent that Richards’ pro se opening brief can be read to assert
    additional procedural irregularities in the tax court’s conduct of the bench trial,
    we summarily reject his claims.
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    authorizes a court of appeals “to require the taxpayer to pay . . . a penalty in any
    case where the decision of the Tax Court is affirmed and it appears that the appeal
    was instituted or maintained primarily for delay or that the taxpayer’s position in
    the appeal is frivolous or groundless.” This court may award sanctions against a
    pro se litigant such as Richards because “pro se litigants are subject to the same
    minimum litigation requirements that bind all litigants and counsel before all
    federal courts.” Kyler, 
    442 F.3d at 1253
    . We have consistently recognized that
    “[a]n appeal is frivolous when the result is obvious, or the appellant’s arguments
    of error are wholly without merit.” Braley v. Campbell, 
    832 F.2d 1504
    , 1511
    (10th Cir. 1987) (quotation omitted).
    Given Richards’ insistence on pursuing meritless legal arguments
    throughout this appeal, we conclude that a sanction is warranted. 2 Nevertheless,
    because this appeal involves only a few relatively straightforward issues, the
    Commissioner has not adequately justified the $8,000 sum requested. In our
    discretion we therefore reduce the requested sanction amount to $4,000.
    2
    We harbor no doubt that Richards appreciates the meritless nature of his
    arguments. He admitted to this court in his opening brief that “the threads that
    wind through the many civil and criminal tax cases” support the decision the tax
    court reached in this case.
    -8-
    IV
    The judgment of the United States Tax Court is AFFIRMED. The
    Commissioner’s motion for sanctions is GRANTED but the amount is limited to
    $4,000. The mandate for sanctions shall issue forthwith.
    ENTERED FOR THE COURT
    Carlos F. Lucero
    Circuit Judge
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