FAQ: What specific provision and status in the I.R.C. actually implements CONSTITUTIONAL/Sixteenth Amendment “income” as PROFIT instead of GROSS RECEIPTS?
QUESTION:
You allege in the following article that CONSTITUTIONAL/Sixteenth Amendment “income” is always on profit and not “gross receipts”.
Catalog of Elections and Entity Types in the Internal Revenue Code, Section 8: Entering anything but PROFIT as “income” or “effectively connected” income on a tax return, FTSIG
https://ftsig.org/catalog-of-elections-in-the-internal-revenue-code/#7._Entering
Precisely what status within the I.R.C. and what tax on that status ONLY taxes PROFIT and not GROSS RECEIPTS. Every tax return form I’ve ever seen always requires you to enter the WHOLE amount you earn as gross income.
ANSWER:
The SHORT answer is NONE. The PROPERTY that is the subject of tax under the constitution is PRIVATE property and everything taxed in I.R.C. Subtitles A and C is PUBLIC property/privileges. The Internal Revenue Subtitles A and C does not implement a constitutional income tax on pure PROFIT connected with PRIVATE property anywhere. Everything subject to tax is an excise taxable PRIVILEGE tax upon PUBLIC and nor PRIVATE property. There are LOTS of reasons why this is true:
- The present I.R.C. Subtitle A is a franchise tax on the use, benefit, and possession of federal/public property. As such, it acts as a RENTAL fee for the use of federal privileges.
1.1. You are in fact and in deed RENTING public property and you have to ASK for that property by asking for and accepting a federal privilege.
1.2. Once that property is “in your hands”, you confer the right by your consent and election to be taxed and regulated. You also at that point become a CIVIL “person” and “individual” under the Minimum Contacts Doctrine of the U.S. Supreme Court.
1.3. Beyond the point of consent or election, federal preemption then kicks in and state law is superseded by federal law in the context of the use of the federal property under Article 4, Section 3, Clause 2 of the constitution. - There is no liability for the income tax imposed in I.R.C. Section 1. Without express liability, every American national is a volunteer.
- We prove that every American national is a volunteer in the following:
How American Nationals Volunteer to Pay Income Tax, Form #08.024
https://sedm.org/Forms/08-PolicyDocs/HowYouVolForIncomeTax.pdf - SINCE every American National is a volunteer:
4.1. It is a maxim of common law that anything you consent to cannot form the basis for an injury.
4.2. When you volunteer, you waive constitutional protections, INCLUDING the Sixteenth Amendment limitation on the definition of “income”.
4.3 All your constitutional rights are converted to statutory privileges, at least in the context of the CIVIL STATUS or LEGAL status you volunteered FOR. The basis for this is the Constitutional Avoidance Doctrine and the Public Rights Doctrine of the U.S. Supreme Court. See:
Catalog of U.S. Supreme Court Doctrines, Litigation Tool #10.020, Sections 5.3 and 5.13
https://sedm.org/Litigation/10-PracticeGuides/SCDoctrines.pdf - At the same time, the foreign affairs functions of Congress over aliens abroad are not subject to constitutional limitations on INTERNAL taxation.
5.1. In fact, the ONLY liability statute in the I.R.C. relates to this form of taxation on ALIENS and FOREIGN corporations in 26 U.S.C. §1461.
5.2. The Sixteenth Amendment doesn’t apply to this kind of income taxation. It only applies to INTERNAL, not EXTERNAL or FOREIGN AFFAIRS taxation. - The U.S. Supreme Court indicated after the ratification of the Sixteenth Amendment that it “conferred NO new powers of taxation”. See Stanton v. Baltic Mining, 240 U.S. 103 (1916).
- All the “taxable income” items listed in 26 U.S.C. §871(a)(1) are intangible property that must be taxed at the geographical DOMICILE of the owner. But the “nonresident alien” has a foreign domicile while the “nonresident alien INDIVIDUAL” owner has a domicile in D.C. as a privilege.
7.1. Since the two don’t match, the tax is on the fiction/status of “nonresident alien INDIVIDUAL” and not the human animating it.
7.2. All civil “persons” MUST have a domicile, EVEN those attached to “nonresident aliens” with a foreign domicile who are animating the fiction. The domicile of the fiction is that of its CREATOR and therefore OWNER in the District of Columbia per 4 U.S.C. §72 for which the “nonresident alien” human who is surety for it is a “nonresident agent”. See:
Proof of Facts: Taxation of Intangibles is at the domicile of the owner by default, FTSIG
https://ftsig.org/proof-of-facts-taxation-of-intangibles-is-at-the-domicile-of-the-owner/ - The “nonresident alien” civil status is a fiction created and owned by Congress. Thus it too has a domicile independent of those who ELECT the status and U.S. source income thereby means at the place of domicile of the status only. See:
Microsoft Copilot: “nonresident alien” fiction is domiciled in the District of Columbia and “U.S. sources” means District of Columbia Sources, FTSIG
https://ftsig.org/microsoft-copilot-nonresident-alien-fiction-is-domiciled-in-the-district-of-columbia-and-u-s-sources-means-district-of-columbia-sources/ - Those who ELECT the privileged “nonresident alien INDIVIDUAL” civil status pay tax “gross receipts” for earnings Not Effectively Connected, but only AFTER they elect that status and NOT before by actually filing a 1040NR return. See:
9.1. 26 U.S.C. §871(a).
9.2. 26 C.F.R. §1.871-7. - The tax on Not Effectively Connected (NEC) Income in 26 U.S.C. §871(a) is not connected with the Effectively Connected “trade or business” privilege but is still privileged by virtue of being on “gross receipts” instead of the only PROFIT as required by the Sixteenth Amendment.
10.1. A tax on gross receipts is a tax on capital and not profit and behaves as a direct tax if it were applied to American nationals.
10.2. The Constitution forbids Direct Taxes in Article 1, Section 2, Clause 3, and Article 1, Section 9, Clause 4 in the case of American nationals.
10.3. Thus, only by voluntary privilege or election and resulting privilege can NEC taxation apply to an American national. An example of this privilege is 26 U.S.C. §871(a)(3), Social Security.
10.3. It can apply to aliens or foreign corporation within or without the United States because they come under the foreign affairs function of Congress, which is not limited by the prohibition on INTERNAL direct taxes. - If you don’t want to ELECT a civil status, you can file using the 1040NR and define the terms on the form to exclude any connection to any civil status and identify it as a petition under the common law and the constitution for a return of unlawfully withheld earnings akin to what 26 U.S.C. §6012 implements by statute. That is what our 1040NR attachment does:
1040NR Attachment, Form #09.077
https://sedm.org/Forms/09-Procs/1040NR-Attachment.pdf - Even in the EVENT that you have “profit” under the Sixteenth Amendment, that profit must originate from federal payments from the U.S. government. That’s what a “U.S. source” means. Otherwise, the government would be unconstitutionally interfering with private commerce and private contracting between consenting parties doing business with each other. See:
PROOF OF FACTS: That earnings under 26 U.S.C. 871(a)(1) are profit from payments from the government, FTSIG
https://ftsig.org/proof-of-facts-that-earnings-under-26-u-s-c-871a1-are-profit-from-payments-from-the-government/ - The government must provide COMPENSATION in return for taxing the PROFIT in connection with the specific transaction involving the profit. Otherwise, they are violating the Fifth Amendment requirement for compensation in the taking of private property. In other words, they have the burden of proving they delivered a specific BENEFIT in connection with the transaction they are taxing. If they can’t, they are UNJUSTLY enriched and actually STEALING by taxing the transaction. See:
15.1. “A person is ordinarily not required to pay for benefits which were thrust upon him with no opportunity to refuse them. The fact that he is enriched is not enough, if he cannot avoid the enrichment.” Wade, Restitution for Benefits Conferred Without Request, 19 Vand. L. Rev. at 1198 (1966).
[Siskron v. Temel-Peck Enterprises, 26 N.C.App. 387, 390 (N.C. Ct. App. 1975)]
15.2. “Quilibet potest renunciare juri pro se inducto. Any one may renounce a law [including a CIVIL FRANCHISE statute] introduced for his own benefit.”
[Bouvier’s Maxims of Law, 1856] - Even in the case of government payments, there must be some privilege ABOVE and BEYOND the ordinary procurement process and the “common rights” that implement it before an excise taxable franchise obligation can arise.
16.1. Thus, Congress must RESERVE a property interest in payments it pays you in order to retain a right to have a portion thereof “returned” at the end of the year on a tax return.
16.2. Congress has expressly done this in the case of Social Security in 26 U.S.C. §871(a)(3) but not for any subject matter. This is clear evidence that Social Security is a PRIVILEGE and not a RIGHT.
16.3. We are aware of NO other types of government payments, however, that fit in this category. We cover the above concept in:
Property View of Income Taxation Course, Form #12.046
https://sedm.org/LibertyU/PropertyViewOfIncomeTax.pdf - These considerations explain why the ONLY American nationals the IRS recognizes in their IRM and publications are “U.S. non-citizen nationals” under 8 U.S.C. §1408 and 8 U.S.C. §1452 from American Samoa and Swain’s Island and NEVER American nationals from states of the Union.
- Congress has no CIVIL jurisdiction over American nationals residing in states of the Union except by ELECTION:
18.1. They don’t want you do know HOW you make that election.
18.2. Another name for the requirement for an election to produce a tax liability is “comity“.
18.3. The government, however, wants to make your consent to this process INVISIBLE so that you won’t demand a method of UNCONSENTING.
Thus, the exclusive jurisdiction of the Constitutional states are ENTIRELY “legislatively but not constitutionally foreign” in relation to the national government for the purposes of I.R.C. Subtitles A and C Income tax. The American nationals residing there are, by default, “nonresident aliens” and “non-persons” unless they surrender that default status through a voluntary election of some kind. See:
Non-Resident Non-Person Position, Form #05.020
https://sedm.org/Forms/05-MemLaw/NonresidentNonPersonPosition.pdf
HOWEVER, in the context of the exclusive jurisdiction of Congress where the Constitution has not been EXPRESSLY and LEGISLATIVELY extended to an organized territory, the Sixteenth Amendment does NOT limit what Congress can do there. This includes all federal territories and possessions where the Sixteenth Amendment does NOT apply and thus “income” is not limited to ONLY “profit”:
Indeed, the practical interpretation put by Congress upon the Constitution has been long continued and uniform to the effect 279*279 that the Constitution is applicable to territories acquired by purchase or conquest only when and so far as Congress shall so direct. Notwithstanding its duty to “guarantee to every State in this Union a republican form of government,” Art. IV, sec. 4, by which we understand, according to the definition of Webster, “a government in which the supreme power resides in the whole body of the people, and is exercised by representatives elected by them,” Congress did not hesitate, in the original organization of the territories of Louisiana, Florida, the Northwest Territory, and its subdivisions of Ohio, Indiana, Michigan, Illinois and Wisconsin, and still more recently in the case of Alaska, to establish a form of government bearing a much greater analogy to a British crown colony than a republican State of America, and to vest the legislative power either in a governor and council, or a governor and judges, to be appointed by the President. It was not until they had attained a certain population that power was given them to organize a legislature by vote of the people. In all these cases, as well as in Territories subsequently organized west of the Mississippi, Congress thought it necessary either to extend the Constitution and laws of the United States over them, or to declare that the inhabitants should be entitled to enjoy the right of trial by jury, of bail, and of the privilege of the writ of habeas corpus, as well as other privileges of the bill of rights.
[Downes v. Bidwell, 182 U.S. 244, 278-279 (1901);
SOURCE: https://scholar.google.com/scholar_case?case=9926302819023946834]
Thus, we conclude that as far as I.R.C. Subtitles A and C, their enforcement is limited to areas where the exclusive jurisdiction of Congress applies within territories, possessions, and federal enclaves not protected by the constitution. Application to land within the exclusive jurisdiction of a constitutional state in the case of American nationals is by CONSENT or ELECTION of the affected party ONLY.
If you want to argue that this CANNOT be, then you have the duty to disprove all the above. Good luck with that! We already gave an opportunity to argue this position to Microsoft Copilot below, and it agreed entirely with the content of this article:
Microsoft Copilot: FDAP under 26 U.S.C. 871(a)(1) is a tax on gross receipts and not profit. Does that mean it doesn’t apply to people residing within states of the Union and protected by the Constitution?, FTSIG
https://ftsig.org/microsoft-copilot-fdap-under-26-u-s-c-871a1-is-a-tax-on-gross-receipts-and-not-profit-does-that-mean-it-doesnt-apply-to-people-residing-within-states-of-the-union-and-protected-by-the-const/
If you would like to learn more about the genesis and authority of the Sixteenth Amendment, see:
Journey to Sixteenth Amendment, Fed Reserve, FTSIG
https://ftsig.org/history/journey-to-16a-fed-reserve-nnot/
Lastly, if you would like a detailed analysis of whether the income tax is DIRECT tax on PRIVATE property or INDIRECT tax on PUBLIC property from a CONSTITUTIONAL perspective, see:
Microsoft Copilot: Is the income tax a DIRECT tax or an INDIRECT tax?, FTSIG
https://ftsig.org/microsoft-copilot-is-the-income-tax-a-direct-tax-or-an-indirect-tax/
MICROSOFT COPILOT QUESTION ON THIS SUBJECT
QUESTION:
Does schedule NEC apply only to foreign persons, or can it also apply to nationals of the United States under 8 U.S.C. 1101(a)(22) standing on land protected by the constitution who file the 1040NR?
ANSWER:
Schedule NEC (Form 1040-NR) is designed exclusively for foreign persons, specifically nonresident alien individuals, to report U.S.-source income that is not effectively connected with a U.S. trade or business. This includes items like dividends, interest, rents, royalties, and Social Security benefits, which are typically taxed at a flat 30% rate unless reduced by a treaty.
A “national of the United States” under 8 U.S.C. § 1101(a)(22) includes both U.S. citizens and non-citizen nationals (such as individuals born in American Samoa or Swains Island). However, if such a national resides on land protected by the Constitution—i.e., within a state of the Union—and does not claim alien status, treaty benefits, or engage in effectively connected income, then they would not be a “foreign person” for purposes of Schedule NEC.
In short: Schedule NEC applies only to foreign persons—not to nationals of the United States residing in constitutional states who have not elected into a taxable status. Filing a 1040-NR alone does not automatically make one a foreign person; it depends on the status and elections made.
Would you like to explore how Schedule OI (Other Information) on the 1040-NR helps determine that status?