FAQ: What’s the most misleading aspect of the geographical “United States” label in I.R.C. 7701(a)(9)?

QUESTION:

What’s the most misleading aspect of the geographical “United States” label in I.R.C. 7701(a)(9)?

ANSWER:

What’s so misleading, is they refer to the federal preemption label as the “geographical sense.” But if you think about it, there’s really no other way to do it. Here’s why:

1. Federal jurisdiction is both a subject matter issue (Article I, Section 8), a property issue (Article 4, Section 3, Clause 2), and a plenary or geographical/police powers issue (Article 1, Section 8, Clause 17: D.C., forts, dockyards, arsenals, other needful buildings, and enclaves). We’ll leave territories and possessions out for now, as I would contend they are not part of the federal system, but rather the national.
2. But the combination of those issues above can happen either within the United States^G, or without. So I would assert that United States^G is not a territorial jurisdiction. Rather, it is a domestic locality wrt federal subject matter jurisdiction. And you could have a foreign locality wrt federal subject matter (think Puerto Rico, or Germany).

Asserting the meaning and purpose for United States^G therefore requires great skill and understanding. I think the court missed the mark in Great Cruz Bay, Inc., St. John v. Wheatley, 495 F.2d. 301 (1974), when they referred to the United States^G as a “taxing jurisdiction.” I knew what they meant—but I think it could have been said better. I think it’s this:

A domestic (INTERNAL) locality with respect to federal taxation established by federal preemption over federal property^PUB.

Conversely, you can have a foreign locality with respect to federal taxation. But in either instance, both issues are domestic^S, where the former occurs in a domestic^G locality, and the latter in a non-domestic^G locality.

Remember, as the U.S. Supreme Court held in Downes v. Bidwell, the tax extends WHEREVER the GOVERNMENT (and its property^PUB rights) rather the GEOGRAPHY is found.

“In the latter character, it was admitted that the power of levying direct taxes might be exercised, but for District purposes only, as a state legislature might tax for state purposes; but that it could not legislate for the District under Art. I, sec. 8, giving to Congress the power “to lay and collect taxes, imposts and excises,” which “shall be uniform throughout the United States,” inasmuch as the District was no part of the United States. It was held that the grant of this power was a general one without limitation as to place, and consequently extended to all places over which the government extends; and that it extended to the District of Columbia as a constituent part of the United States.“
[Downes v. Bidwell, 182 U.S. 244 (1901);
SOURCE: https://scholar.google.com/scholar_case?case=9926302819023946834]

They shield the true source—the domestic^S by leaving IT unspoken, but known only through a firm grasp of the underlying nature of the tax as a RENTAL fee on property^PUB. But they take that unspoken domestic^S, and categorize it as either occurring within domestic^G or within non-domestic^G, leading the “targeted” taxpayer into thinking that making money anywhere is a taxable event. Don’t be fooled.