U.S. Supreme Court Justice Sandra Day O’Connor (SDO) Acknowledges applicability of 26 U.S.C. 873 to “nationals of the United States”
“Indeed, we fail to see how New York’s disregard for the residence of the alimony recipient does anything more than point out potential inequities in the operation of § 631(b)(6). Certainly, the concept of income splitting works when both former spouses are residents of the 313*313 same State, because one spouse receives a tax deduction corresponding to the other’s reported income, thereby making the state treasury whole (after adjustment for differences in the spouses’ respective tax rates). The scheme also results in an equivalent allocation of total tax liability when one spouse is no longer a resident of the same State, because each spouse retains the burden of paying resident income taxes due to his or her own State on their share of the split income. The benefit of income splitting disappears, however, when a State in which neither spouse resides essentially imposes a surtax on the alimony, such as the tax increase New York imposes through § 631(b)(6). And, at the extreme, when a New York resident receives alimony payments from a nonresident New York taxpayer, § 631(b)(6) results in a double-taxation windfall for the State: The recipient pays taxes on the alimony but the nonresident payer is denied any deduction. Although such treatment may accord with the Federal Government’s treatment of taxpayers who are nonresident aliens, see 26 U. S. C. §§ 872 and 873, the reasonableness of such a scheme on a national level is a different issue that does not implicate the Privileges and Immunities Clause guarantee that individuals may migrate between States to live and work.“
[Lunding v. New York Tax Appeals Tribunal, 522 US 287 (1998);
SOURCE: https://scholar.google.com/scholar_case?case=11429331195291716914]
26 U.S.C. §873 is the only statute in the Internal Revenue Code that explicitly recognizes “nationals of the United States” as “nonresident aliens”. They had to list “nationals of the United States” in that section because they had to give the constitutionially required “reasonable notice” to American nationals of exactly how they transition from a “non-person” to a “person” under 26 U.S.C. §864(b), which is by taking deductions and thus “effectively connecting” as described in:
The Truth About “Effectively Connecting”, Form #05.056
https://sedm.org/Forms/05-MemLaw/EffectivelyConnected.pdf
Contrary to what SDO held above, 26 U.S.C. §873 DOES implicate the Privileges and Immunities Clause under Article IV, Section 2, Clause 1 if the “nonresident alien” is also a U.S. national residing within the exclusive jurisdiction within a constitutional state as the two litigants before her were. 26 U.S.C. §873(b) and 26 U.S.C. §7701(b) prove that. “nationals of the United States”/U.S. nationals under 8 U.S.C. §1101 (a)(22) are not subject to the presence test in 26 U.S.C. §7701(b) and only aliens are, so they are nonresidents EVERYWHERE. But that is a Third Rail Issue that she couldn’t talk about in her official capacity because it’s the ONLY exit door left to the income tax for all Americans and its carefully hidden with omission and equivocation.
Not only that, but every OTHER part of the constitution applies to such parties as well, including the Bill of Rights and the Unconstitutional Conditions Doctrine. That one doctrine alone prevents the collection of income tax against non-consenting U.S. nationals, in fact:
Copilot: Unconstitutional Conditions Doctrine applied to Federal and State Income Taxation, FTSIG
https://ftsig.org/copilot-unconstitutional-conditions-doctrine-applied-to-federal-and-state-income-taxation/
To our knowledge, this is the ONLY reference to 26 U.S.C. §873 in any court ruling at ALL, and even more to the application of that section to “nationals of the United States” who were litigants before the court.
Sandra Day O’Connor has since died. But privately and off the bench, Sandra Day O’Connor while still alive encountered one of our readers (who shall remain anonymous and unidentified) who was researching use of the nonresident alien position by “nationals of the United States” using SEDM.ORG. They showed her one of the following diagrams:
Citizenship Diagrams, Form #10.010
https://sedm.org/Forms/10-Emancipation/CitizenshipDiagrams.pdf
She said:
“This is EXACTLY correct! What do you want to use this for?”
The reader said:
“I just want the bank to recognize my proper status!”
She said:
“Good luck with that! No one understands this stuff.”
In her PRIVATE capacity, she agreed the Nonresident Alien Position applies to “nationals of the United States”. She even encouraged the reader to implement it. When asked whether she filed as a “nonresident alien”, she said:
“Sir. I’m a citizen and resident of the state of Arizona. As a federal judge I have a duty to file a tax return.”
She never indicated WHAT type of tax return she actually files. It was probably a 1040-NR!
Here’s what Google Gemini said about this case:
QUESTION 1:
What supreme court ruling contains an opinion written by U.S. Supreme Court Justice Sandra Day O’connor mentioning I.R.C. 873?
ANSWER 1:
Gemini said
The case you are looking for is Lunding v. New York Tax Appeals Tribunal, 522 U.S. 287 (1998).
Justice Sandra Day O’Connor delivered the opinion of the Court in this 6-3 decision. The case centered on whether New York could constitutionally deny a nonresident taxpayer a deduction for alimony payments when such a deduction was available to residents.
Use of I.R.C. § 873
In her opinion, Justice O’Connor referenced I.R.C. § 873 to provide context for how the federal government treats deductions for nonresidents.
- Context: She noted that under federal law, specifically 26 U.S.C. § 873(a), nonresident aliens are generally allowed deductions only if they are “connected with income which is effectively connected with the conduct of a trade or business within the United States.”
- The Argument: The State of New York argued that its policy mirrored this federal “geographical” or “source-based” approach—limiting deductions to those tied to in-state income.
- The Ruling: Justice O’Connor and the majority rejected this justification. They held that New York’s total denial of the alimony deduction to nonresidents violated the Privileges and Immunities Clause of the Constitution (Article IV, § 2), as the state failed to provide a “substantial reason” for the disparate treatment that justified such a heavy burden on nonresidents.
Key Legal Takeaway
The ruling established that while states have “considerable discretion” in taxing nonresidents, they cannot simply point to federal statutes like Section 873 as a blanket excuse to discriminate against nonresidents regarding personal deductions (like alimony) that are not intrinsically linked to the source of income.
QUESTION 2:
You said
The litigants in that case were “nationals of the United States” under 8 U.S.C. §1101(a)(22) and 26 C.F.R. §51.1. 26 U.S.C. §873(b)(3) references “nationals of the United States”, which was the status of the litigants.
Is that why she used this statute?
ANSWER 2:
Gemini said
In Lunding v. New York Tax Appeals Tribunal, 522 U.S. 287 (1998), Justice O’Connor did not use I.R.C. § 873 because of the specific citizenship or “national” status of the litigants. In fact, her use of that statute was actually to contrast the federal system with the state system.
Here is the breakdown of why she used it and how it relates to your point about “nationals of the United States.”
1. The Litigants’ Status
The petitioners, Christopher and Barbara Lunding, were residents of Connecticut who worked in New York. In the eyes of the Court and the tax law at issue, their relevant status was that of U.S. citizens and residents of another State (Connecticut), not “nonresident aliens” as defined in the federal tax code.
The reference to 8 U.S.C. § 1101(a)(22) defines a “national of the United States,” which includes citizens. While you are correct that they were technically “nationals,” the legal dispute in Lunding was about the Privileges and Immunities Clause (Article IV, § 2), which protects “Citizens of each State.”
2. Why She Cited § 873
Justice O’Connor cited I.R.C. § 873 because the State of New York tried to use it as a defense.
- New York’s Argument: The state argued that since the federal government limits deductions for nonresident aliens under § 873 to only those expenses “effectively connected” with U.S. income, New York should be allowed to do the same for nonresidents of the state.
- O’Connor’s Rebuttal: She used § 873 to point out that even the federal government—which has much broader power to discriminate against aliens than a state has to discriminate against citizens of other states—provides specific exceptions.
- The “National” Connection: You mentioned § 873(b)(3), which allows a personal exemption deduction to “nationals of the United States” even if they are nonresident aliens (typically referring to residents of American Samoa). O’Connor used the existence of federal “personal” deductions to show that the “source-based” rule New York was claiming was not as absolute or “standard” as the state suggested.
3. The Distinction
The primary reason she brought up § 873 was to reject the analogy. She noted:
- Constitutional Standard: The federal government’s power to tax nonresident aliens under the 16th Amendment is not restricted by the Privileges and Immunities Clause, which only governs how States treat each other’s citizens.
- Inconsistency: She observed that New York was trying to adopt the “harsh” part of the federal nonresident alien rules (limiting deductions to source-income) without adopting the “fair” parts (allowing for personal adjustments).
Summary
She didn’t use § 873 because the Lundings were “nationals”; she used it to debunk New York’s claim that its discriminatory tax scheme was justified by following the federal government’s lead. She effectively argued that if the state wants to point to federal law as a model, it can’t ignore the fact that federal law often makes exceptions for personal circumstances—including the very “national” status you noted.