Memorandum To: Participants in Conference on Tax Rebellion Movement From: Regional Commissioner Western Region Subject: Tax Rebellion in California I am sending you the minutes of our meeting of February 9, 1973, on the Tax Rebellion Movement. These minutes enumerate action items for the Los Angeles and San Francisco District Directors and for Regional Office officials. I appreciate your past attention to this serious matter and feel confident that all of us working together can successfully overcome this challenge to our tax system. /s/ Homer O. Croasmun Regional Commissioner Attachment Croasmun Memorandum: Page 1 of 6 Minutes of February 9, 1973 Conference on Tax Rebellion Movement in California Participants Mr. Croasmun, Regional Director Mr. Schwartz, Regional Counsel Mr. Rowe, Regional Inspector Mr. Kingman, District Director, San Francisco Mr. Schmidt, District Director, Los Angeles Mr. McCart, Acting Assistant Regional Commissioner, Intelligence Mr. Hansen, Chief, Los Angeles Mr. Howard, Chief, San Francisco Mr. Monzon, Chief, Enforcement, Regional Office, BATF Mr. Vargofcak, Assistant Special Agent-in-Charge, San Francisco Mr. Dvorak, Assistant Regional Inspector Mr. Pollock, Regional Protective Programs Manager Mr. Busalacchi, Regional Public Affairs Officer Mr. Krause, Regional Coordinator, Tax Rebellion Movement Mr. Croasmun opened the conference with a review of the history of the Tax Rebellion Movement. He stated we should set up our metes and bounds to achieve our goals; that we do not have unlimited manpower so we must focus on the total program and concentrate on the leaders of the movement attacking IRS. Mr. Croasmun pointed out that seven months ago we changed our direction on Tax Rebellion cases from a defensive posture and have now seized the initiative by infiltration of their organization so we now know in advance of their plans before they execute them. This is vital and we must continue to stay aggressive if we are to enforce the revenue laws and to protect the Service from attack by tax rebel militants. Mr. Croasmun stated that we are not limiting ourselves to the sanctions in the Revenue Code, but are using all the available law enforcement machinery whether it be federal, state or local laws: for example, if a tax rebel leader is violating a state law by carrying a concealed weapon, we should use state enforcement to prosecute him; and, if there is a firearms violation, ATF agents should be alerted. Mr. Howard advised that he had been advised by the Detroit District that since ( ) spoke on the radio in Cleveland, there had been a flood of General Motors employees submitting false forms W-4. Mr. Busalacchi stated he had a report that ( ) had been active in Albuquerque. Mr. Hansen advised that a ( ) of Ventura County had attempted to file false forms [sic] W-4; that he is now leading the Mariposa camp of militants organized by ( ) the ( ). Mr. Vargofcak said the sheriff of Mariposa County had been checking on the activities of ( ) since May 1972, when the ( ) bought the Mariposa property from ( ); that ( ) is a close personal friend of ( ) that ( ) has a state criminal record; that he has three or four firearms; and that the Bureau of Alcohol, Tobacco & Firearms has a case on ( ). Croasmun Memorandum: Page 2 of 6 Mr. Schmidt pointed out that there are varying degrees of militancy in the various tax rebellion groups; that in the Los Angeles District, Taxpayers Anonymous in Orange County, led by ( ) and ( ) is the most militant; and that we should keep this in mind in deciding our targets. Mr. Monzon gave a summary of laws enforced by the bureau of Alcohol, Tobacco & Firearms which could be used on tax rebel cases. He pointed out it is not a federal violation to carry a gun unless the person has a felony record; that an automatic pistol is not an "automatic" gun under the definitions of BATF unless one pull of the trigger will discharge multiple shots; that explosives are a federal violation; and, likewise, "silencers" are a violation. He said he wanted more information about a report that tax rebels are able to buy silencers in Phoenix, as this would be a clear violation. Mr. Howard advised he has been conferring with state tax officials who are anxious to cooperate with IRS in the attack on tax rebels who also do not pay state taxes; often the state can move quickly to close up a tax rebel's business or revoke his license; that we should see that the state uses its enforcement machinery on those cases which are not our targets. Mr. Croasmun reported on his discussions with Assistant U. S. Attorney Couris and Judge Crocker, Fresno, and of their interest in enforcement of the law in tax rebel cases. Mr. Hansen commented on the problem of federal judges appearing to be anti-IRS based on a belief that IRS is "highhanded." Mr. Howard reported on a change of attitude in federal judges in San Francisco after he met with a number of them and discussed the gravity of the Tax Rebellion Movement and the importance of giving prison sentences as deterrents. There was a general discussion of the importance of meeting with U.S. Attorneys and federal judges to acquaint them with the full picture of the tax rebellion movement. Mr. Croasmun pointed out that after his meeting with Mr. Couris and Judge Crocker, they requested background information on the Movement which was furnished them. Mr. Kingman suggested the possibility of requesting religious leaders to warn their following against participation in the movement, pointing to the beneficial effects of Mormon Church President Lee's message. Mr. Howard advised that after his discussion with the federal judges they said they had not full background information on some of the defendants to whom they had given light sentences. Mr. Schwartz suggested that the Porth-type cases not prosecuted should at least be considered for fraud penalties or other civil penalties. Croasmun Memorandum: Page 3 of 6 Mr. Schwartz also advised the district directors that they should instruct employers who receive false forms W-4 or W-4E which they know to be false through admission of employee or knowledge of previous employment that the employer should disregard the false exemption certificate and withhold on the basis of zero exemptions or on the basis of a former correct form W-4. There was a general discussion on the problem of detecting false W-4 or W-4E cases where the taxpayer does not so advise the government or the employer does not do so; and, particularly so where the taxpayer completes his action by not filing any form of 1040 at year end, but becomes an "IRS dropout." With the present limited matching at the Service Centers of the filing index with prior years' returns, or employers' copies of W-2's with filing indexes, such cases will probably never be detected. Suggestions were made that we use all available means to reach employers to advise them of their responsibility to advise IRS when they receive a suspected false form W-4 or W-4E. Also, we should use our liaison contacts with the Tax Executive Institute to get the message to them of their responsibility in such cases and of advising employer-clients. Also, we should use trade journals to reach employers with this message. Also, we should use Circular E for this purpose. Mr. Krause pointed out the importance of close planning on common targets by the tax rebellion project supervisors of the Los Angeles and San Francisco districts with planning meetings as needed. Action Items for District Directors: 1. Maintain the initiative in the attack on the tax rebels. 2. Know their plans before they arrive at our door to execute them. 3. Identify the leaders of the Movement and concentrate on them. 4. Have a plan of action in coordination with the Region rather than hit and miss defensive reactions. 5. Continue and step up the infiltration in-depth of the Movement. 6. Use all available federal, state and local laws. 7. Use civil penalties on Porth-type cases. 8. Wage a campaign to educate U.S. Attorneys and federal judges with the importance of prison sentences on cases. 9. District Directors to continue to follow up cases of admitted or known false W-4's or W-4E's to advise employers of responsibilities in such cases and follow up to see that proper 1040's are filed at the filing season. 10. Use State taxing agencies willing to cooperate on enforcement of laws on tax rebels. 11. Los Angeles and San Francisco project supervisors to hold periodic planning meetings on common targets. Croasmun Memorandum: Page 4 of 6 Action Items for Region: 1. Use Tax Executive Institute liaison to inform tax consultants and their client-employers of their duties on suspected false exemption cases. 2. Consider requesting legislation or an IRS published ruling to require employers to file with service centers a copy of amended W-4 or W-4E forms. 3. Use Circular E, The employer's Tax Guide on Withholding, to inform employers of responsibilities on suspected false exemption cases. 4. Use trade journals to reach employers for same purpose. Croasmun Memorandum: Page 5 of 6 Supplement 1 (Rev. 3) RC-W Memorandum 12-24 Regional Objective RC-W4 PUBLIC AWARENESS OF THE ROLE OF THE INTERNAL REVENUE SERVICE The Service should be acutely aware of its responsibility to enhance the belief of the American public that Internal Revenue Service is an effective tax administration body, maintaining the highest principles of integrity. Heads of Office should take positive steps to insure that appropriate managers are aware of and responsive to concerns and contacts with professional groups, the communication media and the taxpaying public. The Service must maintain the capacity to respond timely and intelligently to concerns or issues raised by the public. Areas of Consideration * Evaluate, appraise and react to the tax mood of the nation and of local areas. Heads of Office should impress on all employees the value of effective, professional tax administration as a counterpoint to attacks on the self-assessment system. * Maintain an effective Public Affairs program designed to produce pertinent and effective public information concerning both tax and economic stabilization matters. * Recognize the sensitive problems connected with the organized tax resistance movement. Be aware of the need for diligent enforcement action against organized tax protestors who flagrantly violate the tax laws. * Heads of Office should be aware of their roles as public spokesmen in explaining to the general public and to responsible business and professional groups the Service's role in the administration of both our tax system and the economic stabilization program. Official Use Only Croasmun Memorandum: Page 6 of 6 # # #