Memorandum:
Persons Liable for Subtitle A & C Federal Taxes
& Subject to Subtitle F Collection
[Revision 2, May 13, 2001]

The substantial authority standard (26 CFR § 1.6662-4(b)(1)) requires the advocate of a position to make a statement of law that he relies on to support his position. Recognized authorities are listed at § 1.6662-4(d)(3)(iii). Regulations for the substantial authority standard are generally applicable as guides for administrative and/or judicial due process and are adhered to for purposes at hand. This memorandum is intended to be adequately comprehensive. Published authorities cited in this memorandum warrant administrative notice by virtue of the above-cited regulations and they warrant judicial notice under provisions of federal rules of procedure and evidence.
There are certain law-related facts pertaining to standing, venue and subject matter jurisdiction that are not treated in this memorandum but need to be incorporated by mention and reference. The four numbered items that immediately follow have not been disputed or proven in error by the Internal Revenue Service or the Department of Justice even though both have had ample opportunity to do so.
1.	The Internal Revenue Service, successor of the Bureau of Internal Revenue, was not created by Congress, as required by Article I § 8, clause 18 of the Constitution of the United States, so cannot legitimately enforce internal revenue laws of the United States in States of the Union. (See Statement of IRS organization at 39 Fed. Reg. 11572, 1974-1 Cum. Bul. 440, 37 Fed. Reg. 20960, and the Internal Revenue Manual 1100 through the 1997 edition; see also, United States v. Germaine, 99 U.S. 508 (1879); Norton v. Shelby County, 118 U.S. 425, 441, 6 S.Ct. 1121 (1886), and numerous other cases that reinforce the determination “there can be no officer, either de jure or de facto, if there be no office to fill.”)
2.	No internal revenue districts under Internal Revenue Service administrative enforcement jurisdiction have been established in States of the Union under authority of 26 U.S.C. § 7621 and Executive Order #10289, as amended. (See 26 CFR § 301.7621-1) Therefore, IRS enforcement venue is restricted by 4 U.S.C. § 72 (See 26 U.S.C. §§ 7601 et seq.) and whatever specific statutory authority Congress has otherwise enacted to establish IRS venue. The Parallel Table of Authorities and Rules verifies that customs collection districts under administration of the U.S. Customs Service were established via 19 CFR § 101 within States of the Union, but does not verify establishment of internal revenue districts otherwise. While the Parallel Table of Authorities and Rules is a finding aid that is prima facie correct (See 44 U.S.C. § 1510), cumulative evidence in this memorandum reinforces conclusions concerning limited IRS venue and subject matter jurisdiction.
3.	Congress has authorized the Internal Revenue Service, as successor of the Bureau of Internal Revenue, Puerto Rico (predecessor governmental units established May 1, 1900 by the first civil governor), to administer Chapters 1, 2 and 21 of the Internal Revenue Code in insular possessions of the United States by virtue of 26 U.S.C. § 7701(a)(12)(B).
4.	Via 5 U.S.C. § 558(b), Congress specified that agencies may exercise only subject matter jurisdiction with which they are vested. The Secretary of the Treasury delegated certain responsibilities to the Commissioner of Internal Revenue, i.e., the Internal Revenue Service, via Treasury Order #150-42, now incorporated in T.O. #150-01. This is the only venue and subject matter jurisdiction Treasury Order conferring authority to the Commissioner published in the Federal Register in compliance with requirements of 44 U.S.C. § 1505(a). However, there are other unpublished Treasury delegation orders that have special application within the framework of the Federal Register Act, the Administrative Procedures Act, and exceptions relating to government agencies and personnel. The specific “venue” to which the authority applies includes insular possessions and other areas of the world where the United States has jurisdiction. Therefore, Internal Revenue Service subject matter jurisdiction is limited to Federal government agencies and personnel under authority of 5 U.S.C. § 301, the District of Columbia and insular possessions of the United States as provided by statute, and foreign and maritime matters specified by treaties and international agreements (treaties and maritime matters are exempt from Federal Register Act publication requirements). By way of contract, delegation of authority, administrative agreement or otherwise, the Internal Revenue Service is charged with responsibility for maintaining certain Treasury systems of records and providing information to the public. Where government agencies and personnel are concerned, IRS functions are subservient to the Treasury Financial Management Service, the General Services Administration and the General Accounting Office.
The balance of this memorandum addresses who is liable for the family of income taxes imposed by Subtitles A & C of the Internal Revenue Code and who is subject to administrative and judicial process prescribed in Subtitle F.
The Internal Revenue Code, implementing regulations and other authorities relating to federal income tax are tangled, convoluted, vague and otherwise extremely glib so it is necessary to address core issues from several directions in order to construct a comprehensive picture. Fortunately, there are clear but isolated authorities that collectively make the scheme transparent. When brought together, the Federal income tax system takes on the order of a blueprint. However, one of the difficulties characteristic of this approach is choosing a point of demarcation. For that reason, this memorandum begins with regulatory authority for issuing notices of deficiency as the regulation segregates Subtitles A, B & D from Subtitle C authority and thereby provides cognitive footing.
Normal tax imposed by Chapter 1 of the Internal Revenue Code is the same tax at issue under Chapters 1 & 24 collection authority. However, collection procedure is classified differently. Collection by non-government withholding agents (see 26 U.S.C. § 3401(d)) is required by 26 U.S.C. §§ 1441 et seq. The Chapter 3 withholding agent is required to withhold at the source under the classification of “income tax” where withholding from wages at the source in the context of Chapter 24 (26 U.S.C. §§ 3401 et seq.) is classified as “employment tax.” (See 26 CFR § 601.102 for classification of federal taxes) The Internal Revenue Service colorably has jurisdiction over collection under authority of Subtitles A & B, but not under Subtitle C. (See 26 U.S.C. § 7491 for “burden of proof” relating to Subtitle A & B taxes) This is demonstrated by regulatory authorization for revenue officers to issue notices of deficiency, per 26 CFR § 301.6212-1:
§ 301.6212-1 Notice of deficiency. 

(a) General rule. If a district director or director of a service center (or regional director of appeals), determines that there is a deficiency in respect of income, estate, or gift tax imposed by subtitle A or B, or excise tax imposed by chapter 41, 42, 43, or 44, of the Code, such official is authorized to notify the taxpayer of the deficiency by either registered or certified mail.
The employment tax, i.e., withholding authority prescribed by Chapter 24 and other chapters in Subtitle C, does not fall within subject matter jurisdiction of 26 CFR § 301.6212-1 for issuing notices of deficiency. It follows that IRS does not have audit authority or authority to issue notices of lien, levy and seizure where responsibility for withholding from wages falls within Subtitle C parameters.
For purposes of Chapter 24 of the Internal Revenue Code, the “employee” is a government employee defined at 26 U.S.C. § 3401(c), with the employer being a government agency defined at 26 U.S.C. § 3401(d). The definition of “employee” at 26 CFR § 31.3401(c)-1 is clear on the subject:
§ 31.3401(c)-1 Employee. 
  (a) The term "employee" includes every individual performing services if the relationship between him and the person for whom he performs such services is the legal relationship of employer and employee. The term includes officers and employees, whether elected or appointed, of the United States, a State, Territory, Puerto Rico, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing.
There is no statutory authority for non-government employers within States of the Union to withhold from wages under Chapter 3 and, as demonstrated infra, Chapter 24 withholding authority extends only to nonresident aliens, foreign corporations, foreign partnerships, and other foreign juristic entities that might be classified as government agencies or personnel. These distinctions notwithstanding, administrative and enforcement authority for purposes of Chapter 24 withholding at the source is not generally within the scope of Subtitle F of the Internal Revenue Code.
Administrative and judicial collection authority for purposes of Subtitle C employment taxes is prescribed by 5 U.S.C. § 5512 through 5520a. In the event agreement concerning liability isn’t reached, the General Accounting Office, as general agent of the Treasury of the United States (Independent Treasury Act June 10, 1921, ch 18, title III, 42 Stat. 23), must certify tax liabilities or any other obligation to government of the United States. If the debtor employee still refuses to pay, the Attorney General must initiate a civil action for collection (see 5 U.S.C. § 5512 & notes following). Litigation for collection must comply with provisions of the Fair Debt Collection Act (28 U.S.C. §§ 3001 et seq.).
5 USCS § 5512 

§ 5512. Withholding pay; individuals in arrears 

(a) The pay of an individual in arrears to the United States shall be withheld until he has accounted for and paid into the Treasury of the United States all sums for which he is liable.

(b) When pay is withheld under subsection (a) of this section, the employing agency, on request of the individual, his agent, or his attorney, shall report immediately to the Attorney General the balance due; and the Attorney General, within 60 days, shall order suit to be commenced against the individual.

HISTORY:  (Sept. 6, 1966, P.L. 89-554, § 1, 80 Stat. 477; June 6, 1972, P.L. 92-310, Title II, Part 1, § 202, 86 Stat. 202.)
  (As amended Oct. 19, 1996, P.L. 104-316, Title I, § 103(b), 110 Stat. 3828.) 

          HISTORY; ANCILLARY LAWS AND DIRECTIVES 

Prior law and revision: 

 Derivation     U.S. Code       Revised Statutes and 

                      Statutes at Large 

 .................. 5 USC Sec. 82     R.S. Sec. 1766. 

  In subsec. (b), reference to the "General Accounting Office" is substituted for "accounting officers of the Treasury" on authority of Act June 10, 1921, ch 18, title III, 42 Stat. 23. The words "on request of" are substituted for "if required to do so by" as more accurately reflecting the intent. Reference to the "Attorney General" is substituted for "Solicitor of the Treasury" and "Solicitor" on authority of Act March 3, 1933, ch 212, § 16, 47 Stat. 1517; Ex. Or. No. 6166 of June 10, 1933 § 5; and Reorg. Plan No. 2 of 1950, 64 Stat. 1261.
  Standard changes are made to conform with the definitions applicable and the style of this title.
Amendments: 
  1972. Act June 6, 1972, in subsec. (b), deleted "and his sureties", following "against the individual".
  1996. Act Oct. 19, 1996 (effective on enactment, as provided by § 101(e) of such Act, which appears as 2 USCS § 130c note), in subsec. (b), substituted "employing agency" for "General Accounting Office". 

NOTES: 
             CODE OF FEDERAL REGULATIONS
  Department of the Army-Personal check cashing control and abuse prevention, 32 CFR Part 527.
  Environmental Protection Agency-Claims collection standards, 40 CFR Part 13.

                CROSS REFERENCES
  Deductions from military and civilian pay for recovery of erroneous payments, 5 USCS § 5514.
  Coast Guard, pay of enlisted men indebted to United States, 14 USCS § 461.
  Armed forces, withholding pay of officers, 37 USCS § 1007.
  This section is referred to in 37 USCS § 1007.
As demonstrated by the Parallel Table of Authorities and Rules, most collection and enforcement statutes classified in Subtitle F of the Internal Revenue Code are under jurisdiction of the Bureau of Alcohol, Tobacco and Firearms (27 CFR Part 70). The statutory lien imposed by 26 U.S.C. § 6321 does not include liabilities arising under Subtitles A & C and levy and distraint imposed by 26 U.S.C. § 6331 are not generally applicable without an antecedent judgment. (See 28 U.S.C. § 3201 for judgment lien; § 3205 for garnishment authority) Regulatory authority listed in the Parallel Table of Authorities and Rules for relevant six and seven thousand series sections of the Internal Revenue Code follow:
26 USC     Nomenclature	CFR Listing
6020	Substitutes for return	27 Parts 53, 70
6201, 6203, 6204 Assessment authority	27 Part 70
6212	Notice of deficiency	No regulation listed
6303	10-day notice & demand	27 Part 70
6321	Statutory lien	27 Part 70
6331	Levy & distraint	27 Part 70
6651	Failure to file tax return or pay tax	27 Part 24, 25, 70, 194
6652	Failure to file information returns, etc.	No regulation listed
6654	Failure of individual to pay estimated tax	26 Part 1
6655	Failure of corporation to pay est. income tax	26 Part 1
6656	Failure to make deposit of tax	26 Part 1, 27 Part 70
6662	Accuracy-related penalty	26 Part 1
6663	Fraud penalty	No regulation listed
6671	Application of assessable penalties	27 Part 70
6672	Failure to collect & pay, evasion	27 Part 70
6673	Sanctions & costs awarded by courts	No regulations listed
6674	Fraudulent statement; 						failure to furnish statement to employee	No regulation listed
6682	False information concerning withholding	No regulation listed
6694	Understatement by tax return preparer	No regulation listed
6698	Failure to file partnership return	No regulation listed
6700	Promoting abusive tax shelters, etc.	No regulation listed
6701	Aiding & abetting liability understatement	27 Part 70
6702	Frivolous income tax return	No regulation listed
6704	Failure to keep records necessary for 					reporting under section 6047(d)	No regulation listed
6707	Failure to provide information concerning 						tax shelters	No regulation listed
6708	Failure to keep lists of investors in 					potentially abusive tax shelters	No regulation listed
6710	Failure to disclose that contributions 						are nondeductible	No regulation listed
6714	Failure to disclose quid pro quo contributions No regulation listed
6715	Dyed fuel sold for use or used in taxable use	No regulation listed
6721	Failure to file correct information returns	26 Part 35a
6722	Failure to furnish correct payee statements	No regulation listed
6723	Failure to comply with other information 					reporting requirements	27 Part 70
6851	Termination assessments of income tax	26 Part 1
6861	Jeopardy assessments of income, estate, 						gift and certain excise taxes	No regulations listed
6862	Jeopardy assessments other than income,						estate, gift and certain excise taxes	27 Part 70
6863	Stay of collection of jeopardy assessments	27 Part 70
6901	Transferred assets	27 Part 70
6902	Provisions of special application to transferees No regulation listed
6903	Notice of fiduciary relationship	No regulation listed
6904	Prohibition of injunctions	No regulation listed
7121	Closing agreements	27 Part 70
7122	Compromises	27 Part 70
7201	Attempt to evade or defeat tax	No regulation listed
7202	Willful failure to collect or pay tax	No regulation listed
7203	Willful failure to file return, supply 					information or pay tax	No regulation listed
7204	Fraudulent statement or failure to make 					statement to employees	No regulation listed
7205	Fraudulent withholding exemption 					certificate or failure to supply information	No regulation listed
7206	Fraud or false statements	No regulation listed
7207	Fraudulent returns, statements, or other documents 27 Part 70
7210	Failure to obey summons	No regulation listed
7212	Attempts to interfere with administration 						of internal revenue laws	27 Part 170, 270, 275, etc.
7213	Unauthorized disclosure of information	27 Part 17
7214	Offenses by officers or employees of the						United States	5 Part 3101, 27 Part 70
7215	Offenses with respect to collected taxes	No regulation listed
7216	Disclosure of information by preparers	26 Parts 1, 301
7269	Failure to produce records	No regulation listed
7301	Property subject to tax (forfeiture)	No regulation listed
7302	Property used in violation of internal						revenue laws (forfeiture)	27 Parts 24, 272
7321	Authority to seize property subject to forfeiture No regulation listed
7322	Delivery of seized personal property	26 Part 403, 27 Part 72
7323	Judicial action to enforce forfeiture	26 Part 403, 27 Part 72
7324	Special disposition of perishable goods	26 Part 403, 27 Part 72
7325	Personal property valued at $100k or less	26 Part 403, 27 Part 72, 270
7326	Disposal of forfeited or abandoned property 						in special cases	26 Part 403, 27 Part 72
7327	Customs laws applicable	26 Part 403, 27 Part 72
7401	Authorization for civil litigation	27 Part 70
7403	Judicial lien foreclosure	27 Part 70
7601	Canvassing districts	27 Part 70
7602	Examination & summons authority	27 Parts 70, 170 & 296
7603	Service of summons	27 Part 70
7604	Judicial enforcement of summons	27 Part 70
7605	Time & place for examination	27 Part 70
7606	Entry of premises	27 Parts 24, 25, 70, 170, 270, 275,
		290, 295, 296
7608	Authority of revenue officers	27 Parts 70, 170, 296
7609	Third party summonses	27 Part 70
7610	Fees & costs of witnesses	27 Part 70
7621	Establishment of internal revenue districts	No regulation listed
Where regulations authorizing notices of deficiency, lien, levy and seizure under authority of 26 CFR Parts 1 & 31 are not listed in the Parallel Table of Authorities and Rules and other ancillary finding aids authorized by 44 U.S.C. § 1510, the Internal Revenue Service bears the burden of proof that such regulations have been published in accordance with requirements of the Federal Register Act. (See 44 U.S.C. § 1505(a)) The same is true for penalties and crimes. Until the burden of proof necessary to overcome prima facie evidence published in the Parallel Table of Authorities and Rules and other ancillary finding aids is met, 26 CFR § 601.702(a)(2)(ii) effects a bar against adverse IRS actions:
(ii) Effect of failure to publish. Except to the extent that a person has actual and timely notice of the terms of any matter referred to in subparagraph (1) of this paragraph which is required to be published in the Federal Register, such person is not required in any manner to resort to, or be adversely affected by, such matter if it is not so published or is not incorporated by reference therein pursuant to subdivision (i) of this subparagraph. Thus, for example, any such matter which imposes an obligation and which is not so published or incorporated by reference will not adversely change or affect a person's rights.
The exception, per 5 U.S.C. § 301 and 44 U.S.C. § 1505(a), is the rule, regulation or policy statement that has intragovernmental application but does not adversely affect the general population. Where there are no implementing regulations for notices of deficiency, lien, levy or seizure under Parts 1 & 31 of Title 26 of the Code of Federal Regulations, it is obvious that these Subtitle F sections do not have general application except within the jurisdictional context of 27 CFR Part 70 and other regulations under Bureau of Alcohol, Tobacco and Firearms administrative jurisdiction.
The easy explanation for implementing regulations for Internal Revenue Code section cites above, all relating to administration of the Federal Alcohol Administration Act of 1935, is that the sections originated in 1860’s revenue acts relating to alcohol, tobacco and in some cases, cotton. As they evolved through the legislative process, the sections have never been amended for broader application. ATF has statutory as well as regulatory enforcement authority over the Code sections. Precious few Subtitle F six and seven-thousand series sections apply to the normal tax or are otherwise within IRS subject matter jurisdiction.
The Internal Revenue Code is one of fifty titles in the United States Code. The first edition was published in 1926. The United States Code has never been law, as such. The first edition merely classified statutes and statute sections enacted by Congress beginning with the Revised Statutes of 1878 and extending through session laws published in the Statutes at Large through 1925. Titles subsequently enacted as “positive law” constitute “legal evidence” of laws of the United States where those not enacted as positive law, the Internal Revenue Code among them, constitute prima facie evidence of laws of the United States. When there is controversy over any given section of the United States Code, regardless of title, recourse must be had to the Statutes at Large as publication in the Statutes at Large constitutes “conclusive evidence” of laws of the United States.
Congress has enacted a disclaimer with each title of the United States Code. The Internal Revenue Code disclaimer is at 26 U.S.C. § 7806(b):
(b) Arrangement and classification. No inference, implication, or presumption of legislative construction shall be drawn or made by reason of the location or grouping of any particular section or provision or portion of this title, nor shall any table of contents, table of cross references, or similar outline, analysis, or descriptive matter relating to the contents of this title be given any legal effect. The preceding sentence also applies to the sidenotes and ancillary tables contained in the various prints of this Act before its enactment into law.
Sections in the Internal Revenue Code are arranged by subject matter classification. Particularly where Subtitle F administrative and judicial procedure are concerned, physical arrangement does not necessarily determine what the Code section applies to or which of several Department of the Treasury bureaus has subject matter jurisdiction over the section. Via 26 U.S.C. § 7806(b), Congress executed a disclaimer that effectively puts the burden of proof on the advocate: When an application of any given section of the Internal Revenue Code is challenged, the advocate must prove application to facts at issue. Process prescribed for administrative due process procedure at 5 U.S.C. §§ 556(d) & (e) corresponds to process in courts of the United States as well, particularly where the burden of proof and limits to consideration are concerned:
Aside from application of any given section of the Internal Revenue Code being inconclusive, not all internal revenue laws of the United States are contained in Title 26. As demonstrated supra, administrative and judicial enforcement for Chapter 24 government personnel tax is found at 5 U.S.C. §§ 5512 through 5520a, various internal revenue-related criminal statutes are classified in Title 18, various Department of Justice and judicial statutes are classified in Title 28 and there are numerous internal revenue-related sections in Title 31 and other titles of the Code. Subtitle E of the Internal Revenue Code and Title 27 of the United States Code are inextricably linked. By way of 26 U.S.C. § 7327, the Internal Revenue Code is linked with customs laws that published in Title 19.
While the Parallel Table of Authorities and Rules and other ancillary finding aids published in the Index volume of the Code of Federal Regulations may only constitute prima facie evidence, the table is nonetheless sufficient to shift the burden of proof to the advocate who proposes a different application for any given section of the Internal Revenue Code than the Parallel Table of Authorities and Rules prescribes. This is particularly the case where the department or agency responsible for administration is also responsible for maintaining accuracy of the Parallel Table of Authorities and Rules. See Administrative Committee of the Federal Register regulation 1 CFR § 8.5.
Authority for publication of the Code of Federal Regulations and finding aids, along with stipulation that such publications constitute prima facie evidence, is codified at 44 U.S.C. § 1510:
§ 1510. Code of Federal Regulations
  (a) The Administrative Committee of the Federal Register, with the approval of the President, may require, from time to time as it considers necessary, the preparation and publication in special or supplemental editions of the Federal Register of complete codifications of the documents of each agency of the Government having general applicability and legal effect, issued or promulgated by the agency by publication in the Federal Register or by filing with the Administrative Committee, and are relied upon by the agency as authority for, or are invoked or used by it in the discharge of, its activities or functions, and are in effect as to facts arising on or after dates specified by the Administrative Committee. 
(b) A codification published under subsection (a) of this section shall be printed and bound in permanent form and shall be designated as the "Code of Federal Regulations." The Administrative Committee shall regulate the binding of the printed codifications into separate books with a view to practical usefulness and economical manufacture. Each book shall contain an explanation of its coverage and other aids to users that the Administrative Committee may require. A general index to the entire Code of Federal Regulations shall be separately printed and bound. 
(c) The Administrative Committee shall regulate the supplementation and the collation and republication of the printed codifications with a view to keeping the Code of Federal Regulations as current as practicable. Each book shall be either supplemented or collated and republished at least once each calendar year. 
(d) The Office of the Federal Register shall prepare and publish the codifications, supplements, collations, and indexes authorized by this section. 
(e) The codified documents of the several agencies published in the supplemental edition of the Federal Register under this section, as amended by documents subsequently filed with the Office and published in the daily issues of the Federal Register, shall be prima facie evidence of the text of the documents and of the fact that they are in effect on and after the date of publication. 
(f) The Administrative Committee shall prescribe, with the approval of the President, regulations for carrying out this section. 
(g) This section does not require codification of the text of Presidential documents published and periodically compiled in supplements to Title 3 of the Code of Federal Regulations.
The Parallel Table of Authorities and Rules, along with other ancillary finding aids published in the Index volume of the Code of Federal Regulations, are intended to give people a reliable means for locating regulations that might be applicable to them. The purpose is to preclude imposition of secret law.
Congress first authorized publication of the Code of Federal Regulations after the Supreme Court of the United States took an uncompromising stand against what amounted to executive law. The pivotal case was Panama Refining Co., et al v. Ryan et al, 293 U.S. 388, 55 S. Ct. 241, 79 L. Ed. 446 (1935):
We are not dealing with action which, appropriately belonging to the executive province, is not the subject of judicial review, or with the presumptions attaching to executive action. n15 To repeat, we are concerned with the question of the delegation of legislative power. If the citizen is to be punished for the crime of violating a legislative order of an executive officer, or of a board or commission, due process of law requires that it shall appear that the order is within the authority of the officer, board or commission, and, if that authority depends on determinations of fact, those determinations must be shown. As the Court said in Wichita Railroad & Light Co. v. Public Utilities Comm'n, 260 U.S. 48, 59: "In creating such an administrative agency the legislature, to prevent its being a pure delegation of legislative power, must enjoin upon it a certain course of procedure and certain rules of decision in the performance of its function. It is a wholesome and necessary principle that such an agency must pursue the procedure and rules enjoined and show a substantial [***75] compliance therewith to give validity to its action. When, therefore, such an administrative agency is required as a condition precedent to an order, to make a finding of facts, the validity of the order must rest upon the needed finding. If it is lacking, the order is ineffective. [*433] It is pressed on us that [**254] the lack of an express finding may be supplied by implication and by reference to the averments of the petition invoking the action of the Commission. We can not agree to this." Referring to the ruling in the Wichita case, the Court said in Mahler v. Eby, 264 U.S. 32, 44: "We held that the order in that case made after a hearing and ordering a reduction was void for lack of the express finding in the order. We put this conclusion not only on the language of the statute but also on general principles of constitutional government." We cannot regard the President as immune from the application of these constitutional principles. When the President is invested with legislative authority as the delegate of Congress in carrying out a declared policy, he necessarily acts under the constitutional restriction applicable to [***76] such a delegation.

We see no escape from the conclusion that the Executive Orders of July 11, 1933, and July 14, 1933, and the Regulations issued by the Secretary of the Interior thereunder, are without constitutional authority.
Thereafter, Congress enacted the Federal Register Act and within a few years the scheme for the Code of Federal Regulations and a comprehensive index were added to the legislation. However, the index was made more or less useless after 1967 amendments to the legislation. John Cervase addressed the matter via writ of mandamus, an attorney who believed the lack of comprehensive indexing compromised the American people. In Cervase v. Office of the Federal Register, 580 F.2d 1166 (1978), the Third Circuit Court of Appeals affirmed the mandamus. The history of and purpose of the Code of Federal Regulations and comprehensive indexing was reviewed in the decision. Selected portions of the Cervase decision follow:
John Cervase, an attorney at law appearing pro se, appeals from the dismissal of his complaint on the government's motion under Rule 12(c) of the Federal Rules of Civil Procedure. The complaint alleges: (1) that the Office of the Federal Register is under a statutory duty to prepare and publish an analytical subject index to the Code of Federal Regulations; (2) that the Office has breached this duty by preparing only a 164-page table of contents to the entire 120-volume Code; and (3) that this breach of duty has injured Cervase and the public at large by making it almost impossible for them to know which [**2] federal regulations apply to them. The government filed an answer to this complaint, but later moved for judgment on the pleadings. On December 16, 1976, the district court granted the government's motion and dismissed the action. The court reasoned that mandamus would not lie to enforce the alleged statutory duty, that the Office was not a suable entity, and that the plaintiff had failed to satisfy the requirements of standing. In addition, the court declined to accept an amended complaint proffered by Cervase. The entire transcript of the exceptionally brief hearing on the government's Rule 12(c) motion is quoted in the margin. n1 Since we believe that such a summary disposition of Cervase's complaint was improper, we reverse the dismissal and remand the case for further proceedings.

The original Federal Register Act provided for a compilation of all existing agency regulations of general applicability and legal effect. In 1937, however, that Act was amended to provide for codification instead of compilation, with a new codification to be made after five years. n6

In the 1937 amendment Congress, for the first time, [**6] imposed the indexing obligation on those responsible for preparing the periodic codifications. n7 The significance of this obligation within the framework of what is commonly referred to as the Federal Register System n8 is obvious. Codification of a document is prima facie evidence both of its text and of its continuing legal effect. n9 Publication of the document in the Federal Register makes it effective against the world. But without the retrieval mechanism provided by an adequate index, a person might never be aware of a document containing a regulation affecting him until some federal bureaucrat produced a copy of the document and attempted to apply it to him. Indeed, the affected individual might already have changed his position in complete ignorance of the existence of the regulation. Such ignorance would avail him not, however, since publication in the Federal Register gives him constructive notice [*1169] of the existence of the regulation. The Federal Register Act was enacted because of widespread dissatisfaction with the unsystematic manner in which executive orders, agency regulations, and similar materials were being made available to the public. n10 The basic [**7] object of this statutory reform was to eliminate secret law. We think that the indexing obligation is a central and essential feature of this congressional plan. Without that obligation the periodic codification of regulations cannot serve the congressional purpose of providing public access to what has been published in the Federal Register.

The Administrative Committee of the Federal Register is charged with the statutory responsibility for publishing the Federal Register and the Code of Federal Regulations. n13 However, through a regulation the Committee has delegated the authority to administer the Office of the Federal Register to the Director of the Federal Register. n14 Other regulations provide for the indexing of the Federal Register n15 and for the annual publishing of a subject index to the Code of Federal Regulations. n16 Neither the Federal Register Act nor these regulations make this matter of indexing discretionary. On the contrary, there is a plain and mandatory duty to provide indices.

Cervase claims that the 164-page table of contents is so totally inadequate that it cannot be considered to be in compliance with that mandatory duty. In his brief to the district court Cervase observed that the 1938 codification consisted of 14 volumes, with a general index of 513 pages. The current codification has grown to 120 volumes covering fifty titles, while what passes for an index has actually shrunk to 164 pages. By contrast, the general index to the fifty titles of the annotated United States Code comprises eight bound volumes and eight supplements, or a total of 9024 pages.
Although his complaint alleged only a violation of 44 U.S.C. § § 1510(b) and (d), in his brief to the district court Cervase also relied on the Administrative Procedure Act, n17 as amended by the Freedom of Information Act. n18 This Act imposes a separate indexing obligation on federal agencies: 
Each agency shall also maintain and make available for public inspection and copying current indexes providing identifying information for the public as to any matter issued, adopted, or promulgated after July 4, 1967, and required by this paragraph to be made available or [**10] published. Each agency shall promptly publish, quarterly or more frequently, and distribute (by sale or otherwise) copies of each index or supplements thereto unless it determines by order published in the Federal Register that the publication would be unnecessary and impracticable, in which case the agency shall nonetheless provide copies of such index on request at a cost not to exceed the direct cost of duplication. A final order, opinion, statement of policy, interpretation, or staff manual or instruction that affects a member of the public may be relied on, used, or cited as precedent by an agency [*1170] against a party other than an agency only if - 
(i) it has been indexed and either made available or published as provided by this paragraph; or
(ii) the party has actual and timely notice of the terms thereof.

 5 U.S.C. § 552(a) (2) (emphasis supplied). Since Cervase's amended complaint was not filed, we do not know whether it sought relief against any other agencies for failure to comply with the statute quoted above. But Cervase did argue that § 1510(b) should be construed in pari materia with the Freedom of Information Act. That [**11] Act reaffirmed Congress' commitment to the principle of meaningful public access, by means of indexing, to records of agency action.
To ignore ancillary finding aids such as the Parallel Table of Authorities and Rules would be to treat legislation Congress enacted as nothing more than the creation of busy work to swell government bureaucracy. The truth of the matter is that the Parallel Table of Authorities and Rules commands judicial notice. Where the advocate proposes application of any given Code section other than that verified by the Parallel Table of Authorities and Rules, he bears the burden of proving a different application than the table prescribes. Presumption favors the defendant unless or until the advocate meets the burden of proof. The purpose of the comprehensive Index to the Code of Federal Regulations, including the Parallel Table of Authorities and Rules, is intended to provide a reliable resource that assists people who need to know what regulation applies to whom and what liability or responsibility any given regulation imposes.
The burden of proof rule begins at the administrative due process level, as prescribed by 5 U.S.C. §§ 556(d) & (e):
(d) Except as otherwise provided by statute, the proponent of a rule or order has the burden of proof. Any oral or documentary evidence may be received, but the agency as a matter of policy shall provide for the exclusion of irrelevant, immaterial, or unduly repetitious evidence. A sanction may not be imposed or rule or order issued except on consideration of the whole record or those parts thereof cited by a party and supported by and in accordance with the reliable, probative, and substantial evidence. The agency may, to the extent consistent with the interests of justice and the policy of the underlying statutes administered by the agency, consider a violation of section 557(d) of this title sufficient grounds for a decision adverse to a party who has knowingly committed such violation or knowingly caused such violation to occur. A party is entitled to present his case or defense by oral or documentary evidence, to submit rebuttal evidence, and to conduct such cross- examination as may be required for a full and true disclosure of the facts. In rule making or determining claims for money or benefits or applications for initial licenses an agency may, when a party will not be prejudiced thereby, adopt procedures for the submission of all or part of the evidence in written form.
(e) The transcript of testimony and exhibits, together with all papers and requests filed in the proceeding, constitutes the exclusive record for decision in accordance with section 557 of this title and, on payment of lawfully prescribed costs, shall be made available to the parties. When an agency decision rests on official notice of a material fact not appearing in the evidence in the record, a party is entitled, on timely request, to an opportunity to show the contrary. [Underscore added for emphasis]
However, while fault demonstrated by the Parallel Table of Authorities and Rules is significant in itself, it does not positively determine liability for the Chapter 1 normal tax and other species of income tax imposed by Subtitles A & B of the Internal Revenue Code, nor does it demonstrate the hard link between Subtitle A & C application.
Where Subtitle A is concerned, the “payee” (recipient of payments) is not the person liable to the government for the normal tax, and where Subtitle C is concerned, the “employee” (wage or salary earner) is not the person liable. In the first instance, the withholding agent is liable for withholding the appropriate tax, keeping books and records and filing returns; in the latter instance, the government agency is liable. The “payee” and the “employee” are not required to keep books and records and file returns except in unusual circumstances where there might be reason for filing refund claims with the Internal Revenue Service. In most situations, payees and employees settle tax matters with withholding agents or responsible agency officers.
Per 26 CFR § 31.6001-1(d), the employee subject to withholding at the source of wages isn’t required to keep books and records:
(d) Records of employees. While not mandatory (except in the case of claims), it is advisable for each employee to keep permanent, accurate records showing the name and address of each employer for whom he performs services as an employee, the dates of beginning and termination of such services, the information with respect to himself which is required by the regulations in this subpart to be kept by employers, and the statements furnished in accordance with the provisions of § 31.6051-1.
While an employee may be required to submit to increased withholding or may be due refunds, either or both are to be resolved between the employer and the employee. Rarely should an employee have direct dealings with the Internal Revenue Service. Among the exceptions would be in the event of over-withholding of Chapter 21 Social Security tax due to the employee working for two or more foreign employers in the course of a year. In that event, the employee would file for a refund directly with the Internal Revenue Service. (See 26 CFR § 601.401(d)) If an employee billed an employer for a refund of Social Security and/or the government personnel tax but the employer refused to make the refund, the employee could then file for a special refund directly from the Internal Revenue Service with a Form 843. See 26 CFR §§ 31.6001-1 through the end of Part 31.
Liability of the withholding agent for purposes of Subtitle A is as follows:
26 CFR 1.1461-1 

 § 1.1461-1 Payment and returns of tax withheld. 
  (a) Payment of withheld tax -- (1) Deposits of tax. Every withholding agent who withholds tax pursuant to chapter 3 of the Internal Revenue Code (Code) and the regulations under such chapter shall deposit such amount of tax with a Federal reserve bank or authorized financial institution as provided in § 1.6302-2(a). If for any reason the total amount of tax required to be returned for any calendar year pursuant to paragraph (b) of this section has not been deposited pursuant to § 1.6302-2, the withholding agent shall pay the balance of tax due for such year at such place as the Internal Revenue Service (IRS) shall specify. The tax shall be paid when filing the return required under paragraph (b)(1) of this section for such year, unless the IRS specifies otherwise. 
 (2) Penalties for failure to pay tax. For penalties and additions to the tax for failure to timely pay the tax required to be withheld under chapter 3 of the Code, see sections 6656, 6672, and 7202 and the regulations under those sections.
Per 26 U.S.C. §§ 3403 & 3404, the employer is liable for withholding at the source for purposes of Chapter 24:
§ 3403. Liability for tax. 
The employer shall be liable for the payment of the tax required to be deducted and withheld under this chapter, and shall not be liable to any person for the amount of any such payment.
§ 3404. Return and payment by governmental employer. 
If the employer is the United States, or a State, or political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing, the return of the amount deducted and withheld upon any wages may be made by any officer or employee of the United States, or of such State, or political subdivision, or of the District of Columbia, or of such agency or instrumentality, as the case may be, having control of the payment of such wages, or appropriately designated for that purpose.
Regulations at 26 CFR §§ § 31.3402(d)-1 & 31.3403-1 are even more detailed with respect to employer liability:
§ 31.3402(d)-1 Failure to withhold. 
  If the employer in violation of the provisions of section 3402 fails to deduct and withhold the tax, and thereafter the income tax against which the tax under section 3402 may be credited is paid, the tax under section 3402 shall not be collected from the employer. Such payment does not, however, operate to relieve the employer from liability for penalties or additions to the tax applicable in respect of such failure to deduct and withhold. The employer will not be relieved of his liability for payment of the tax required to be withheld unless he can show that the tax against which the tax under section 3402 may be credited has been paid. See § 31.3403-1, relating to liability for tax.
§ 31.3403-1 Liability for tax. 
  Every employer required to deduct and withhold the tax under section 3402 from the wages of an employee is liable for the payment of such tax whether or not it is collected from the employee by the employer. If, for example, the employer deducts less than the correct amount of tax, or if he fails to deduct any part of the tax, he is nevertheless liable for the correct amount of the tax. See, however, § 31.3402(d)-1. The employer is relieved of liability to any other person for the amount of any such tax withheld and paid to the district director or deposited with a duly designated depositary of the United States.
Withholding at the source, whether by a withholding agent under provisions of 26 U.S.C. §§ 1441 et seq. or the responsible agency officer, is on income or wages paid to a nonresident alien, a foreign corporation, a foreign partnership or some other foreign juristic entity. The requirement for withholding is incorporated in the definition of “withholding agent” at 26 CFR § 1.1441-7(a):
 § 1.1441-7 General provisions relating to withholding agents. [Effective Jan. 1, 2001]
(a) Withholding agent defined -- (1) In general. For purposes of chapter 3 of the Internal Revenue Code and the regulations under such chapter, the term withholding agent means any person, U.S. or foreign, that has the control, receipt, custody, disposal, or payment of an item of income of a foreign person subject to withholding, including (but not limited to) a foreign intermediary described in § 1.1441-1(e)(3)(i), a foreign partnership, or a U.S. branch described in § 1.1441-1(b)(2)(iv)(A) or (E). See § § 1.1441-1(b)(2) and (3) and 1.1441-5(c), (d), and (e), for rules to determine whether a payment is considered made to a foreign person. Any person who meets the definition of a withholding agent is required to deposit any tax withheld under § 1.1461-1(a) and to make the returns prescribed by § 1.1461-1(b) and (c), except as otherwise may be required by a qualified intermediary withholding agreement, a withholding foreign partnership agreement, or a withholding foreign trust agreement. When several persons qualify as withholding agents with respect to a single payment, only one tax is required to be withheld and deposited. See § 1.1461-1. A person who, as a nominee described in § 1.6031(c)-1T, has furnished to a partnership all of the information required to be furnished under § 1.6031(c)-1T(a) shall not be treated as a withholding agent if it has notified the partnership that it is treating the provision of information to the partnership as a discharge of its obligations as a withholding agent.
The “individual” subject to withholding at the source, whether for purposes of Chapter 3 or Chapter 24, is a nonresident alien. Definitions at 26 CFR § 1.1441-1(c)(3)(i) & (ii) clarify application of withholding authority:
(3) Individual -- (i) Alien individual. The term alien individual means an individual who is not a citizen or a national of the United States. See § 1.1-1(c). 
 (ii) Nonresident alien individual. The term nonresident alien individual means a person described in section 7701(b)(1)(B), an alien individual who is a resident of a foreign country under the residence article of an income tax treaty and § 301.7701(b)-7(a)(1) of this chapter, or an alien individual who is a resident of Puerto Rico, Guam, the Commonwealth of Northern Mariana Islands, the U.S. Virgin Islands, or American Samoa as determined under § 301.7701(b)-1(d) of this chapter. An alien individual who has made an election under section 6013 (g) or (h) to be treated as a resident of the United States is nevertheless treated as a nonresident alien individual for purposes of withholding under chapter 3 of the Code and the regulations thereunder.
Per 26 CFR § 1.1441-1(d)(1), withholding agents are not required to withhold at the source from payments to payees who are United States persons:
(d) Beneficial owner's or payee's claim of U.S. status -- (1) In general. Under paragraph (b)(1) of this section, a withholding agent is not required to withhold under chapter 3 of the Code on payments to a U.S. payee, to a person presumed to be a U.S. payee in accordance with the provisions of paragraph (b)(3) of this section, or to a person that the withholding agent may treat as a U.S. beneficial owner of the payment. Absent actual knowledge or reason to know otherwise, a withholding agent may rely on the provisions of this paragraph (d) in order to determine whether to treat a payee or beneficial owner as a U.S. person.
Although somewhat convoluted, distinction between non-exempt persons, i.e., nonresident aliens, foreign corporations, and the like, and exempt persons, which include citizens and resident of the United States, domestic corporations, and domestic government entities, is provided by definitions at 26 CFR §§ 1.1441-1(c)(2), (20) & (21):
(2) Foreign and U.S. person. The term foreign person means a nonresident alien individual, a foreign corporation, a foreign partnership, a foreign trust, a foreign estate, and any other person that is not a U.S. person described in the next sentence. Solely for purposes of the regulations under chapter 3 of the Internal Revenue Code, the term foreign person also means, with respect to a payment by a withholding agent, a foreign branch of a U.S. person that furnishes an intermediary withholding certificate described in paragraph (e)(3)(ii) of this section. Such a branch continues to be a U.S. payor for purposes of chapter 61 of the Internal Revenue Code. See § 1.6049-5(c)(4). A U.S. person is a person described in section 7701(a)(30), the U.S. government (including an agency or instrumentality thereof), a State (including an agency or instrumentality thereof), or the District of Columbia (including an agency or instrumentality thereof).
(20) Exempt recipient. The term exempt recipient means a person that is exempt from reporting under chapter 61 of the Internal Revenue Code and backup withholding under section 3406 and that is described in § § 1.6041-3(q), 1.6045-2(b)(2)(i), and 1.6049-4(c)(1)(ii), and § 5f.6045-1(c)(3)(i)(B) of this chapter. Exempt recipients are not exempt from withholding under chapter 3 of the Internal Revenue Code unless they are U.S. persons or foreign persons entitled to an exemption from withholding under chapter 3.
(21) Non-exempt recipient. A non-exempt recipient is any person that is not an exempt recipient under paragraph (c)(20) of this section.
The general rule at 26 CFR § 1.1441-1(d) applies uniformly to payees and employees:
(d) Beneficial owner's or payee's claim of U.S. status -- (1) In general. Under paragraph (b)(1) of this section, a withholding agent is not required to withhold under chapter 3 of the Code on payments to a U.S. payee, to a person presumed to be a U.S. payee in accordance with the provisions of paragraph (b)(3) of this section, or to a person that the withholding agent may treat as a U.S. beneficial owner of the payment. Absent actual knowledge or reason to know otherwise, a withholding agent may rely on the provisions of this paragraph (d) in order to determine whether to treat a payee or beneficial owner as a U.S. person.
The manner of claim for exemption from withholding by a citizen or resident of the United States was simple and clear in the version of 26 CFR § 1.1441-5(a) that was effective through January 31, 2000:
§ 1.1441-5 Claiming to be a person not subject to withholding.
(a) Individuals. For purposes of chapter 3 of the Code, an individual’s written statement that he or she is a citizen or resident of the United States may be relied upon by the payer of the income as proof that such individual is a citizen or resident of the United States. This statement shall be furnished to the withholding agent in duplicate. An alien may claim residence in the United States by filing Form 1078 with the withholding agent in duplicate in lieu of the above statement.
The solid link between Subtitle A and C withholding authority is 26 CFR § 31.3402(n)-1:
§ 31.3402(n)-1 Employees incurring no income tax liability. 
Notwithstanding any other provision of this subpart, an employer shall not deduct and withhold any tax under chapter 24 upon a payment of wages made to an employee after April 30, 1970, if there is in effect with respect to the payment a withholding exemption certificate furnished to the employer by the employee which contains statements that-- 
 (a) The employee incurred no liability for income tax imposed under subtitle A of the Code for his preceding taxable year; and 
 (b) The employee anticipates that he will incur no liability for income tax imposed by subtitle A for his current taxable year. 
 For purposes of section 3402(n) and this section, an employee is not considered to incur liability for income tax imposed under subtitle A if the amount of such tax is equal to or less than the total amount of credits against such tax which are allowable to him under part iv of subchapter A of chapter 1 of the Code, other than those allowable under section 31 or 39. For purposes of section 3402(n) and this section, "liability for income tax imposed under subtitle A" shall include liability for a qualified State individual income tax which is treated pursuant to section 6361(a) as if it were imposed by chapter 1 of the Code. An employee is not considered to incur liability for such a State income tax if the amount of such tax does not exceed the total amount of the credit against such tax which is allowable to him under section 6362(b)(2) (B) or (C) or section 6362(c)(4). For purposes of this section, an employee who files a joint return under section 6013 is considered to incur liability for any tax shown on such return. An employee who is entitled to file a joint return under such section shall not certify that he anticipates that he will incur no liability for income tax imposed by subtitle A for his current taxable year if such statement would not be true in the event that he files a joint return for such year, unless he filed a separate return for his preceding taxable year and anticipates that he will file a separate return for his current taxable year.
The regulatory scheme is resolved by (a) the payee or employee having been a citizen or resident of the United States in the preceding year and (b) intending to retain United States citizen or resident status in the current and/or future years. Liability for Subtitle A tax, whether withheld or otherwise found owing under Subtitle A or Chapter 24 authority, lies against nonresident alien individuals and foreign juristic entities such as corporations, partnerships and trusts.
This general application is to some extent modified by source rules found at 26 CFR § 1.861-8. The regulation includes a comprehensive list of income sources that citizens and residents of the United States may be taxed on when they have items of income from the enumerated sources.
In general, citizens and residents of the United States may be taxed on items of income derived from some country other than the United States, income from insular possessions of the United States, and income from international trade subject to trade agreements and treaties. The determination rule at 26 CFR § 1.861-8(a)(4) prescribes application rules:
(4) Statutory grouping of gross income and residual grouping of gross income. For purposes of this section, the term "statutory grouping of gross income" or "statutory grouping" means the gross income from a specific source or activity which must first be determined in order to arrive at "taxable income" from which specific source or activity under an operative section. (See paragraph (f)(1) of this section.) Gross income from other sources or activities is referred to as the "residual grouping of gross income" or "residual grouping." For example, for purposes of determining taxable income from sources within specific foreign countries and possessions of the United States, in order to apply the per-country limitation to the foreign tax credit (as in effect before enactment of the Tax Reform Act of 1976), the statutory groupings are the separate gross incomes from sources within each country and possession. Moreover, if the taxpayer has income subject to section 904(d) (as in effect after enactment of the Tax Reform Act of 1976), such income constitutes one or more separate statutory groupings. In the case of the per-country limitation, the residual grouping is the aggregate of gross income from sources within the United States. In some instances, where the operative section so requires, the statutory grouping or the residual grouping may include, or consist entirely of, excluded income. See paragraph (d)(2) of this section with respect to the allocation and apportionment of deductions to excluded income.
In general, citizens and residents of the United States and United States juristic entities such as corporations, partnerships and trusts are liable for Subtitle A income taxes on sources itemized at 26 CFR § 1.861-8(f)(1):
(f) Miscellaneous matters -- (1) Operative sections. The operative sections of the Code which require the determination of taxable income of the taxpayer from specific sources or activities and which give rise to statutory groupings to which this section is applicable include the sections described below. 
 (i) Overall limitation to the foreign tax credit. Under the overall limitation to the foreign tax credit, as provided in section 904(a)(2) (as in effect before enactment of the Tax Reform Act of 1976, or section 904(a) after such enactment) the amount of the foreign tax credit may not exceed the tentative U.S. tax (i.e., the U.S. tax before application of the foreign tax credit) multiplied by a fraction, the numerator of which is the taxable income from sources without the United States and the denominator of which is the entire taxable income. Accordingly, in this case, the statutory grouping is foreign source income (including, for example, interest received from a domestic corporation which meets the tests of section 861(a)(1)(B), dividends received from a domestic corporation which has an election in effect under section 936, and other types of income specified in section 862). Pursuant to sections 862(b) and 863(a) and § § 1.862-1 and 1.863-1, this section provides rules for identifying the deductions to be taken into account in determining taxable income from sources without the United States. See section 904(d) (as in effect after enactment of the Tax Reform Act of 1976) and the regulations thereunder which require separate treatment of certain types of income. See example 3 of paragraph (g) of this section for one example of the application of this section to the overall limitation. 
 (ii) [Reserved] 
 (iii) DISC and FSC taxable income. Sections 925 and 994 provide rules for determining the taxable income of a FSC and DISC, respectively, with respect to qualified sales and leases of export property and qualified services. The combined taxable income method available for determining a DISC's taxable income provides, without consideration of export promotion expenses, that the taxable income of the DISC shall be 50 percent of the combined taxable income of the DISC and the related supplier derived from sales and leases of export property and from services. In the FSC context, the taxable income of the FSC equals 23 percent of the combined taxable income of the FSC and the related supplier. Pursuant to regulations under section 925 and 994, this section provides rules for determining the deductions to be taken into account in determining combined taxable income, except to the extent modified by the marginal costing rules set forth in the regulations under sections 925(b)(2) and 994(b)(2) if used by the taxpayer. See Examples (22) and (23) of paragraph (g) of this section. In addition, the computation of combined taxable income is necessary to determine the applicability of the section 925(d) limitation and the "no loss" rules of the regulations under sections 925 and 994. 
 (iv) Effectively connected taxable income. Nonresident alien individuals and foreign corporations engaged in trade or business within the United States, under sections 871(b)(1) and 882(a)(1), on taxable income which is effectively connected with the conduct of a trade or business within the United States. Such taxable income is determined in most instances by initially determining, under section 864(c), the amount of gross income which is effectively connected with the conduct of a trade or business within the United States. Pursuant to sections 873 and 882(c), this section is applicable for purposes of determining the deductions from such gross income (other than the deduction for interest expense allowed to foreign corporations (see § 1.882-5)) which are to be taken into account in determining taxable income. See example 21 of paragraph (g) of this section. 
 (v) Foreign base company income. Section 954 defines the term "foreign base company income" with respect to controlled foreign corporations. Section 954(b)(5) provides that in determining foreign base company income the gross income shall be reduced by the deductions of the controlled foreign corporation "properly allocable to such income". This section provides rules for identifying which deductions are properly allocable to foreign base company income. 
 (vi) Other operative sections. The rules provided in this section also apply in determining -- 
 (A) The amount of foreign source items of tax preference under section 58(g) determined for purposes of the minimum tax; 
 (B) The amount of foreign mineral income under section 901(e); 
 (C) [Reserved] 
 (D) The amount of foreign oil and gas extraction income and the amount of foreign oil related income under section 907; 
 (E) The tax base for citizens entitled to the benefits of section 931 and the section 936 tax credit of a domestic corporation which has an election in effect under section 936; 
 (F) The exclusion for income from Puerto Rico for residents of Puerto Rico under section 933; 
 (G) The limitation under section 934 on the maximum reduction in income tax liability incurred to the Virgin Islands; 
 (H) The income derived from Guam by an individual who is subject to section 935; 
 (I) The special deduction granted to China Trade Act corporations under section 941; 
 (J) The amount of certain U.S. source income excluded from the subpart F income of a controlled foreign corporation under section 952(b); 
 (K) The amount of income from the insurance of U.S. risks under section 953(b)(5); 
 (L) The international boycott factor and the specifically attributable taxes and income under section 999; and 
(M) The taxable income attributable to the operation of an agreement vessel under section 607 of the Merchant Marine Act of 1936, as amended, and the Capital Construction Fund Regulations thereunder (26 CFR, part 3). See 26 CFR 3.2(b)(3).
Unlike casual narrative, words and phrases used in statutes, regulations and the like have precise meanings that have specific applications. For example, 26 U.S.C. § 1(a), which authorizes joint returns for married individuals, makes the following provisions:
Sec. 1. Tax imposed.
(a) Married individuals filing joint returns and surviving spouses.
There is hereby imposed on the taxable income of –
(1) every married individual (as defined in section 7703) who makes a single return jointly with his spouse under section 6013, and
(2) every surviving spouse (as defined in section 2(a)), a tax determination in accordance with the following table:
Per 26 CFR § 1.1441-1(c)(3)(i), supra, the term “individual” means “alien individual.” Because of its special meaning, the term “individual” is classified as a “term of art.” So far as Subtitle A of the Internal Revenue Code is concerned, the term “individual” does not have the common conversational meaning it ordinarily has in fiction and other narrative literature.
By understanding that the term applies to a specific class of person, the next task is determining what “taxable income” is for the class of individual who might file a single return jointly under authority of § 6013. However, § 6013 is a permissive, not a mandatory, Internal Revenue Code section:
6903	Joint returns.
A husband and wife may make a single return jointly of income taxes under subtitle A, even though one of the spouses has neither gross income nor deductions…
The next problem is determining what “taxable income” is (26 U.S.C. § 63), as distinguished from “gross income” (26 U.S.C. § 61).
At 26 U.S.C. § 6012(a)(1)(A), we find that, “Every individual having for the taxable year gross income which equals or exceeds the exemption amount…” shall file a return. However, this Code section is as flawed as §§ 1 & 6013 as it rests on determination of what individual is liable and what constitutes gross income for the individual who is liable. The section that actually requires filing a return, but does not determine who must file except for specifying that filing determination is governed by location in internal revenue districts of the United States, is § 6091. Internal revenue districts must be established under authority of 26 U.S.C. 7621 and Executive Order 10289, as amended.
§ 6091. Place for filing returns or other documents. 
(a) General rule. When not otherwise provided for by this title, the Secretary shall by regulations prescribe the place for the filing of any return, declaration, statement, or other document, or copies thereof, required by this title or by regulations.
(b) Tax returns. In the case of returns of tax required under authority of part II of this subchapter--
  (1) Persons other than corporations. 
   (A) General rule. Except as provided in subparagraph (B), a return (other than a corporation return) shall be made to the Secretary--
     (i) in the internal revenue district in which is located the legal residence or principal place of business of the person making the return, or
    (ii) at a service center serving the internal revenue district referred to in clause (i), as the Secretary may by regulations designate.
The venue or territorial bounds of any given law must be determined prior to addressing subject matter jurisdiction of whatever agency is responsible for administering and enforcing it. Section 6091 is a venue statute. In general, it restricts the requirement for filing returns to territorial bounds of internal revenue districts.
By way of 26 U.S.C. § 7621, Congress authorized the President to establish internal revenue districts of the United States. In compliance with requirements of 3 U.S.C. § 301, the President delegated authority for establishing internal revenue districts to the Secretary of the Treasury through an amendment to E.O. 10289. By way of Treasury Order 150-42, a former Secretary of the Treasury delegated authority to the Commissioner of Internal Revenue for administration of internal revenue laws of the United States in insular possessions of the United States. In 1986, the original delegation was amended by T.O. 150-01. The replacement eliminated authority in the Panama Canal Zone and simultaneously expanded authority to “other areas of the world” where the United States has jurisdiction. Even this illusion of geographical authority was abandoned in March 2001 when the most recent version of T.O. 150-01 was canceled by T.O. 150-02. The new delegation order organizes the Internal Revenue Service into divisions without reference to any particular geography other than national headquarters being located in the District of Columbia.
The venue or territorial jurisdiction issue has significant import as regulations governing general procedure state the obvious with respect to the Internal Revenue Service having administrative authority exclusively within internal revenue districts except where a matter falls within international jurisdiction. Unless or until internal revenue districts are established in States of the Union in compliance with requirements of 26 U.S.C. § 7621, 4 U.S.C. § 72 restricts IRS geographical authority. Venue of the Internal Revenue Service in internal revenue districts is restated in 26 CFR § 601.101(a):
§ 601.101 Introduction. 

  (a) General. The Internal Revenue Service is a bureau of the Department of the Treasury under the immediate direction of the Commissioner of Internal Revenue. The Commissioner has general superintendence of the assessment and collection of all taxes imposed by any law providing internal revenue. The Internal Revenue Service is the agency by which these functions are performed. Within an internal revenue district the internal revenue laws are administered by a district director of internal revenue. The Director, Foreign Operations District, administers the internal revenue laws applicable to taxpayers residing or doing business abroad, foreign taxpayers deriving income from sources within the United States, and taxpayers who are required to withhold tax on certain payments to nonresident aliens and foreign corporations, provided the books and records of those taxpayers are located outside the United States. For purposes of these procedural rules any reference to a district director or a district office includes the Director, Foreign Operations District, or the District Office, Foreign Operations District, if appropriate. Generally, the procedural rules of the Service are based on the Internal Revenue Code of 1939 and the Internal Revenue Code of 1954, and the procedural rules in this part apply to the taxes imposed by both Codes except to the extent specifically stated or where the procedure under one Code is incompatible with the procedure under the other Code. Reference to sections of the Code are references to the Internal Revenue Code of 1954, unless otherwise expressly indicated. [Underscore added for emphasis added]
The venue or geographical implications of 26 CFR § 601.101 concerning internal revenue districts confirms restrictions imposed by 26 U.S.C. §§ 7601 et seq. Where there is no evidence that the Secretary of the Treasury established internal revenue districts in States of the Union under authority vested by E.O. #10289, IRS personnel are ordinarily prohibited from enforcement of internal revenue laws of the United States in States of the Union unless there is accommodation by States of the Union with respect to certain classes of people other than those native to or naturalized within the several States party to the Constitution. Requirements for filing imposed by 26 U.S.C. § 6091 reinforce this conclusion.
A few cases in which § 6091 was determined to be the Code section that requires filing returns include United States v. Calhoun, 566 F. 2d 969, 973 (5th Cir. 1978); United States v. Garman, 748 F.2d 218, 219 (4th Cir. 1984); United States v. Griffin, 814 F.2d 806, 810 (1st Cir. 1987); United States v. Citron, 221 F.Supp. 454, 456 (S.D.N.Y. 1963); United States v. Gilkey, 362 F.Supp. 1069, 1071 (E.D. Pa. 1973);United States v. Ramantanin, 452 F.2d 670, 671 (4th Cir. 1971); United States v. Lawhon, 499 F.2d 352, 355 (5th Cir. 1974); United States v. Quimby, 636 F.2d 86, 90 (5th Cir. 1981); United States v. Gorman, 393 F.2d 209, 213, 214 (7th Cir. 1968); United States v. Grabinski, 727 F.2d 681, 684 (8th Cir. 1984); United States v. Clinton, 574 F.2d 464, 465 (9th Cir. 1978); and United States v. Dawes, 874 F.2d 746, 750 (10th Cir. 1989).
As required by § 6091(a), the Secretary promulgated regulations for the Code section. There are four in the 26 CFR § 1.6091 series but only § 1.6091-3 has a valid Office of Management and Budget number listed (OMB numbers are cataloged at 26 CFR § 602.101(b)). The 26 CFR § 1.6091-3 regulation imposes the following filing requirements:
§ 1.6091-3 Income tax returns required to be filed with Director of International Operations. 

  The following income tax returns shall be filed with the Director of International Operations, Internal Revenue Service, Washington, DC 20225, or the district director, or the director of the service center, depending on the appropriate officer designated on the return form or in the instructions issued with respect to such form: 
 (a) Income tax returns on which all, or a portion, of the tax is to be paid in foreign currency. See § § 301.6316-1 to 301.6316-6 inclusive, and § § 301.6316-8 and 301.6316-9 of this chapter (Regulations on Procedure and Administration). 
 (b) Income tax returns on an individual citizen of the United States whose principal place of abode for the period with respect to which the return is filed is outside the United States. A taxpayer's principal place of abode will be considered to be outside the United States if his legal residence is outside the United States or if his return bears a foreign address. 
 (c) Income tax returns of an individual citizen of a possession of the United States (whether or not a citizen of the United States) who has no legal residence or principal place of business in any internal revenue district in the United States. 
 (d) Except in the case of any departing alien return under section 6851 and § 1.6851-2, the income tax return of any nonresident alien (other than one treated as a resident under section 6013 (g) or (h)). 
 (e) The income tax return of an estate or trust the fiduciary of which is outside the United States and has no legal residence or principal place of business in any internal revenue district in the United States. 
 (f) Income tax returns of foreign corporations. 
 (g) The return by a withholding agent of the income tax required to be withheld at source under Chapter 3 of the Code on nonresident aliens and foreign corporations and tax-free covenant bonds, as provided in § 1.1461-2. 
 (h) Income tax returns of persons who claim the benefits of section 911 (relating to earned income from sources without the United States). 
 (i) Income tax returns of corporations which claim the benefits of section 922 (relating to special deduction for Western Hemisphere trade corporations) except in the case of consolidated returns filed pursuant to the regulations under section 1502. 
 (j) Income tax returns of persons who claim the benefits of section 931 (relating to income from sources within possessions of the United States). 
 (k) Income tax returns of persons who claim the benefits of section 933 (relating to income from sources within Puerto Rico). 
 (l) Income tax returns of corporations which claim the benefits of section 941 (relating to the special deduction for China Trade Act corporations). 

The list of return requirements itemized in 26 CFR § 1.6091-3 roughly corresponds with income sources listed at 26 CFR § 1.861-8(f)(1), supra. However, even though I.R.C. § 6091 determines venue, it does not resolve two key elements of the tax scheme.
In order for there to be a tax liability, there must be a taxing statute and a liability statute. The necessity of these elements was addressed in United States of America v. Menk, 260 F. Supp. 784 at 787:
It is immediately apparent that this section alone does not define the offense as the defendant contends. But rather, all three of the sections referred to in the information - Sections 4461, 4901 and 7203 - must be considered together before a complete definition of the offense is found. Section 4461 imposes a tax on persons engaging in a certain activity; Section 4901 provides that payment of the tax shall be a condition precedent to engaging in the activity subject to the tax; and Section 7203 makes it a misdemeanor to engage in the activity without having first paid the tax, and provides the penalty. It is impossible to determine the meaning or intended effect of any one of these sections without reference to the others.
Any time a penalty is at issue, there must be taxing and liability statutes antecedent to the penalty statute being applicable. Where someone is simply compelled to perform some act such as filing a tax return, there must be taxing and liability statutes. Further, the taxing statute must be specific. This requirement was articulated in United States of America v. Community TV, Inc., 327 F.2d 79 (10th Cir., 1964):
Without question, a taxing statute must describe with some certainty the transaction, service, or object to be taxed, and in the typical situation it is construed against the Government. Hassett v. Welch, 303 U.S. 303, 58 S. Ct. 559, 82 L. Ed. 858.
The tax imposed by 26 U.S.C. § 1 lacks specificity until the “individual” subject to the tax is determined and until “taxable income” is determined. Where the latter is concerned, taxable income, defined at 26 U.S.C. § 63, is some portion of “gross income” defined at 26 U.S.C. § 61. However, § 61 lists items of income but does not specify sources of income that might constitute gross income for any given person. That is the role of source rules prescribed in Subchapter N of Chapter 1, §§ 861 et seq., and attending regulations, cited and treated supra.
Meaning of the word “income” causes confusion but the Supreme Court has more or less reduced the legal meaning of the troublesome term to “gain”. If there is no gain, there is no income at least so far as the term is used in the Sixteenth Amendment. Coming to grips with the distinction between capital and pay or compensation for labor verses profit or gain is essential to determining what is or isn’t treated as gross income. A reasonably decent exposition of the term and its application was provided by the Supreme Court in Bowers v. Kerbaugh-Empire Company 271 U.S. 170; 46 S. Ct. 449; 70 L. Ed. 88 (1926):
[***7] The Sixteenth Amendment declares that Congress shall have power to levy and collect taxes on income, "from [*174] whatever source derived" without apportionment among the several States, and without regard to any census or enumeration. It was not the purpose or effect of that Amendment to bring any new subject within the taxing power. Congress already had power to tax all incomes. But taxes on incomes from some sources had been held to be "direct taxes" within the meaning of the constitutional requirement as to apportionment. Art. I, § 2, cl. 3, § 9, cl. 4; Pollock v. Farmers' Loan and Trust Co., 158 U.S. 601. The Amendment relieved from that requirement and obliterated the distinction in that respect between taxes on income that are direct taxes and those that are not, and so put on the same basis all incomes "from whatever source derived." Brushaber v. Union Pac. R. R., 240 U.S. 1, 17. "Income" has been taken to mean the same thing as used in the Corporation Excise Tax Act of 1909, in the Sixteenth Amendment and in the various revenue acts subsequently passed. Southern Pacific Co. v. Lowe, 247 U.S. 330, 335; [***8] Merchants L. & T. Co. v. Smietanka, 255 U.S. 509, 519. After full consideration, this Court declared that income may be defined as gain derived from capital, from labor, or from both combined, including profit gained through sale or conversion of capital. Stratton's Independence v. Howbert, 231 U.S. 399, 415; Doyle v. Mitchell Brothers Co., 247 U.S. 179, 185; Eisner v. Macomber, 252 U.S. 189, 207. And that definition has been adhered to and applied repeatedly. See e. g. Merchants L. & T. Co. v. Smietanka, supra, 518; Goodrich v. Edwards, 255 U.S. 527, 535; United States v. Phellis, 257 U.S. 156, 169; Miles v. Safe Deposit Co., 259 U.S. 247, 252-253; United States v. Supplee-Biddle Co., 265 U.S. 189, 194; Irwin v. Gavit, 268 U.S. 161, 167; Edwards v. Cuba Railroad, 268 U.S. 628, 633. In determining what constitutes income substance rather than form is [***9] to be given controlling weight. Eisner v. Macomber, supra, 206. [Underscore added for emphasis]
Gain derived from capital, from labor, or from both removes capital and labor as objects of the normal tax imposed by 26 U.S.C. § 1. The income at issue is “derived from”. This explains why the wage even of government personnel (26 CFR §§ 3401 et seq.) is not the object of taxation. Labor is equivalent to a capital asset. The return for labor, which is necessary for living and enjoying life, attends unalienable rights proclaimed in the Declaration of Independence: All people are endowed with rights to life, liberty and pursuit of happiness (property). The Fifth Amendment protects these rights by the substantive right to due process in the course of the common law. Direct tax on capital and/or labor are what they are and do not fall within the province of the Sixteenth Amendment tax on “income” as the term is applied by law.
The matter was treated somewhat more extensively in Conner v. Unites States of America 303 F. Supp. 1187 (USDC, S.D. Tex, 1969):
The issue to be resolved here is whether or not plaintiffs improperly excluded from their gross income, as that phrase appears in section 61(a) of the Internal Revenue Code of 1954, $4,200.00 received from the insurance company as reimbursement for the rental payments paid by plaintiffs plus $465.82 for reimbursement for other out-of-pocket living expenses resulting from the fire. n1 The parties agree that this is an issue which is solely one of law to be decided by the Court.
Section 61(a), Internal Revenue Code of 1954, defines gross income in the following terms:
"Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items: (1) Compensation for services, including fees, commissions, and similar items; (2) Gross income derived from business; (3) Gains derived from dealings in property; (4) Interest; (5) Rents; (6) Royalties; (7) Dividends; (8) Alimony and separate maintenance payments; (9) Annuities; (10) Income from life insurance and endowment contracts; (11) Pensions; (12) Income from discharge of indebtedness; (13) Distributive share of partnership gross income; (14) Income in respect of a decedent; and (15) Income from an interest in an estate or trust."
[*1189] How really broad is section 61(a)? Does it include within its scope the type of receipt paid to plaintiffs in this instance? The answers to these questions can be determined only by a careful investigation of the concept of income for tax purposes and the various stages through which it has evolved.
Income has been the subject of federal taxation since as long ago as the Civil War and continuously since 1913. Rapp, Some Recent Developments in the Concept of Taxable Income, 11 Tax L. Rev. 329 (1956). In that year, the sixteenth amendment [**7] to the United States Constitution was proclaimed as having been ratified. It provided then, as now, that:
"The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."
Plainly, the amendment was not a grant of power to Congress to tax incomes, for such a power is one which Congress always had. It was adopted to meet the decision of the United States Supreme Court in Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429, 39 L. Ed. 759, 15 S. Ct. 673 (1895) which declared the Income Tax Act of 1894 unconstitutional on the ground that it was an unapportioned direct tax. See Bowers v. Kerbaugh-Empire Co., 271 U.S. 170, 173-4, 70 L. Ed. 886, 46 S. Ct. 449 (1926).
No attempt has ever been made by Congress to define with specificity the term "income" as it is used in the sixteenth amendment. In earlier taxing acts, it instead provided that "gross income" includes "gains, profits, and income" from various designated sources "or from any source whatsoever," leaving to administrative and judicial determination the inclusion or exclusion of [**8] certain items. See Rapp, supra.
The judiciary accepted this responsibility and in Eisner v. Macomber, 252 U.S. 189, 207, 64 L. Ed. 521, 40 S. Ct. 189 (1919), the Supreme Court, referring to two cases n2 arising under the Corporation Tax Act of 1909, endorsed the following definition of income:
"'Income may be defined as the gain derived from capital, from labor, or from both combined,' provided it be understood to include profit gained through the sale or conversion of capital assets." 
With the growth of tax jurisprudence and the increasing store of experience with income tax problems, this "all-inclusive" formulation to test the presence of income was found to be impractical. The Supreme Court gradually abandoned its earlier pronouncements as universal criteria, instead approaching particular situations on an ad [**9] hoc basis, and throughout underscoring the "all-inclusive" scope of the income which Congress is permitted constitutionally to tax. n3
Final abandonment of the "all-inclusive" approach to this definition of income came with the case of Commissioner v. Glenshaw Glass Co., supra. There, it was held that exemplary damages recovered for fraud or as the punitive two-thirds portion of a treble damage antitrust recovery must be reported by a taxpayer as gross income under section 22(a) of the Internal Revenue Code of 1939. That provision is as follows:
"'Gross income' includes [**10] gains, profits, and income derived from salaries, wages, or compensation for personal service ... of whatever kind [*1190] and in whatever form paid, or from professions, vocations, trades, businesses, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property; also from interest, rent, dividends, securities, or the transaction of any business carried on for gain or profit, or gains or profits from any source whatever." 
The Court said that the Eisner definition of "income" was useful in the context of the decision there, i.e., distinguishing gain from capital, but that:
" ... it was not meant to provide a touchstone to all future gross income questions ...
"Here we have instances of undeniable accessions to wealth, clearly realized, and over which the taxpayers have complete dominion...."
The language of section 61(a) of the Internal Revenue Code of 1954, set forth above, might at first glance appear to have broadened the definition of gross income by the omission of any reference to gain. n4 This, however, is not so, because the Supreme Court had before [**11] it the then recently enacted 1954 Code of Internal Revenue when it decided Commissioner v. Glenshaw Glass Co., supra. It noted that, although the definition of gross income had been simplified, "no effect on its present broad scope was intended." 348 U.S. at 432. n5 In addition, the Court in General American Investors Co. v. Commissioner, 348 U.S. 434, 99 L. Ed. 504, 75 S. Ct. 478 (1955), decided the same day as Glenshaw Glass Company, supra, held that "insider profits" under the Securities and Exchange Act of 1934 were includable in the recipient corporation's gross income.
"In accordance with the legislative design to reach all gain constitutionally taxable unless specifically excluded, we conclude that the petitioner is liable for the tax ...." 348 U.S. at 436. 
The opinion in Glenshaw Glass Company, supra, regardless of what it said about Eisner v. McComber, supra, did not repudiate the concept that there must be gain before there is income within the meaning of the sixteenth amendment. 1 Mertens, section 5.02, p. 4. This is verified by the fact that in Commissioner v. Lo Bue, 351 U.S. 243, 100 L. Ed. 1142, 76 S. Ct. 800 (1956), a year after [**12] the decisions in Glenshaw Glass Company, supra, and General American Investors v. Commissioner, supra, it was said:

"We have repeatedly held that in defining 'gross income' as broadly as it did in section § 22(a) Congress intended to ' tax all gains except those specifically exempted.'" 351 U.S. at 246.
To the same effect, see Commissioner v. Minzer, 279 F.2d 338 (5th Cir. 1960).
Accountants and economists may differ greatly as to what is or is not income. It is not, however, their theories that have guided the courts throughout the years. Instead, the courts have chosen to use the meaning given the term "income" by its everyday use in common speech. Helvering v. Edison Bros. [*1191] Stores, 133 F.2d 575 (8th Cir. 1943); 1 Mertens, supra, n. 5, p. 2. And the meaning of income in its everyday sense is "a gain or recurrent benefit usually measured in money that derives from capital or labor; also: the amount of such gain recovered by an individual in a given period of time." Webster's Seventh New Collegiate Dictionary, p. 425 (1965 - Emphasis added). Income is nothing more nor less than realized gain. Shuster v. Helvering, 121 F.2d 643 (2nd Cir. 1941). It is not synonymous with receipts. 47 C.J.S., section § 98, p. 226.
Whatever may constitute income, therefore, must have the essential feature of gain to the recipient. This was true when the sixteenth amendment became effective, it was true at the time of the decision in Eisner v. McComber, supra, it was true under section 22(a) of the Internal Revenue Code of 1939, and it is likewise [**14] true under section 61(a) of the Internal Revenue Code of 1954. If there is no gain, there is no income.
It is apparent that plaintiffs in this case realized no gain in connection with the reimbursement by the insurance company of the rental payments in the total amount of $4,200.00. If there was any income in the ordinary and real sense of the word realized by anyone relating to these payments, it was the owner of the house that plaintiffs rented. With respect to the reimbursement by the [**15] insurance company to plaintiffs of the $4,200.00, plaintiffs were no more than a conduit through which these funds passed.
If one of plaintiffs suffered a personal injury covered by insurance, the receipts of that insurance would be specifically excludable under section 104(a)(3) of the Internal Revenue Code of 1954. The same would hold true under section 104(a)(2) if plaintiffs had been compensated for personal injury not covered by insurance. While it is recognized that these statutory exclusions apply only to personal injuries, the same logic on which they are based would control the issue of the judicial exclusion from gross income of the payments made to the plaintiffs here. Congress has taxed income, not compensation. [Underscore added for emphasis]
Direct payment for labor is different from profit derived from labor. If a business contracted labor to another concern with the consequence of generating profit above the cost of labor, returns beyond direct payment to whoever actually provided the labor would be profit. If a worker, professional or whatever earned more from his labor than he needed to live, interest and other returns generated from investment of direct labor returns would potentially be subject to the Chapter 1 normal tax. In a manner of speaking, wages, salaries and the like are compensation, not income. This conclusion is reinforced by the 26 CFR § 31.3402(n)-1 exemption provision. Even for government personnel, the wage is not the object of the tax. But even this technicality appears to be qualified almost to the point of being moot by the necessity of determining the source of income in order to qualify what is gross and therefore taxable income to whom.
At the risk of belaboring the point, the term “individual,” as used in 26 U.S.C. § 1, takes on contextual vagary because of peculiarities of Subtitles A, B & C. The person subject to the tax, i.e., the nonresident alien individual or foreign juristic entity, is not the person liable for keeping books and records, filing returns and paying the tax. As previously demonstrated, the withholding agent (26 U.S.C. §§ 1441 et seq.) is liable for withholding tax on items of income for purposes of Subtitle A where the employer agency by way of a designated officer is liable for Chapter 24 employment taxes withheld from wages at the source (26 U.S.C. §§ 3401 et seq.).
The OMB number for 26 CFR § 1.6091-3 corresponds with the Form 1040NR tax return, which is a return filed by or for nonresident aliens with income from sources within the United States other than income derived from United States trade or business. Other than that, withholding agents and responsible government agency officers are the persons liable for keeping books and records, withholding at the source, filing returns and paying the normal tax. Domestic corporations, partnerships and other juristic entities that receive items of income from sources listed in 26 CFR § 1.861-8(f)(1) are also required to file applicable returns and pay the prescribed tax.
In summary, nonresident aliens and foreign juristic entities are subject to the normal tax imposed by Chapter 1 and other income taxes included in Subtitles A & B of the Internal Revenue Code when income is derived from sources within the United States. Under authority of Chapter 24, withholding at the source from wages derived from government employment is also applicable to nonresident aliens and foreign juristic entities as it is the Chapter 1 normal tax that is actually withheld. The Chapter 3 withholding agent, although an employer may operate in a dual capacity, does not withhold from wages, as such, where the government agency authorized under Chapter 24 to withhold from wages does not generally withhold from income other than wages. The withholding agent and the designated agency officer are the persons liable for the tax whether those subject to the tax pay it or not.
Citizens and residents of the United States are not liable for the Chapter 1 normal tax from sources within the United States regardless of the activity or enterprise that might be included in the 26 U.S.C. § 61 list of income items and activities unless the person is authorized to serve as a withholding agent or serves as the responsible officer for a government agency authorized by the Treasury Financial Management Service to withhold at the source. Likewise, Chapter 3 withholding agents must be certified or otherwise submit qualifying forms. See 26 CFR § 1.1441-1effective January 1, 2001.
Withholding agents and designated government agency officers are liable for withholding at the source, keeping books and records, filing returns and paying accrued liabilities withheld at the source under authority of Chapters 3 & 24 of the Internal Revenue Code. The payee or employee is not generally required to keep books and records and file returns except in unusual situations where he or she might not be able to resolve the matter with a single withholding agent or employer. Whether the withholding agent or agency officer responsible for withholding withholds sufficient tax from payees and employees or not, the withholding agent or government employer is liable for making full payment of tax principal, interest and penalties. 
There are no 26 CFR Part 1 or 31 regulations for notices of deficiency, notices of lien, notices of levy, notices of seizure, audits, summonses or other adverse administrative action arising out of Subtitle F of the Internal Revenue Code. In general, implementing regulations for these Code sections are in 27 CFR § 70, which is under administrative authority of the Bureau of Alcohol, Tobacco and Firearms.
There is no evidence that internal revenue districts within the scope of Internal Revenue Service subject matter jurisdiction have been established in States of the Union under authority of 26 U.S.C. § 7621 and Executive Order 10289, as amended. Without internal revenue districts within IRS subject matter jurisdiction having been established, IRS personnel are precluded from directly engaging in administrative collection activity in States of the Union by 4 U.S.C. § 72.
The Chapter 1 normal tax, i.e., income tax, issues against profits and gains from capital, from labor, or from both, but does not apply directly to capital, labor or compensation.