Another Income Tax Win Against the I.R.S.
FedEx Employee Beats I.R.S. in Court

Substantially reprinted from the New York Times article of August 12, 2003
FedEx pilot, Vernice Kuglin, 58, legally has NO taxes withheld from her paycheck, and the I.R.S., like a child denied his fifth helping of ice cream, is throwing a temper tantrum.

After being charge with six counts of "tax evasion" and having her passport stolen by the I.R.S., Vernice was acquitted by a federal jury in Memphis, TN, on Friday. Like many other income tax cases in which the victim has won, Kuglin's testimony was bolstered by a stack of letters she had written to the I.R.S., asking the Internal Revenue Service to tell her the law that requires her to pay taxes. True to its track record, the I.R.S. refused to respond to her repeated inquiries. Instead, the agency used its standard "bluff and bully" strategy to try and force Kuglin to pay. Though many woman her age would have buckled, Vernice stood firm.

As court documents show, the experienced pilot filed a withholding statement on Dec. 30, 1995, directing that no taxes be withheld from her pay. From 1996 through 2001 she earned $920,000 as a pilot for FedEx, but no taxes were withheld, she said yesterday. Had she ignorantly allowed withholding for the period, a total of about $250,000 would have been stripped from her pay and given to the I.R.S. Sandra Munoz, a company spokeswoman for FedEx, said that the shipper was complying with all I.R.S. regulations on withholding and did not say that Kuglin had done anything wrong. Munoz also did not say how many other employees had submitted similar requests via W-4 forms or otherwise, and were having no taxes withheld. Joe Murphy, the federal prosecutor in the case, indicated in court that the agency intended to find a way to take all that it can by way of a civil action. Mr. Murphy did not say if the actions of the I.R.S. were lawful, choosing to dismiss the issue yesterday by saying that he was not allowed to comment on the case outside of court.

The lead defense lawyer, Lowell H. Becraft Jr. of Huntsville, Ala., said he built the defense around the absence of response by the I.R.S. to Ms. Kuglin's letters. He said the letters showed that his client lacked a criminal intent to evade the tax laws and was instead operating from a sincere belief that her conduct was proper. Mr. Becraft, who 12 years ago was part of a team that won acquittals for 17 defendants in another Memphis tax trial, said that jurors told him they had voted 7 to 5 for conviction on Thursday. They then told Judge Jon P. McCalla of Federal District Court that they were deadlocked. He ordered further deliberations, and the jury voted to acquit on Friday. "The whole thing could have been resolved if the government had simply answered her questions," Mr. Becraft said. "It didn't happen. I made an argument to the jury that an American has a right to ask the government for answers. A lot of people in the tax movement do not hide, they are in the face of the I.R.S. and they write letters that set forth their position. And while a lot of them are not articulate or well grounded in legal positions, they have some things they want answered" about their tax liability. But their questions are usually ignored, he said. Mr. Becraft said during an hour he spent with jurors after the verdict their most focused comments were about the absence of a response from the I.R.S. to Ms. Kuglin's letters. The I.R.S. was unable to state yesterday what policy it has on responding to letters asking it to specify the law that makes people liable for income taxes. Nancy Mathis, an I.R.S. spokeswoman, quipped that the I.R.S. had posted various items on its Web site and that it had issued press releases stating that taxes are mandatory, yet she did not cite any sections from the Internal Revenue Code.

In interviews over the last nine years, scores of people who affirm that they are not required to pay the income tax have said that they had sent letters to the I.R.S., asking what law makes them liable for the taxes, yet had received no response. Ms. Kuglin said yesterday, "I believe the 16th Amendment is constitutional and the Internal Revenue Code is constitutional, but I also feel there is a gross misapplication of the individual income tax laws by the I.R.S. The questions I have asked are what section of the Internal Revenue Code makes me liable for the individual income tax and what law requires me to fill out the Form 1040" tax return, she said. Ms. Kuglin said, "The judge was very gracious to Mr. Murphy and very fair in my trial. We had a good, clean case and I would have been pleased because of that if the jury had gone either way, though I am obviously more pleased with the way they decided." She said the judge simply indicated that it was not within his jurisdiction to take any civil actions requiring payment of the taxes. Ms. Kuglin said she hoped to resume flying as soon as the government returns her passport, which was seized after her indictment early this year. In February 2002, a Tax Court judge dismissed Ms. Kuglin's claims of I.R.S. irregularities in determining she owed taxes for 1994 and 1995, but declined an I.R.S. request to impose penalties on her for filing frivolous actions to delay collection.

Court Transcript (Large PDF file)