Jury Acquits Pilot Who Questioned Liability for Income Tax * The New York Times

[MORTARDUDE]

Jury Acquits Pilot Who Questioned Liability for Income Tax

The New York Times

August 12, 2003, Tuesday, Late Edition - Final

SECTION: Section C; Page 3; Column 1; Business/Financial Desk

BYLINE: By DAVID CAY JOHNSTON


A federal jury in Memphis has acquitted a FedEx pilot on six counts of tax evasion after she testified that she wrote letters asking the Internal Revenue Service what law required her to pay taxes but never received a response.

The verdict, reached on Friday, brings into question the I.R.S. practice of ignoring such questions, which it regards as frivolous because the first words of the Internal Revenue Code are "a tax is hereby imposed."

The pilot, Vernice Kuglin, 58, 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. Normal withholding for the period would have been about $250,000.

FedEx would not say yesterday how many other employees had submitted W-4 forms requesting that little or no tax be withheld. Sandra Munoz, a company spokeswoman, also declined to say whether the company had reviewed its payroll to identify employees who were having no taxes withheld. She did say that FedEx was complying with all I.R.S. regulations on withholding.

The acquittal does not relieve Ms. Kuglin of the obligation to pay the taxes. Joe Murphy, the federal prosecutor in the case, indicated in court that the government intended to pursue collection in a civil action. Mr. Murphy said yesterday 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, noted that the I.R.S. had posted various items on its Web site stating that taxes are mandatory and that it had issued press releases making the same point.

Scores of people who contend that they are not required to pay taxes have said, in interviews over the last nine years, that they had sent letters to the I.R.S. asking what law makes them liable for taxes and had received no response. Promoters of tax evasion schemes often cite the absence of a response as evidence for their claims that taxes are voluntary.

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 she was also troubled by how the "tax honesty movement" had seized on her acquittal, saying she was upset with a remark attributed to Judge McCalla. Both she and Mr. Becraft described the quotation as untrue and misleading.

The quotation, widely distributed over the weekend by people who deny the legitimacy of the tax laws or of the federal government, came from the Web site of the We the People Foundation for Constitutional Education, the chief organizer of the "tax honesty movement." It quoted the judge as refusing to require Ms. Kuglin to file tax returns, saying, "Sir, I don't work for the I.R.S."

Ms. Kuglin said: "I am concerned that some of the tax honesty people are exploiting this and making it look like the judge was being flip. He didn't say that. 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.

[Jerry D]

I like that Judge can we get him to replace Ginsburgh ?