Anti-Tax Groups Convince Americans Not to Pay Taxes

Jan. 16, 2008 — -- While most Americans only dream about not having to pay taxes, there are others -- allegedly including Hollywood actor and millionaire Wesley Snipes -- who believe they are exempt from taxation because of the way they interpret the Internal Revenue Code.

But tax lawyers told ABCNEWS.com that the obscure "interpretation" is often nothing more than a technique used by organized groups to bilk people out of money through consulting fees and membership dues by convincing them they don't owe tax money to the government.

Snipes, whose criminal trial began this week in Florida, is charged with eight counts of tax fraud and conspiracy to defraud the government after allegedly filing fraudulent claims for income tax refunds worth millions. He is also accused of refusing to file tax returns at all, beginning in 1999, according to the federal indictment against Snipes, obtained by ABCNEWS.com.

The indictment alleges that Snipes became a member of an anti-tax group known as the American Rights Litigators, which tax analysts told ABCNEWS.com is known for scamming its clients into believing in the "861 Argument."

This so-called argument refers to Section 861 of the Internal Revenue Code, which groups like the ARL say imposes taxes only on income made outside the United States, therefore making income earned within the United States ineligible for taxation.

"It's a twisted reading of the federal tax code," said J.J. MacNab, a Maryland tax expert who has testified before Congress on anti-tax movements. "It's a cult belief."

The government argues that, under the direction of the ARL, Snipes used multiple illegal tactics to avoid paying taxes.

After first initiating contact with ARL and paying the organization a consulting fee in January 2000, Snipes filed an affidavit of incompetence, claiming, among other things, that he did not understand the tax laws and did not know how they applied to him, according to the indictment.

In 2000 Snipes also filed a fraudulent amended tax return for the 1996 tax year that claimed the government owed him a refund of more than $4 million, according to the indictment.

Also in 2000, the ARL began producing fake "bills of exchange," also known as phony checks, totaling $14 million, which Snipes delivered to the IRS in "alleged payment of his federal income tax obligations" for the years of 2000, 2001 and 2002, according to the court documents.

Tax dispute lawyers told ABCNEWS.com that, historically, the 861 argument has never held up in court. There have been a few cases in which defendants were acquitted of criminal charges and avoided jail time by essentially arguing they were brainwashed by groups like the ARL. But every one of the cases has resulted in defendants being forced to pay outstanding taxes and late penalties, the tax lawyers said.

"The American Rights Litigators is a small group -- maybe five or six people in their office -- that profit from marketing to tax protestors," said MacNab. "They claim that if you follow their forms, buy their books and abide by their guidelines they'll get you out of the tax system forever."