California CPA’s Appeal of Disbarment Denied

The Treasury Department has denied the appeal of Joseph R. Banister from an administrative law judge’s decision that Banister be disbarred from practice before the Internal Revenue Service. Banister is a Certified Public Accountant from San Jose and former IRS criminal investigation agent.

The IRS Office of Professional Responsibility, in a complaint against Banister, alleged that he was misrepresenting the law to taxpayers and that he failed to file his own federal income tax returns for tax years 1999-2002. OPR investigates allegations of disreputable conduct and incompetence against tax practitioners and enforces the standards of practice for those who represent taxpayers before the IRS, as detailed in Treasury Department Circular 230.

Judge William B. Moran in a Dec. 24, 2003, decision found that Banister provided erroneous advice to taxpayers, including improperly advising them that returns were not required because Sections 861 through 865 of the Internal Revenue Code define "source of income" in a manner which excluded the income of U.S. citizens residing in the U.S. from U.S. tax. Banister also provided erroneous advice that they were not required to file returns because the 16th Amendment to the Constitution was not properly ratified. The original complaint against Banister was later amended to charge Banister with not filing his own returns for tax years 1999-2002.

Banister filed an appeal of the judge’s decision with the Department of the Treasury, citing numerous alleged errors. In a decision dated June 25, 2004, David F.P. O’Connor, acting under a delegation from the Secretary of the Treasury, affirmed Judge Moran’s decision regarding erroneous advice to taxpayers. O’Connor found that the Office of Professional Responsibility had not met its burden of proof with respect to the charge that Banister had failed to file his own returns. He did not send the case back to Judge Moran for further proceedings, during which the Office of Professional Responsibility could have introduced the required additional evidence, because O’Connor agreed with Judge Moran that the charges related to erroneous advice to taxpayers alone warranted disbarment from practice before the IRS.

In rejecting Banister’s claim that his advice to clients was protected speech, and that sanctions under Circular 230 should not restrain zealous advocacy on behalf of taxpayers, O’Connor said “zealous advocacy does not constitute license for the assertion of frivolous positions.” O’Connor noted a number of court decisions in which Banister’s positions on Section 861 and the 16th Amendment have been rejected. He agreed with the spirit of Judge Moran’s statement that “the 861 argument and the non-ratified Sixteenth Amendment argument share a related lunacy in that, for differently concocted reasons, neither accomplishes the presumed goal of creating a Federal income tax on U.S. citizens.”

In addressing the charges related to Banister’s failure to file his own tax returns, O’Connor found that the Office of Professional Responsibility had not met its burden of proof. The missing element was evidence that Mr. Banister had gross income sufficient to trigger a filing obligation in each of the cited tax years.

O’Connor considered and rejected a number of claims that Banister raised regarding the fairness of the discipline process and his opportunity to present his case to the Administrative Law Judge. As a result of this decision, Banister has been disbarred from representing taxpayers before the IRS. He may appeal the decision to U.S. District Court.

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