Washington (Aug. 12, 2004) -- The United States Court of Appeals for the Ninth Circuit affirmed a federal district court preliminary injunction barring three promoters of a scheme that claims that paying federal income tax is voluntary, the Justice Department said.

The court affirmed an injunction against Irwin Schiff and two associates, Cynthia Neun and Lawrence N. Cohen, that bars the trio from advertising or selling Schiff’s “zero-income tax return” plan; from preparing tax returns for others; and from assisting others to violate the tax law, including by “selling services, books or other materials that provide direction about how to fill out fraudulent or false tax forms,” the DoJ said.

The Ninth Circuit rejected Schiff’s contention, also asserted by the American Civil Liberties Union in a “friend of the court” brief, that the injunction violated the First Amendment because it prohibited the sale of Schiff’s book, “The Federal Mafia.” The court held that the portions of the book that the government sought to enjoin were “fraudulent commercial speech” and as such weren't protected by the First Amendment. The appeals court also held that it wasn't a violation of the First Amendment for the lower court to require Schiff to post the injunction on his Web site.

The Nevada district court that issued the injunction had found that the promotion of Schiff’s scheme involved more than 3,000 individuals and an estimated $56 million in attempted tax evasion, and noted that a number of individuals were convicted of tax crimes after following Schiff’s theories.

The injunction also requires Schiff, Neun and Cohen to provide a copy of it to each of their customers, to post it on their Web sites and to provide the government with a list of their customers.

-- WebCPA staff

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