## Facts

- Three individual taxpayers filed 1982 federal income tax returns claiming self-created “war tax credits” on the credits line, reducing their reported tax liability.
- Sharon S. Welch claimed a $1,250 “war tax credit” and attached a letter stating that her religious and moral opposition to war prevented her from financing weapons; she stated she would donate the withheld amount to charity.
- Larry Goldsmith claimed a $251.32 credit described as related to “government war crimes,” attaching a letter stating he was deducting a portion of tax as a protest against U.S. militarism and requesting that the balance be used for peaceful purposes.
- Christopher J. Lenney similarly claimed a “war tax credit” reflecting a self-calculated portion of tax he believed supported military expenditures.
- No Internal Revenue Code provision authorizes a “war tax credit” or permits reducing tax liability based on conscientious objection to government spending.
- The IRS assessed each taxpayer a $500 civil penalty under 26 U.S.C. § 6702(a) for filing a frivolous return.
- The IRS had internal, unpublished guidelines listing positions (including “war tax” claims) as frivolous for § 6702 purposes.

## Issues

1. Whether the IRS’s failure to publish internal § 6702 guidelines in the Federal Register invalidated the § 6702 penalty assessments under 5 U.S.C. § 552(a).
2. Whether returns claiming “war tax credits” based on moral or religious opposition to military spending qualify as frivolous returns subject to penalties under 26 U.S.C. § 6702(a).

## Decision

- The First Circuit affirmed the district court’s dismissal with prejudice for failure to state a claim and upheld the penalties.
- The court held that unpublished IRS guidelines did not invalidate § 6702 assessments because the guidelines were interpretive and did not change taxpayers’ substantive rights or obligations.
- The court held the taxpayers’ returns were frivolous under § 6702 because they were facially incorrect by claiming a non-existent credit, and the incorrectness stemmed from a protest position rather than any lawful basis.

## Legal Principles

- A § 6702 penalty may be imposed when a filed document purporting to be a return contains facially incorrect information indicating the self-assessment is substantially incorrect, and the defect results from a frivolous position or intent to impede tax administration.
- Agency interpretive guidelines that merely clarify a statute and do not alter substantive rights generally do not provide a basis to invalidate enforcement action solely because the guidance was not published in the Federal Register.
- Taxpayers may not unilaterally reduce federal income tax liability based on conscientious, moral, or religious objections to how the government spends tax revenues.

## Conclusion

The First Circuit held that “war tax credit” protest returns are sanctionable as frivolous under 26 U.S.C. § 6702 and that the IRS’s reliance on unpublished interpretive guidance did not defeat penalties grounded in the statute’s text.


Welch v. United States, 750 F.2d 1101 (1st Cir. 1985)