                                                                           FILED
                            NOT FOR PUBLICATION                             NOV 23 2012

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U .S. C O U R T OF APPE ALS




                            FOR THE NINTH CIRCUIT



JOSEPH R. BANISTER,                              No. 11-15961

              Plaintiff - Appellant,             D.C. No. 5:10-cv-02764-JW

  v.
                                                 MEMORANDUM *
UNITED STATES DEPARTMENT OF
THE TREASURY; TIMOTHY F.
GEITHNER, in his official capacity as
Secretary of Treasury,

              Defendants - Appellees.



                    Appeal from the United States District Court
                      for the Northern District of California
                      James Ware, District Judge, Presiding

                          Submitted November 8, 2012 **
                            San Francisco, California

Before: FARRIS, FERNANDEZ, and BYBEE, Circuit Judges.




        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
        **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
      Plaintiff-Appellant Joseph R. Banister appeals from the decision of the

United States District Court for the Northern District of California affirming the

Secretary of the Treasury’s decision to disbar Banister from practice before the

Internal Revenue Service (IRS). Banister admitted to advising clients that they

were not liable for income taxes based on his belief that the Sixteenth Amendment

was not properly ratified and his understanding that Section 861 of the Internal

Revenue Code, 26 U.S.C. § 861, and the regulations thereunder (“Section 861”)

exempted the clients from having to pay income taxes. He also admitted to signing

a client’s tax returns as the returns’ preparer when the returns stated that the client

was not liable for income taxes under Section 861. We have jurisdiction pursuant

to 28 U.S.C. § 1291. We affirm.

      Banister alleges first that the administrative law judge (ALJ), in a decision

upheld by the Secretary of the Treasury, erred in determining that Banister’s

conduct was willful, and disregarded evidence that was relevant to this

determination. We find no error. Even if a good faith belief in an incorrect

understanding of tax law can serve as a defense to an allegation of willfulness in

this context, it was not error to determine that Banister’s violations were willful.

Banister is correct that, in Cheek v. United States, the Supreme Court rejected the

view that “a good-faith misunderstanding of the law or a good-faith belief that one


                                            2
is not violating the law, if it is to negate willfulness, must be objectively

reasonable.” 498 U.S. 192, 201 (1991). But the Court went on to distinguish

between “innocent mistakes caused by the complexity of the Internal Revenue

Code,” on the one hand, and positions that “reveal full knowledge of the provisions

at issue and a studied conclusion, however wrong, that those provisions are invalid

and unenforceable,” on the other. Id. at 205. With regard to the latter category, the

Court held that “a defendant’s views about the validity of the tax statutes are

irrelevant to the issue of willfulness.” Id. at 206. Violating a tax statute because

one believes the statute is invalid constitutes a“refus[al] to utilize the mechanisms

provided by Congress to present . . . claims of invalidity,”and the state of mind

behind such a refusal does not offer a defense to willfulness. Id.

       Banister’s position that the Sixteenth Amendment was not properly ratified

is a belief about the validity of the tax statutes, and therefore, it is irrelevant to the

question of willfulness whether or not he held this belief in good faith. All the

government needed to show was that Banister “refuse[d] to utilize the mechanisms

provided by Congress” to present his claims. Id. The government has shouldered

this burden. Therefore Banister “is in no position to claim that his good-faith

belief about the validity of the [Sixteenth Amendment] negates willfulness.” Id.




                                             3
      Banister’s Section 861 position is “a case in which there is no claim that the

provision at issue is invalid,” and therefore the government must show that, despite

his professed beliefs, Banister was “aware that the law impose[d] a duty upon him”

and did not simply make “an innocent mistake[].” Id. at 201–02, 205. In this

context, Banister reads Cheek’s prohibition against considering the reasonableness

of a professed good-faith belief too broadly. Cheek only narrowly prohibited the

judge from “[c]haracterizing a particular belief as not objectively reasonable” and

“transform[ing] the inquiry into a legal one,” taking the issue away from the finder

of fact. Id. at 203. Here, the ALJ also functioned as factfinder, and so under

Cheek was free to consider the reasonableness of the asserted beliefs and “consider

them to be nothing more than simple disagreements with known legal duties

imposed by the tax laws.” Id. at 203-04.

      As Banister’s extensive research into Section 861 surely revealed, his

position has been universally dismissed by our court system. See, e.g., Solomon v.

Comm’r, 66 T.C.M. (CCH) 1201 (1993) (finding a taxpayer’s tax avoidance

argument was “not bolstered by the regulations under section 861,” and

sanctioning the taxpayer for making frivolous arguments including the Section 861

argument offered by Banister), aff’d by unpublished order, 42 F.3d 1391 (7th Cir.

1994). We view this universal dismissal of Banister’s Section 861 position,


                                           4
coupled with his experience at the IRS and extensive research, as clear evidence

that Banister’s Section 861 position is a “simple disagreement[] with known legal

duties” and not merely an “innocent mistake[],” thus undermining his claim

regarding good-faith belief. The ALJ therefore did not err in rejecting this position

as unreasonable and finding that Banister committed willful violations.

      Banister also alleges that the ALJ erred and violated his due process rights

by (1) finding the IRS pleadings sufficiently particularized; (2) denying Banister’s

discovery requests; (3) denying Banister an evidentiary hearing on the merits and

granting summary judgment; (4) prohibiting Banister from testifying; (5) denying

Banister’s right to cross-examine the witnesses against him; and (6) excluding

allegedly exculpatory witness testimony. None of these assertions have merit.

With regard to the IRS pleadings, the complaint satisfied the requirements set out




                                          5
in 31 C.F.R. § 10.62,1 providing Banister with an opportunity to prepare a defense

by specifying the facts and law constituting the basis for the proceeding.

      Banister admitted to conduct that qualifies as disreputable behavior under 31

C.F.R. § 10.50, rendering him eligible for disbarment under 31 C.F.R. § 10.70.

Specifically, by advising clients that they did not have to pay taxes based on

positions that he could not in good faith have believed to be consistent with the

law, Banister violated 31 C.F.R. §§ 10.51(d), 10.51(j), 10.22(b), and 10.22(c). By

signing a client’s tax returns as preparer even though he knew the positions

advanced in support of the returns did not have a realistic possibility of being

sustained and were frivolous, Banister also violated 31 C.F.R. § 10.34. In light of

Banister’s admissions, there were no material facts in dispute, and the legal



      1
        Many of the regulations in Title 31, Subtitle A, Part 10 of the Code of
Federal Regulations, also known as “Circular 230,” were revised in July 2002 and
then again in September 2007. Under the savings provision of the September 2007
revised regulations, 31 C.F.R. § 10.91, the September 2007 revisions have no
impact on Banister’s case because both the conduct in question and the institution
of the proceedings occurred prior to September 26, 2007. Under the savings
provision of the July 2002 revised regulations, 31 C.F.R. § 10.91, only Subparts D
and E, respectively covering 31 C.F.R. §§ 10.60 through 10.82 and 31 C.F.R. §§
10.90 through 10.93, of the July 2002 revised regulations apply to Banister’s case
because the conduct in question occurred prior to July 26, 2002 but the
proceedings were not instituted until after that date. All citations in this disposition
to sections of Circular 230, other than citations to Subparts D and E, refer to the
regulations in effect prior to the July 2002 revisions. Citations to Subparts D and E
refer to the July 2002 revised regulations.

                                           6
conclusions were apparent based on the settled facts. Summary judgment was thus

wholly appropriate, and no evidentiary hearing was needed. With the material

facts settled, the ALJ did not err by refusing to grant extraneous requests for

discovery, witness testimony, or cross-examination.

      AFFIRMED.




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