IRS slaps a $6 million lien on business of county contractor U.S. says Allnutt has '81-'86 tax liability

October 18, 1992|By James M. Coram | James M. Coram,Staff Writer

The Internal Revenue Service has seized the business of a Howard County contractor who once said that paying taxes with paper money is unconstitutional.

The $6 million lien -- based on a reported tax liability from 1981 through 1986 -- has put 60 employees and 20 subcontractors out of work and affected 100 other businesses in the county.

Fred Waters Allnutt was convicted in 1983 of evading state taxes.

He had refused to file a state tax return or pay property taxes because he believed payment with Federal Reserve notes violated the U.S. Constitution.

The IRS seized trucks, earth moving equipment and an office building belonging to Mr. Allnutt on Oct. 5. The seizure is unrelated to his earlier troubles with state tax officials, an IRS spokesman said.

As a result of the seizure, Mr. Allnutt has filed for protection under Chapter 11 of the bankruptcy code, said Tim Umbreit, Mr. Allnutt's attorney. Mr. Allnutt could not be reached for comment.

Mr. Allnutt, the IRS and the court are trying to reach an accord whereby the company's employees and subcontractors can return to work this week, Mr. Umbreit said.

The seizure "has affected at least 100 separate businesses in the county" that have contracts with Mr. Allnutt, Mr. Umbreit said. "We are trying to get the ripple effect minimized as much as possible."

According to documents filed in Circuit Court here Oct. 2, Mr. Allnutt has a total tax liability of $6,027,198.79 for the years 1981 through 1986.

Identical liens have been filed against Mr. Allnutt and various com

panies having the same address as the Allnutt Building: Constitutional Leasing Association, Fred W. Allnutt Excavating, JFC, JFC Excavating, Sovereign Equipment Association, Sovereign Equipment Co., and Ellicott Building Association, nominee of Fred W. Allnutt.

"The seizure was a last resort," said an IRS agent who agreed to act as a spokesman on condition that he not be identified. "Interim contacts [with Mr. Allnutt] were not successful, and his liability continued to escalate. The next step could be the sale of his assets."

"At this point, it's a civil matter -- no criminal indictments are pending," the IRS spokesman said.

Mr. Allnutt was convicted in an unrelated tax case in August 1983 for failure to file a valid 1981 state tax return and for failure to pay his 1981 retail sales taxes. His gross income was reported to have been more than $400,000 that year.

Although not a member of a 1980s tax protest group called Free State Constitutionalists, Mr. Allnutt held similar views. He said at the time that he believed Federal Reserve Notes are illegal because Article I, Section 10.1 of the Constitution says states shall not "make anything but gold and silver coin a tender in payment of debts."

That clause makes Federal Reserve notes illegal, and the state of Maryland could not require that he pay taxes with them, Mr. Allnutt argued at the time.

Everyone who used that argument as a reason for failing to file federal or state tax returns was required to pay up or go to court. Those who went to court were convicted and most spent time in jail.

Mr. Allnutt did not. He was given a six-month suspended sentence that called for him to serve five years on probation, four of them unsupervised.

"I could have chosen the easier path of tranquil servitude to the state," he told former Circuit Court Judge Guy Cicone at the time of sentencing.

"However, my understanding of the truth of the Word of God and the history of my beloved country demands that I stand here as a witness to that truth so that it is on the record eternally. I simply cannot deny my own conscience, come what may. This stand I take is the least I can do to protect our God-given rights of life, liberty, and property."

"This is perhaps a case that bothers me as much as it bothers you," Judge Cicone told Mr. Allnutt. "Let me allay your fears and those of your family. If is anybody is pondering the idea you may go to jail, I promise you, you won't."

Mr. Allnutt avoided jail and did not meet with his probation officer other than on the day of his sentencing. Like every other part of his sentence, the probation portion was stayed while he appealed it.

According to court records, Mr. Allnutt told his probation officer on the day of his sentencing that he was self-employed, but had no income, and that he had no intention of paying $10,755.50 in fines and court costs. Regardless, he paid $3,000 before his appeal.

After his appeal was denied, the probation officer asked for and received a court order in May 1986 demanding that Mr. Allnutt appear in court to say why his probation should not be revoked for failure to pay the $7,555.50 he still owed the court. In August of the same year, the money was paid and the probation terminated.

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