Not Written for You: The Income Tax Hidden in Plain Sight
Part 11 of 13
The State That Isn't Your State
When an American reads the word "State" in a federal statute, the assumption is immediate: my state. Ohio. Georgia. Texas. That assumption is wrong more often than most people would believe.
The Internal Revenue Code contains multiple definitions of "State." They are not the same. They do not all include the fifty states of the Union. And the differences are not accidental.
"Includes" Revisited
In Part 1 of this series, we established how the word "includes" operates in statutory definitions. The enumerated items that follow "includes" establish a class. Only items of the same class may be added. Unstated items outside the class are excluded.
The definition of "State" for the purposes of FICA — the Social Security and Medicare tax — is found at 26 U.S.C. § 3121(e)(1):
Read the enumerated items. The District of Columbia. Puerto Rico. The Virgin Islands. Guam. American Samoa. Every item on the list is a place under the exclusive legislative jurisdiction of Congress. Not one is a state of the Union.
The class established by these items is federal territories and possessions. Ohio is not in that class. Neither is Georgia or Texas. The definition does not include the fifty states, because the fifty states are not in the same class as the enumerated items.
Congress Knows the Difference
Some readers will assume this must be a drafting error. It is not. Congress has demonstrated repeatedly that it knows exactly how to include the fifty states when it wants to.
Elsewhere in Title 26 — in § 6103(b)(5)(A), a provision concerning the disclosure of tax return information — the definition reads:
There it is. "Any of the 50 States." When Congress intends the definition to embrace the states of the Union, it says so. It uses "means" — which limits the definition strictly to the enumerated items — and it names the fifty states explicitly.
The FICA definition does neither. It uses "includes," and it lists only federal territories and possessions.
"United States" Is No Different
The definition of "United States" for FICA purposes, found at § 3121(e)(2), follows the same pattern:
The Supreme Court in Hooven & Allison Co. v. Evatt, 324 U.S. 652 (1945), identified three distinct meanings of "United States": the nation as a sovereign among nations, the territory over which federal sovereignty extends, or the collective name for the states united under the Constitution. These are not the same thing.
The enumerated items in § 3121(e)(2) — Puerto Rico, the Virgin Islands, Guam, American Samoa — are all territory over which federal sovereignty extends. That is the second meaning. It is not the third. The fifty states of the Union, united under the Constitution, are not enumerated and do not fall within the class established by the items that are.
Alaska and Hawaii Prove the Point
When Alaska and Hawaii were admitted to the Union as states, Congress removed them from the Social Security Act's definition of "State." If the definition had always included the states of the Union, there would have been nothing to remove. Congress removed them precisely because once they became states of the Union, they were no longer in the class of federal territories and possessions that the definition establishes.
Why It Matters
Every statute operates within its own definitions. If "State" does not include the fifty states, and "United States" does not include the fifty states, then the provisions controlled by those definitions do not reach the citizens of the fifty states working within them.
This is not a loophole. It is the structure of the code. Congress limited these provisions to the places under its exclusive legislative jurisdiction, and it did so using the same definitional tools it uses throughout the United States Code.
Next: Every definition, every form, every Treasury Decision, and every withholding chapter points to the same class of persons. The final post ties every thread together.
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