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Concern At IRS Use of Civil Asset Forfeiture Laws

by Mike Godfrey,, Washington

31 October 2014

Following a recent report in The New York Times, lawmakers have expressed concerns about the Internal Revenue Service's use of civil asset forfeiture laws to seize the assets of small business owners.

The Civil Asset Forfeiture Act of 2000, which was aimed at preventing money laundering, drug trafficking, or other crimes, has been criticized for enabling government agencies to use greatly reduced standards of evidence to seize assets, and for the assets' owners themselves to generally have to prove their innocence.

In addition, civil forfeiture victims must either pay for a lawyer, which some cannot afford to do, or defend their property themselves. Overall, more than USD2bn was collected in 2013 from civil and criminal forfeitures.

In its article, The New York Times, using various examples, pointed out that "the Government has gone after run-of-the-mill business owners and wage earners without so much as an allegation that they have committed serious crimes. The Government can take the money without ever filing a criminal complaint, and the owners are left to prove they are innocent."

One example showed how the IRS had not accused a small restaurant "of money laundering or cheating on her taxes – in fact, she has not been charged with any crime. Instead, the money was seized solely because she had deposited less than USD10,000 at a time [so-called 'structuring'], which they viewed as an attempt to avoid triggering a required government report."

The newspaper's article led the IRS to state that "after a thorough review of our structuring cases over the last year and in order to provide consistency throughout the country (between our field offices and the US attorney offices) regarding our policies, IRS-Criminal Investigations (CI) will no longer pursue the seizure and forfeiture of funds associated solely with 'legal source' structuring cases. … IRS-CI special agents will [only] use this act as an indicator that further illegal activity may be occurring."

However, others are of the opinion that the law still needs to be reformed. Chuck Grassley (R – Iowa), Ranking Member of the Senate Judiciary Committee, and formerly Chairman and Ranking Member of the Finance Committee with jurisdiction over the IRS, said that "the IRS plays a role in fighting money laundering and other criminal activity, but it has to treat business owners fairly. If the pendulum has swung too far in favor of the Government and against fairness for innocent people, then it's time to reform civil asset forfeiture laws and procedures."

"I plan to look into the government's use of civil forfeiture laws," he added, "and develop potential reforms where necessary."

In fact, a Civil Asset Forfeiture Reform Act was introduced in the House of Representatives in July this year by Tim Walberg (R – Michigan), a member of the Committee on Oversight and Government Reform. The Act seeks to restore personal property rights under the Fifth Amendment and ensure due process of law.

"In a country founded on principles of due process and property rights," he explained, "we should not be promoting a system where an individual's property may be seized without a finding of guilt. Reform to our civil asset forfeiture laws is necessary to ensure the federal government can no longer profit from the unjust seizure of property."

TAGS: money-laundering | compliance | Finance | tax | small business | business | tax compliance | law | Internal Revenue Service (IRS) | enforcement | tax authority | legislation | United States | standards

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