IRS Will Give Civil Forfeiture Victims a Chance to Get Seized Money Back

The IRS has not only admitted to doing wrong, but it is now helping to undo the damage. In addition, they are doing so through a legal mechanism pioneered by the Institute for Justice—the use of petitions for remission or mitigation to reopen closed civil forfeiture cases.

Innocent Americans who had their money wrongly seized by the IRS in the last six years for so called “structuring” violations will now have the chance to get that money back, according to an anonymous source who spoke to The Daily Signal. The IRS is inviting individuals involved in approximately 700 cases to file petitions to reclaim their seized cash.

“The IRS should not have taken this money in the first place, but we are thrilled the IRS is now taking steps to give it back,” said Rob Johnson, an attorney at the Institute for Justice. “When we filed our petitions a year ago, we wanted to clear a path for other property owners to follow. With this announcement from the IRS, it’s clear that we’ve succeeded.”

The Institute for Justice pioneered the use of remission petitions to reopen closed civil forfeiture cases in July 2015, when two of IJ’s clients, Ken Quran and Randy Sowers, petitioned the government to get their money back. A remission petition is a request for voluntary relief from the executive branch—akin to a pardon petition. Ken has since had his money returned, while the government has yet to rule on Randy’s petition.

Until 2014, the IRS had a policy of seizing the assets of individuals and businesses accused of nothing more or less than depositing or withdrawing cash in amounts under $10,000. The IRS called this “structuring” and would seize entire bank accounts—without any notice or due process—claiming the pattern of under-$10,000 transactions showed an intent to avoid federal bank reporting requirements.

This issue was first brought to national attention in 2014, when IJ represented Carole Hinders in a civil forfeiture action initiated by the IRS to take her entire bank account. Carole was the owner of a Mexican restaurant in Iowa. Her restaurant only accepted cash, which meant that Carol made frequent trips to the bank to avoid having large sums of money at the restaurant.  In August 2013, the federal government used civil forfeiture to seize nearly $33,000, even though Carole did nothing wrong.

Carole’s story, and the story of another IJ client who had almost half a million dollars seized under the structuring laws, was featured in a front-page article published by the New York Times. Around the same time, IJ also put those cases in a broader context through the report “Seize First, Question Later,” which provided definitive data on the IRS’s application of the structuring laws.

In response to IJ’s efforts, the IRS announced a policy change in October 2014, taking these kinds of asset seizures  off the table. The IRS announced that it would henceforth limit application of the structuring laws to real criminals seeking to conceal their unlawful activities.

But while this policy change was a positive development, it did nothing for people who had money taken before the policy change. Between 2007 and 2013 alone, the IRS seized $43 million in more than 600 structuring cases where the IRS reported no suspicion of criminal activity apart from the act of under-$10,000 cash transactions.

In an effort to open up a pathway for those hundreds of forfeiture victims to get their money back, IJ filed petitions to the IRS on behalf of two clients who had lost their money prior to the 2014 changes. In February 2016, the IRS granted the petition IJ filed on behalf of Ken Quran, a North Carolina convenience store owner whose entire bank account was seized.  This was the first indication of real progress on re-opening cases from before the policy change.

Now, the IRS has invited 700 other property owners with pre-policy change cases to file remission petitions to get their money back. The IRS’s decision effectively endorses the use of remission petitions to reopen old cases, vindicating IJ’s efforts on behalf of property owners and offering a ray of hope that these hundreds of civil forfeiture victims will eventually be made whole.

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