Seize First, Question Later

April 1, 2015

The IRS has recently had some terrible, horrible, no good, very bad days. 

The latest was in February, when IRS commissioner John Koskinen found himself in front of the U.S. House Ways and Means oversight subcommittee answering tough questions about the agency’s use of forfeiture to seize money from bank accounts because of alleged “structuring” violations—breaking cash transactions into small amounts to evade reporting requirements. Committee members were armed with data about the agency’s forfeiture practices from our newest strategic research report—Seize First, Question Later: The IRS and Civil Forfeiture, released just days before the hearing. 

As readers of Liberty & Law remember, IJ clients Terry Dehko, Sandy Thomas, Mark Zaniewski, Carole Hinders and Jeff Hirsch were caught in the IRS’s forfeiture net, even though they were entirely innocent of any crime. But they were not alone.

As Seize First, Question Later documents, from 2005 to 2012, the IRS seized more than $242 million for suspected structuring violations in more than 2,500 cases. During that time, the number of structuring-related seizures grew significantly: In 2012, the IRS initiated more than five times as many such seizures as it did in 2005, yielding a 166 percent increase in forfeiture revenue. 

Particularly troublesome is a sizable and growing gap between what the agency seized and what it later kept, suggesting the IRS snatched more than it could later justify. All together, of the $242 million seized, nearly half—$116 million—was not forfeited. 

Despite the IRS’s aggressive use of forfeiture, before September 2013, when we filed our first structuring-related forfeiture case on behalf of Terry Dehko and Sandy Thomas, few people knew of the practice. But after our five lawsuits against the IRS, a front-page New York Times story about the IRS’s schemes featuring IJ clients Carole Hinders and Jeff Hirsch, an investigative story on CNN, and the release of Seize First, Question Later with an accompanying Washington Post story, the IRS’s practices vaulted to the attention of national lawmakers. 

Rep. Peter Roskam, chair of the oversight committee, called the IRS’s forfeiture practice an “abuse,” and other members heaped criticism upon the agency. Before the hearing ended, Koskinen was compelled to apologize but said the agency was just following the law. The tepid apology drew an admonishment from Rep. Charles Rangel: “Whether or not it is within the law, it is wrong to, without any criminal evidence, seize somebody’s property.” 

We couldn’t agree more. And until the law changes, we plan to ensure more bad days for the IRS in order to realize good days for freedom.

Dick Carpenter is an IJ director of strategic research. 

In several important ways, the experiences of our clients were emblematic of what our research discovered about the IRS’s actions overall:

  • Our clients waited a year or more to see the return of their money; although the IRS data did not indicate how long people fought to get their money back, it took the IRS about a year to win its forfeiture cases, suggesting successful challenges take about as long.
  • Our clients were suspected of nothing more than engaging in transactions less than $10,000; at least a third of the IRS’s structuring-related seizures originated for the same reason—no other criminal activity, such as fraud, money laundering or smuggling was alleged.
  • The government pursued civil rather than criminal procedures against our clients; from 2006 to 2013, nearly four out of five of all IRS forfeitures for suspected structuring were civil.

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