fbpx

IJ Scores Win In Lawsuit Against IRS Over Forfeiture Records

Appeals Court Rejects IRS’s Argument For Stonewalling FOIA Request

Money, Chain, Lock around stack of money

WASHINGTON—This morning, the U.S. Court of Appeals for the D.C. Circuit unanimously sided with the Institute for Justice (IJ) in a fight with the IRS over the agency’s forfeiture records. In its decision, the court ruled that the IRS cannot deliberately frustrate FOIA requests by quibbling over immaterial technicalities. The court also ruled that the IRS must put the effort into determining which records are public, rather than applying blanket exemptions to whole swaths of data that may or may not be exempt from disclosure.

“The lack of transparency surrounding forfeiture is deeply troubling, especially considering the vast power federal agencies have to take property from people without so much as charging them with a crime,” said IJ Senior Research Analyst Jennifer McDonald. “The public ought to know how the IRS is using forfeiture.”

The effort started in March 2015 when IJ filed a Freedom of Information Act (FOIA) request for all records contained in the IRS Asset Forfeiture Tracking and Retrieval System (AFTRAK). The IRS originally refused to release the information unless IJ paid more than $750,000 in fees. Once IJ brought suit under FOIA in December 2016, the agency reversed course and argued that AFTRAK is not actually a database and therefore cannot possibly contain records. Rather than search for all of the requested records, the IRS eventually produced one standard forfeiture report that was 99% redacted. Later, the court ordered the IRS to remove some of the redactions, but it otherwise agreed that the IRS had fulfilled its obligations, prompting IJ to appeal the decision.

Senior Circuit Judge Williams rebuked the IRS’s strategy of contesting the definition of a database, writing, “A request certainly should not fail where the agency knew or should have known what the requestor was seeking all along.” Judge Williams made it clear that the IRS will have to turn over all the data the IRS has that falls within the request. And the Court also rejected the IRS’s blanket redactions of much of the information on the printed report.

The case has been remanded to the district court, which will be asked to determine whether AFTRAK is actually a database, and if so, whether the IRS truly provided all of the records IJ requested.

“We are pleased with the D.C. Circuit’s thorough decision and appreciate the Court’s careful consideration of this case. We continue to believe that the IRS is impermissibly withholding records in the AFTRAK system that are subject to FOIA and look forward to further establishing IJ’s entitlement to those records in the district court on remand,” said Andrew Prins of Latham & Watkins LLP, who represents IJ pro bono and argued the case.

Previously, the IRS provided IJ limited information about its forfeiture practices regarding civil and criminal “structuring.” The data revealed that the IRS had been aggressively applying structuring laws to seize lawfully obtained currency from innocent individuals and businesses. A front-page article in the New York Times that relied on these data spurred the IRS to change its policy to limit structuring seizures to instances in which the seized funds were derived from illegal activity. Revealing the full contents of AFTRAK will shed important light on the rest of the IRS’s forfeiture activities.

JOIN THE FIGHT!   Sign up for newsletters:

JOIN THE FIGHT!