Too Easy to Seize: New Report on IRS Forfeitures Highlights Need for Broad Civil Forfeiture Reform

Arlington, Va.—Thanks to federal civil forfeiture laws, the Internal Revenue Service has seized millions of dollars from thousands of Americans’ bank accounts without proof of criminal wrongdoing, according to anew report from the Institute for Justice (IJ). The IRS practice of “seize first, ask questions later” highlights the need for broad reform of federal civil forfeiture laws that impose substantial burdens on property owners and make seizing property—and profiting from it—too easy for law enforcement.

The IRS took the “seize first, question later” approach when it cleaned out the bank account of Carole Hinders’ Mexican restaurant in Spirit Lake, Iowa. Carole’s restaurant only accepted cash, so she made frequent cash deposits. To the IRS, this was evidence of illegal “structuring”—deliberately depositing or withdrawing cash in amounts under $10,000 to evade federal reporting requirements imposed on banks. And under federal civil forfeiture law, that was all the IRS needed to seize her money and force Carole into court to try to prove her innocence and win her money back, which she eventually did more than a year-and-a-half after it was seized.

Stories like Carole’s are increasingly common, according to a new report issued by the Institute for Justice.

“The IRS data we obtained give rare insight into how federal forfeiture laws work and how they affect people caught in their web,” said Dick Carpenter, IJ’s Director of Strategic Research. “Most publicly available federal forfeiture data don’t reveal key details like whether forfeitures followed civil or criminal procedures, how long they take to resolve, or what alleged crimes justified seizures.”

According to IRS data obtained by IJ and detailed in the new report:

• From 2005 to 2012, the IRS seized more than $242 million for suspected structuring violations in more than 2,500 cases, and annual seizures increased fivefold over those eight years.
• At least a third of those cases, like Carole’s, arose from nothing more than a series of cash transactions under $10,000, with no other criminal activity alleged.
• Four out of five IRS structuring-related forfeitures were civil, not criminal, so the IRS faced a lower evidentiary standard and did not need to secure a conviction to forfeit the cash, and owners had fewer rights in fighting to win it back.
• Like Carole, owners likely face a long legal battle to win their money back: The average IRS structuring-related forfeiture took nearly a year to complete.
• Nearly half of the money initially seized by the IRS was not ultimately forfeited, raising concerns that the IRS seized more than it could later justify to forfeit the cash.

READ THE FULL REPORT

Seize First, Question Later: The IRS and Civil Forfeiture

By IJ Director of Strategic Research Dick Carpenter and IJ Attorney Larry Salzman

“It’s no accident the IRS overwhelmingly prefers civil forfeiture to criminal forfeiture,” said IJ Attorney Larry Salzman. “It allows them to seize cash without the effort of investigating whether the property owner did anything wrong, let alone convicting anyone of a crime. Under civil forfeiture, the burden is then on property owners to go to court and spend a year or more trying to prove their innocence to win their money back.”

“The IRS’s forfeiture activity exposes the rotten core of federal civil forfeiture law,” added IJ Senior Attorney Scott Bullock. “Allowing law enforcement to take property from people without convicting them of a crime and then profit from the seizure will inevitably lead to abuse.”

The Fifth Amendment Integrity Restoration (FAIR) Act, recently introduced by Sen. Rand Paul, R-Ky., and Rep. Tim Walberg, R-Mich., would curb structuring-related seizures and correct defects in federal civil forfeiture law that stack the deck against people whose property is seized and enable law enforcement agencies to profit from forfeiture.

After Carole’s story and otherabuses grabbed headlines, the IRS announceda new policy of only seizing money derived from illegitimate sources. However, as long as the law remains as it is, people remain at risk of unjustified seizures. “The new IRS policy on structuring seizures amounts to ‘Trust us—from now on, we’re only taking money from real criminals,’” said Salzman. “But why was the IRS taking money from innocent people in the first place? Civil forfeiture makes taking cash and property too easy, and the IRS’s track record with structuring-related seizures is a vivid example of why a policy of ‘trust us’ is not enough—for the IRS or any law enforcement agency. Congress must act to protect all property owners from unjustified seizures.”

For more information on IJ’s Forfeiture Initiative visit:endforfeiture.com