Civil forfeiture

New Law Stops IRS From Stealing People's Money Simply Because It Deems Their Bank Deposits Suspiciously Small

A provision of the Taxpayer First Act requires evidence of other illegal activity for seizures based on "structuring" and mandates prompt hearings.

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Yesterday Donald Trump signed a law that forbids the IRS to seize the bank accounts of business owners based on nothing more than the allegation that they "structured" their deposits or withdrawals to evade federal reporting requirements. That kind of odious money grab—which, like other forms of civil forfeiture, did not require criminal charges, let alone a conviction—provoked bipartisan outrage in Congress after it was publicized by the Institute for Justice, the libertarian public interest law firm.

Since 1970 the humorously named Bank Secrecy Act has required financial institutions to report transactions involving $10,000 or more to the Treasury Department, because such large sums of cash are obviously suspicious. You know what else is suspicious? Transactions involving less than $10,000, because they suggest an attempt to evade the government's reporting requirement, which has been a federal crime, known as "structuring," since 1986.

Suspicion of structuring was the sole justification when the IRS seized $60,000 from Maryland dairy farmer Randy Sowers in 2012, $446,000 from Long Island candy and snack wholesaler Jeffrey Hirsch that same year, $33,000 from Iowa restaurateur Carole Hinders in 2013, and $107,000 from North Carolina convenience store owner Lyndon McLellan in 2014. The negative publicity generated by stories like those led the IRS to announce in 2014 that it would no longer pursue forfeiture in cases where there was no evidence of illegal activity beyond structuring itself. The Justice Department unveiled similar restrictions in 2015.

Section 1201 of the Taxpayer First Act, the bill that Trump signed yesterday, codifies the shift in IRS policy, saying, "Property may only be seized by the Internal Revenue Service" in structuring cases "if the property to be seized was derived from an illegal source or the funds were structured for the purpose of concealing the violation of a criminal law or regulation other than" structuring. The law also requires that the IRS notify the owner within 30 days of a seizure and mandates a hearing to consider whether there was probable cause for the seizure within 30 days of the owner's request.

"Previously," the Institute for Justice notes, "property owners targeted for structuring had to wait months or even years to present their case to a judge." Sowers and Hirsch, both I.J. clients, "ultimately recovered their wrongfully taken money, but only after years of legal proceedings and high-profile media coverage."

I.J. senior attorney Darpana Sheth, who heads the organization's National Initiative to End Forfeiture Abuse, welcomed the demise of this particularly egregious kind of legalized theft. "Innocent entrepreneurs will no longer have to fear forfeiting their cash to the IRS, simply over how they handled their money," Sheth said in a press release. "Seizing for structuring was one of the most abusive forms of civil forfeiture, and we're glad to see it go."

The restrictions in the new law do not apply to the Justice Department. I.J. says a campaign it organized resulted in "464 petitions from owners seeking to recover their money that had been seized for structuring." Of the 208 petitions relating to forfeitures pursued by the IRS, the agency granted "roughly 84 percent and returned over $9.9 million to property owners." Of the 256 petitions related to cases involving the DOJ, the IRS recommended that the department grant 194. But as of last summer, the DOJ had accepted just 41 petitions, or 21 percent, "and refused to return more than $22.2 million."

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  1. “New law stops IRS”

    If only you could’ve stopped there

  2. Without any doubt, this is excellent news. But why do we need a law to stop a federal agency from stealing? Wouldn’t it be, you know… the other way around?

    1. You would think but not.

    2. Governments always steal. Ours actually steals less then the average. But ALL governments steal.

      Government is like fire. If you are young, vigorous, and trained, it is possible (if uncomfortable) to live without it. But its is much easier to live with it, provided you keep an eye on it at all times.

      1. less than average? try way more than any other government in human history. I have 4 trillion reasons I’m right.

      2. “Government is not reason, it is not eloquence — it is force! Like fire it is a dangerous servant and a fearful master; never for a moment should it be left to irresponsible action.

        Upton Sinclair claiming this to be a George Washington quote (George may or may not have actually said this…)

        “Comrade Members, like fire and fusion, government is a dangerous servant and a terrible master. You now have freedom—if you can keep it. But do remember that you can lose this freedom more quickly to yourselves than to any other tyrant.

        Robert A. Heinlein “The Moon Is a Harsh Mistress”

    1. “Property may only be seized by the Internal Revenue Service” in structuring cases “if the property to be seized was derived from an illegal source or the funds were structured for the purpose of concealing the violation of a criminal law or regulation other than” structuring. The law also requires that the IRS notify the owner within 30 days of a seizure and mandates a hearing to consider whether there was probable cause for the seizure within 30 days of the owner’s request.

      Its a start but I don’t trust the government not to abuse these loopholes. I skimmed the bill didn’t see anything about conviction so I am not sure how “illegal source” or concealing the violation of a criminal law or regulation other than” structuring” is arrived out. So for Sowers case could they find some other violation on the farm like cattle are sheltered too close to each pursuant to sect 456483q and then take their money?

  3. It sure is a good thing we kept that tryant Trump out of office or this kind of stuff wouldn’t be happening.

    1. The bastard.

      1. Well he had to figure away to get the cash to Putin somehow. Its not like he’s Obama with pallets at his disposal.

  4. Now if only we could do something about civil asset forfeiture.

    1. Something – indeed something – is being done. Legislatures are passing laws limiting it. Loopholes around such laws are being closed. The Supreme Court has ruled that the injunction against excessive fines applies to the states, and that asset forfeiture is a fine.

      It got bad slowly, it’ll get fixed slowly.

  5. There was an episode of Law and Order were the heroic detectives intercept someone trying to leave the country with $9990 in cash.

    One detective whines that “there’s nothing we can do, it’s below the $10,000 limit.” The other detective pulls a $20 out of his wallet, throws it on the stack of money and says, “now there is.”

    That’s some good police work.

    1. the cops on that show are usually the worst people in the episode.

      1. I take that back the prosecutors are pretty bad.

        1. Sam Waterston played the typical asshole DA better than anyone ever could.

          1. You are right about Sam Waterston, but I liked Michael Moriarity (Ben Stone) better.

            Best Law & Order cop? Jerry Orbach, Chris Noth, or Vincent D’Onfrio?

            1. I always liked Orbach the most. I don’t know if he was the best cop, but he was the best character.

            2. As if there is any other answer than Orbach?

          2. cops > prosecutors > DA > state AG > ex-prosecutor/DA/AG who runs for President

        2. Every episode has the same basic plot:

          “We know he’s guilty but so far he’s managed to get away with it because there’s no evidence. Go make some so we can arrest this bastard.”

          1. Spoiler: No matter what the crime was, even a dead hooker in an alley in Harlem, It’s the rich white guy.

          2. That sounds like SVU. I’ll still contend that 90s Law and Order was a lot more nuanced. There’s some great episodes of the original, before the last couple of seasons when they decided every episode needed a big twist in the third act, the police went full Patriot Act, and any hint of right-wing sympathy meant a character was a monster.

          3. Or the “if only this freedom-oriented law didn’t exist, we could get the evidence we need to arrest this bastard.” While it may not have been their intention, I have a feeling L&O made an entire generation of viewers authoritarian because every episode, you have the viewer’s bias of knowing a crime was committed, who it was most likely to be, and how they did it. They feed you just the right amount of information to root for the cops and attorneys to use any means necessary to get the bad guy.

            In retrospect, I really hope that was unintentional for the purposes of entertainment or else L&O might be one of the most insidious and subversive shows ever created. Dick Wolf does the same shit in his Chicago series.

          4. sounds like psychologically softening up the citizenry to support police misconduct and evidence tampering, since we all know the bad guys are guilty anyway

  6. You know what else is suspicious?
    Not making a deposit or withdrawal to avoid BSA reporting or structuring charges.

  7. :Yesterday Donald Trump signed a law that forbids the IRS to seize the bank accounts of business owners based on nothing more than the allegation that they “structured” their deposits or withdrawals to evade federal reporting requirements.

    Obviously, #TrumpIsWorseThanHitler and he is doing this to hurt little children!

  8. Seems huge. Maybe the other one would have signed it, too. Then again, maybe legislators wouldn’t even have bothered trying.

  9. But all that money was going straight into reducing the deficit/debt , right?
    Now what are we going to do?

  10. a big improvement, but still illegal to take the cash without a conviction. and then the fine needs to be commensurate. keep fighting for real justice.

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  13. IJ FTW, again! The Institute for Justice is the single most worthy charitable cause a libertarian can give to.

    Contribute to IJ!

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  15. The IRS has never cared about the constitution. Why should we expect them to comply with a mere statute that requires them to obey the 5th Amendment?

    -jcr

  16. keep up the good work such a great article
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    keep up the good work

  17. […] shared other cases amounting to hundreds of thousands of dollars in small business […]

  18. […] or if the money were structured to conceal criminal activity.” [Nick Sibilla, Forbes; Jacob Sullum, Reason; […]

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