Yesterday afternoon, April 4, 2017, the Treasury Inspector General for Tax Administration (TIGTA) publically released a bombshell report finding the Internal Revenue Service’s criminal investigations of structuring laws and civil forfeiture “compromised the rights of some individuals and businesses.” The TIGTA found that “91 percent of the 278 investigations in its sample where source of funds could be determined were of businesses and individuals whose funds were obtained legally.”
The Institute for Justice’s litigation and research, including its report Seize First, Question Later, which is cited by TIGTA, helped bring these abuses to light.
The report also found:
●Department of Justice attorneys working with the IRS encouraged “quick hits,” where property was easier to seize, “rather than pursuing cases with other criminal activity (such as drug trafficking and money laundering), which are more time-consuming”;
●“The Government appeared to bargain non-prosecution to resolve the civil forfeiture case[s]”;
●Investigators often ignored reasonable explanations for transactions that appeared to fit a pattern of structuring.
Yesterday, U.S. Representatives Peter J. Roskam (R-IL) and Joseph Crowley (D-NY) reintroduced the RESPECT Act, “which would limit the IRS’s ability to seize people’s money without first charging them with a crime.”
In response to today’s report, Institute for Justice Attorney Robert Everett Johnson issued the following statement:
Today’s report confirms that the IRS used civil forfeiture to seize millions of dollars from innocent business owners. The IRS’s own internal watchdog found that the IRS had a practice of seizing entire bank accounts based on nothing more than a pattern of under-$10,000 cash deposits. The IRS gave no warning prior to these seizures, and the IRS did not speak to property owners to see if there might be some honest explanation for the pattern. Shockingly, even when property owners provided an innocent explanation for their banking practices following the seizures, the IRS watchdog found that the agency did not even consider whether it might be true. That disregard for the pursuit of justice is the unfortunate but unsurprising result of civil forfeiture’s profit incentive, which allows agencies like the IRS to use money that they seize to fund their budgets.
While the IRS recognizes that what happened in these cases was wrong, the IRS still has not returned all of the money that it seized. And the Department of Justice, which in many cases must sign off to return seized money, has also failed to return these ill-gotten gains. The IRS and DOJ have given back some money to some property owners, but justice will not be served until all of this money is returned.