H.R. 1843 would limit the Internal Revenue Service’s civil asset forfeiture authority. To seize funds the IRS believes to have been structured to avoid Bank Secrecy Act reporting requirements, the IRS would have to show probable cause that those funds were derived from an illegal source or connected to other criminal activity. It also would provide procedural protections to people from whom the IRS has seized assets based on allegations of structuring.
Within 30 days of seizing property, the IRS must: (1) make a good faith effort to find all owners of the property, and (2) notify the owners of the post-seizure hearing rights established by this bill. The IRS may apply to a court for one 30-day extension of the notice requirement if it can establish probable cause of an imminent threat to national security or personal safety.
If the owner of the property requests a court hearing within 30 days after the date on which notice is provided, the property must be returned unless the court holds a hearing within 30 days after notice is provided and finds that there is probable cause to believe that the property was derived from an illegal source or the funds were structured to conceal the violation of a criminal law or regulation other than a structuring violation.
The bill amends the Internal Revenue Code to exclude from gross income any interest received from the federal government with respect to an action to recover property seized by the IRS pursuant to a claimed violation of the structuring provisions of the BSA.
The Ways and Means Committee found that found that IRS Criminal Investigation (IRS CI) was seizing funds that appeared to have been used in transactions “structured” to be under $10,000 to avoid Bank Secrecy Act reporting requirements. Numerous small business owners had legitimate reasons for keeping their transactions under $10,000, including insurance policies that only protected cash-on-hand up to $10,000 and bank tellers who told the small business owners to keep their deposits under $10,000 to reduce paperwork. When business owners tried to get their money back, their cases would be sent to the Department of Justice (DOJ); frequently, DOJ attorneys would hold the funds long enough that the business owners felt compelled to settle the cases and give up a portion of the funds to get the remainder returned to them.
The IRS changed its policy in October 2014 to restrict civil asset forfeitures based on allegations of structuring to only seize assets involved in other criminal activity, except in exceptional circumstances. H.R. 1843 would codify many of these processes and would ensure that individuals can have their assets returned to them if they do not receive a hearing about the seizure within 30 days.
In September 2016, the House of Representatives voted 415-0 to unanimously pass H.R. 5523, the Clyde-Hirsch-Sowers-RESPECT Act. The bill was named for Andrew Clyde; Jeffrey, Richard, and Mitch Hirsch; and Randy Sowers – all small business owners victimized by forfeiture abuse.
In June of 2017, the IRS announced it would send letters to everyone from whom it had seized assets based on allegations of “structuring” cash deposits, in an attempt to begin the process of returning improperly seized money to individuals.