The House Ways and Means Committee has passed a bill that limits when the IRS can take action on taxpayer assets. From The Hill:

The bill concerns cases where taxpayers are suspected of “structuring” transactions under $10,000 to avoid bank-reporting requirements.

Under the legislation, the IRS would only be able to seize funds in suspected structuring cases when the funds came from illegal sources or the transactions were structured in order to conceal other criminal activity. Additionally, the legislation would establish a process to review seizures.

The bill came about following hearings held by the Ways and Means Committee’s oversight panel about the IRS’s civil asset forfeiture practices.

The Hill explained that since 2014, the IRS has used a policy that says officials can “only seize illegally sourced funds in structuring cases.” Before that, the agency “would also seize taxpayers’ funds that came from legal sources.” Lawmakers testified that they had a hard time retrieving their money under the old policy.

In April, Reason detailed a report from the watchdog group The Treasury Inspector General for Tax Administration (TIGTA) that found the agency “seized more than $17 million from innocent business owners over a two-year period using obscure anti-money laundering rules and civil asset forfeiture.” From Reason:

The inspector general found money seized and forfeited by the IRS was legally obtained in 91 percent of a sample of 278 structuring investigations it reviewed occurring between fiscal years 2012 and 2014. Altogether, those funds totalled $17.1 million and involved 231 cases.

“That is just a shocking, shocking statistic,” says Robert Johnson, an attorney at the Institute for Justice. “It shows the cases we’ve been bringing are not isolated incidents by any stretch of the imagination. This is the bread and butter of what the IRS has been doing for years.”

The inspector general also found that, in 54 cases, property owners gave reasonable explanations for why their deposits did not exceed $10,000, but in most of those cases there was no evidence that IRS investigated their explanations.

In addition, the inspector general found evidence “that in at least 37 cases the Government bargained nonprosecution in order to resolve the civil forfeiture.” In other words, the IRS leveraged its civil forfeiture cases by threatening to file criminal charges.

Rep. Peter Roskam (R-IL) tried to push through this legislation last year, which passed the House 415-0, but the Senate never brought it up. Sen. Tim Scott (R-SC) had a companion bill, but the Senate didn’t act on that either.

But since this bill has passed the panel and Scott reintroduced his bill, action may happen in both chambers.

Fourteen states have taken steps to outlaw civil asset forfeiture without a criminal conviction.


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