Legislation reintroduced by U.S. Rep. Peter Roskam (R-IL) would rein in the IRS’s ability to seize taxpayers’ assets without first charging them with a crime, an improper use of government authority that was confirmed on Tuesday by an audit of IRS procedures by the Treasury Inspector General.
Roskam, chairman of the House Ways and Means Subcommittee on Tax Policy, led the introduction of the RESPECT Act, which would prohibit the IRS from seizing assets from individuals or small businesses amid allegations of structured cash transactions unless specific criteria are first met.
Structuring is a criminal offense involving the execution of cash transactions in a specific way so as to avoid banking regulations, such as in money laundering and tax evasion.
Roskam had led an investigation into IRS and Department of Justice asset seizures related to allegations of structured cash transactions against small business owners during the 114th Congress when he served as chairman of the Ways and Means Oversight Subcommittee.
On Tuesday, the Treasury Inspector General for Tax Administration (TIGTA) released a report confirming the committee’s earlier findings that the IRS Criminal Investigation (CI) division had enforced anti-structuring provisions of the Bank Secrecy Act primarily against individuals who had legally obtained their income. Under the Bank Secrecy Act, financial institutions are required to report currency transactions in excess of $10,000.
TIGTA reviewed 278 CI anti-structuring investigations and found that in 91 percent of them businesses and individuals had obtained funds legally. While the Bank Secrecy Act does not differentiate between legal and illegal sources of funds, the report concluded the IRS procedures dictate that the purpose of its civil assets forfeiture program is to target and dismantle criminal enterprises.
U.S. Reps. Kevin Brady (R-TX), the chairman of the House Ways and Means Committee, Vern Buchanan (R-FL), the chairman of the Subcommittee on Oversight, and Roskam said in a joint statement that the report confirms that “the IRS has knowingly abused its authority to wrongly target and seize money from hard working Americans.”
“We commend TIGTA for issuing this report and building off of our work to bring IRS’s abusive practices to light,” the committee leaders said. “These investigations are a critical part of holding the IRS accountable to the American people, as well as delivering justice to the innocent victims of the IRS. We will continue working to ensure taxpayers are advised of their rights and treated with respect.”
The TIGTA report concluded that CI regularly relied on patterns of currency transactions to justify asset seizures in anti-structuring cases rather than seeking information from the property owners. When owners were contacted, IRS agents didn’t always properly identify themselves, explain the purpose of interviews, or advise them of their rights.
In one case reviewed by the Oversight Subcommittee last year, the IRS improperly seized money from Maryland dairy farmer Randy Sowers and forced him to settle the case, forfeiting 50 percent of the $60,000 that had been taken. Sowers, who testified at the oversight hearing last May, got his money back in July as a result of the subcommittee’s work, Roskam said.
“It’s clear to everyone involved that there was rampant abuse in the forfeiture program,” Roskam said. “The IRS and Department of Justice abused their authority and took money from people who did nothing wrong. With (Monday’s) legislation, we’re making sure they can never do it again. With the support of so many lawmakers from both sides of the aisle, we can finally put this ugly chapter to rest.”
Roskam introduced the RESPECT Act with U.S. Rep. Joseph Crowley (D-NY), the chairman of the Democratic Caucus.
“Civil asset forfeiture may have begun as a tool to combat criminal activity, but it has morphed into a complex process that unfairly entangles innocent individuals,” Crowley said. ”There is no question that the laws are deeply flawed and the process was riddled with abuse. I am proud to work with Congressman Roskam on this legislation.”
U.S. Sen. Tim Scott (R-SC) plans to introduce companion legislation in the Senate.