This week, the U.S. House of Representatives will consider H.R. 5523, the “Clyde-Hirsch-Sowers RESPECT (Restraining Excessive Seizure of Property through the Exploitation of Civil Asset Forfeiture Tools) Act,” sponsored by Congressman Peter Roskam (R-Ill.) It enjoys the bipartisan co-sponsorship of twelve Members of Congress as ideologically diverse from Mr. Roskam as Chris Van Hollen of Maryland, Danny Davis of Illinois, and Joe Crowley of New York–all Democrats. It was reported out of the tax-writing Ways and Means Committee by voice vote and was discharged immediately from the Financial Services Committee. It is widely expected to pass by an overwhelming bipartisan margin on the House floor later this week via the non-controversial suspension calendar.
This is a big win for taxpayers, a triumph for justice, and a fitting reward for the dogged work of Congressman Roskam and his staff, without whose insistent IRS oversight this bill would never have ripened as it has.
At issue is the ability of the IRS to seize bank accounts and other property under so-called “civil asset forfeiture laws.” In order to make it harder for terrorists, human traffickers, etc. to operate in our banking system, the law requires banks and other institutions to report cash deposits and withdrawals of $10,000 or more. A banking customer engaging in many deposits just under this $10,000 limit is often suspected of trying to evade this well-known rule (in a tactic known as “structuring”), and comes under suspicion by civil and criminal authorities.
The problem is that the IRS has taken this common sense check against terrorist money laundering and used it to go after innocent taxpayers. Consider the story of convenience store owner Lyndon McClellan of Franklin, North Carolina. He went to work one day and found that the IRS had seized his entire business bank account, worth a little over $100,000, putting his business in danger of shutting down.
At one point, the IRS offered to give him half his money back if he would sign away the other half. He refused, and has now become a poster child for IRS abuse in this area. That’s obviously an outrageous offer worthy of a mafia protection racket, not an agency of the U.S. government.
The Institute for Justice reports that the IRS seized $43 million from 618 property owners between 2007 and 2013, with nothing more than a suspicion of activity based on cash deposits and withdrawals.
On June 10, 2016, the IRS told Roskam’s oversight team that they intended to give the money back in cases where there was no untoward activity.
On June 16, 2016, Roskam introduced the RESPECT Act. It changes IRS procedure by statute to require of the agency three things in any civil asset forfeiture: first, probable cause to seize (believe it or not, that isn’t required today); second, a hearing within 30 days for the taxpayer; third, if the funds are returned to the taxpayer because he was found innocent any resulting interest paid by the IRS is free of taxation.
On July 5, 2016, another victim of IRS civil asset forfeiture abuse–Frederick County, Maryland dairy farmer Randy Sowers–was told by the IRS that they were making him whole. Here’s what Sowers and Roskam had to say at an oversight hearing back in June:
Later this week, the House will have a chance to make sure there are no more Lyndon McClellans or Randy Sowers. They will pass H.R. 5523 and taxpayers will finally get (a little) more of the respect they deserve from Uncle Sam.