Can the RESPECT Act prevent civil forfeiture abuses?Stephen A Weisberg
Congress recently took a long-overdue step towards curbing abuses of IRS authority concerning civil forfeiture. Just last week, the U.S. House of Representatives passed – via voice vote – the Clyde-Hirsch-Sowers Restraining Excessive Seizure of Property through the Exploitation of Civil asset forfeiture Tools (RESPECT) Act.
The RESPECT Act is the first federal legislative action in years dealing specifically with the pervasive issue of unfair and borderline illegal civil forfeiture by the IRS. When done correctly, civil forfeiture can be a legitimate way to enforce reporting requirements and ensure that taxes are properly paid. When abused, however, it puts innocent taxpayers on the defensive, forcing them to fight for years to have wrongfully seized property returned.
As of the time of this post, the U.S. Senate hasn’t yet taken action on a corollary forfeiture measure introduced by Senators Sherrod Brown (D-OH) and Tim Scott (R-SC).
What protections would the RESPECT Act provide?
The RESPECT Act will, if passed, prevent the IRS from seizing private assets in certain civil cases. Specifically, no forfeiture can occur for allegations that taxpayers structure finances to avoid the reporting mandates of the Bank Secrecy Act unless reasonable suspicion exists that one of the following is true:
- The assets are from an illegal source (i.e., criminal activity)
- The property/funds are structured in such a way as to conceal criminal activity
- The assets are structured in a particular manner to avoid triggering reporting mandates for something other than the Bank Secrecy Act (to avoid FATCA, etc.)
The RESPECT Act also establishes strict time limits on determining the owners of seized property and informing those owners of concerning it. In addition, the owner of IRS-seized property can request a hearing within 30 days from the date of the forfeiture. At that time, a judge will decide if the property is tied to any illegal activity. If the judge finds that there is no reasonable suspicion of illegality, the IRS must return the property.
The current civil forfeiture and seizure system is subject to abuse by the IRS and state tax agencies. Hopefully the RESPECT Act will curb those abuses. In the meantime, has your property been wrongfully seized? If so, contact a skilled tax attorney to learn more about your legal rights (including possible actions to challenge a wrongful forfeiture).
Lead Tax Attorney, The W Tax Group