Last week brought a potentially huge development in the long-standing fight against abuses of IRS authority in civil forfeiture cases: 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.
Most people outside political circles are unaware of the Act, but it represents the first major steps at curbing wrongful asset forfeiture in a long time. The Senate hasn’t yet voted on a corollary measure introduced by Senators Tim Scott (R-SC) and Sherrod Brown (D-OH).
What would the RESPECT Act do?
Generally, the Act would prevent the IRS seizure of assets in civil matters where there is an allegation of structuring to avoid the reporting requirements of the Bank Secrecy Act unless there is a reasonable suspicion that one of these has occurred:
- The funds in question originated from an illegal source (i.e., criminal activity)
- The funds were structured to conceal the violation of a criminal law
- The assets were structured to avoid reporting requirements for a provision other than the Bank Secrecy Act (for example, to avoid FATCA)
Furthermore, the RESPECT Act puts into place strict time requirements during which the IRS must make a good faith effort to find the owners of any seized property and to inform those owners of all their rights regarding the assets. Under the Act, if the owner of the property requests a hearing within 30 days from the date of the seizure, unless a hearing is held in that time (during which a judge finds that the property is tied to criminal activity), the IRS must return it.
Until this Act passes, civil forfeiture is still rife with abuse by the IRS and state taxation authorities. Contact an experienced tax attorney to learn about your legal rights regarding asset seizure and possible actions to challenge a wrongful forfeiture.