Lawmakers seek relief for taxpayers with seized assets

Lawmakers seek relief for taxpayers with seized assets
© Greg Nash

Republican and Democratic lawmakers alike are asking the Obama administration to give refunds to taxpayers wrongly ensnared by government civil forfeiture laws. 

Reps. Peter Roskam (R-Ill.), John Lewis (D-Ga.) and a bipartisan group of House Ways and Means members specifically asked the Treasury Department to give almost $30,000 back to Randy and Karen Sowers, Maryland dairy farmers who saw the IRS seize their account in 2012. Other taxpayers, the lawmakers said, deserve their money back as well. 

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"As the Treasury secretary, you have the opportunity to right the wrong done to these small business owners," the eight lawmakers wrote to Treasury Secretary Jack LewJacob (Jack) Joseph LewHogan urges Mnuchin to reconsider delay of Harriet Tubman bill Mnuchin says new Harriet Tubman bill delayed until 2028 Overnight Finance: US reaches deal with ZTE | Lawmakers look to block it | Trump blasts Macron, Trudeau ahead of G-7 | Mexico files WTO complaint MORE

The central issue discussed in the letter is the government's policy for seizing assets, and the use of civil forfeiture laws to target terrorism, money laundering and other crimes that involve the banking system.

But Roskam, Lewis and other members of the House Ways and Means oversight subcommittee have expressed concern that the government had too much power to seize assets of legitimate small-business owners and taxpayers.

The Sowers, for instance, ran afoul of the IRS by repeatedly making bank deposits in increments of less than $10,000. Those are the sort of transactions that can make the government suspicious of an illegal tactic known as structuring, in which account holders make transactions specifically to avoid bank reporting requirements.

Both the IRS and the Justice Department have acknowledged their civil asset policy had treated some legitimate businesses and taxpayers unfairly. John Koskinen, the IRS commissioner, apologized to those taxpayers at a February hearing, and the Justice Department has since changed its policies to only target assets in the most serious of cases.

But the House lawmakers say that won't help families like the Sowers, who eventually settled with the government for $29,500 after their $67,000 account was seized. Reps. Joseph Crowley (D-N.Y.), Mike Kelly (R-Pa.), Pat Meehan (R-Pa.), Kristi Noem (R-S.D.), Charles Rangel (D-N.Y.), Jim Renacci (R-Ohio) and Jason Smith (R-Mo.) also signed the letter.

The House tax writers said both the IRS and the Justice Department have acknowledged pursuing settlements even when they knew small-business owners hadn't been trying to evade the government.

The IRS's policy change, the lawmakers wrote, "came too late to help the victims of the IRS’s abusive seizure practices. Now, Treasury still holds funds seized from innocent small business owners who settled their cases only because they could not afford to do otherwise."

"The IRS’s October 2014 policy change is tantamount to an admission that it never should have seized funds that were not associated with an illegal source," they added. "The Sowers and others like them should be treated with the same fairness applied to cases going forward."