CDZ What Constitutional rights?

[oldfart]

In my day job I try to keep up with the developing case law, and found an interesting post I'd like to share. If you are prone to elevated blood pressure when you hear true stories of gubmint run amok, you should probably skip this one in the interest of your health. ACLU types and Second Amendment fanatics should react to it about the same. The article can be found at IRS Seizure of Assets Using Anti-Structuring Laws

The author is Robert Everett Johnson who is an attorney at the Institute for Justice. He joined the Institute in August 2014, and litigates cases protecting private property, economic liberty, and freedom of speech. These are the people who litigated the Loving v. United States case where it took on the return preparer regulations. The Institute currently represents clients who have had property seized based on the anti-structuring laws.

The blog where this was posted, Procedurally Taxing, is moderated by Professors Leslie Book and Kieth Fogg of the Villanova Law School. Prof Book has served as Director of Villanova's Graduate Tax Program and is a principal author of one of the most highly regarded texts in tax law used law schools and graduate tax programs. Prof Fogg served for more than thirty years in Office of Chief Counsel. For chuckles and grins, they also write the tax blog for Forbes. In Nerdvana they are the tax litigation superstars.

For the facts and circumstances, I can't summarize it better than the article:

The New York Times recently reported about a series of cases in which the IRS has seized money from innocent Americans based on purported violations of so-called “anti-structuring” laws, which make it a crime to deposit less than $10,000 cash in the bank in order to evade bank reporting requirements. Carole Hinders, the proprietor of a Mexican restaurant in small-town Iowa, had almost $33,000 seized after her mother advised her that keeping cash deposits under $10,000 would make life easier for the bank. And three brothers in Long Island—Jeffrey, Richard, and Mitchell Hirsch—had over $400,000 seized after their accountant likewise advised them to keep cash deposits under $10,000.

Now reasonable people would assume that making cash deposits of under $10,000 would be perfectly legal when they are in the ordinary course of business or have some reasonable explanation other than money laundering or other illegal financial dealings. We would expect that the government would have the burden of proving some level of prima facie evidence of improper motive. The IRS does not agree. In these cases it has argued that the pattern of deposits in and of itself justifies seizure of the entire balance in suspect bank accounts without prior judicial process. Mr Johnson and the Institute are representing the taxpayers in these two cases.

The first reaction you probably have is moral outrage. This cannot possibly be constitutional can it? The answer will hinge on what constitutes due process (the government can legally and constitutionally take any property as long as due process is afforded. Consider eminent domain cases and civil forfeiture under drug laws) and in the case of forfeiture laws this is the Civil Asset Forfeiture Reform Act of 2000 (CAFRA). Now I know that this just rolls off the tongue and that every American is intimately familiar with its provisions, but if you make cash deposits of under $10,000 and don't want the IRS to seize your bank account in an administrative action maybe you should become familiar with it.

Let me digress on a side note here. I have political opinions most of you would not agree with and that's fine. But I have been representing taxpayers before the IRS for over 35 years in my day job and have lectured extensively on the CPE circuit. From my collections experience, these cases are not outriders or rogue agents; this is the IRS modus operandi in Collections. If you think this is bad, it doesn't even make my Top Ten for most outrageous collections actions. Reagan had it wrong; the Evil Empire is not located in Moscow, but in the Treasury Building.

Back to Mr Johnson.

In these and other cases, the IRS is seizing money based solely on a pattern of deposits, without warning and without any serious investigation to determine the reason for that pattern. But the IRS should not simply assume that every case that looks like it might involve structuring actually does involve structuring. The IRS should conduct a serious investigation to determine the reason behind a pattern of deposits, and should do so before it swoops in and takes a business’s entire bank account. Too often, the IRS has not taken that basic step.

So the IRS does not think it has to prove improper motive, it feels it can just take the money. This should cause a little excitement among Libertarians at least equal to the outrage of the ACLU.

So what about the procedural safeguards of CAFRA?

In addition to being substantively unjustified, the IRS’s conduct also runs afoul of procedural protections afforded by federal statute and the Constitution. The IRS routinely draws out structuring cases for years: In the case of the Hirsch brothers, the IRS has held the seized currency for over two years, but has not yet commenced any forfeiture proceedings. And in the case of Carole Hinders, although over one year has elapsed since the account was seized, Carole has not yet had an opportunity to present her defense to a judge. This kind of delay causes extraordinary difficulties for businesses that are deprived of their operating capital while awaiting their day in court. And it also makes it easier for the IRS to pressure many property owners into extortionate settlement agreements. In addition to being unfair to property owners, this habitual delay is flatly unlawful.

In the Civil Asset Forfeiture Reform Act of 2000 (“CAFRA”), Congress enacted deadlines to govern these kinds of forfeiture proceedings. See 18 U.S.C. § 983(a)(1). Under CAFRA, the government has a 60-day window to do one of three things: it may send “written notice to interested parties” of a “non-judicial civil forfeiture proceeding”; it may “obtain a criminal indictment containing an allegation that the property is subject to forfeiture”; or it may “file[ ] a civil judicial forfeiture action against the property.” Id. § 983(a)(1)(A).In other words, the government may choose to proceed via administrative forfeiture, criminal forfeiture, or civil judicial forfeiture. If the government does none of these things, however, CAFRA provides that “the Government shall return the property” to “the person from whom the property was seized.” Id. § 983(a)(1)(F). The IRS blew far past these deadlines in dealing with the Hirsch brothers. Instead of commencing forfeiture proceedings in a matter of days after the seizure, the IRS has waited years.

So Mr Johnson is litigating what remedy is available to taxpayers you languish years without a day in court in forfeiture cases. An interesting not is that he is arguing that abuse by the government in delaying these cases should trigger lose of the capacity to argue forfeiture at all.

In United States v. Eight Thousand Eight Hundred and Fifty Dollars ($8,850) in U.S. Currency, 461 U.S. 555 (1983), the Supreme Court set out a multi-factor test to determine when delay is so extreme that it acts as a total bar to further forfeiture proceedings. A court will look “to four factors: length of delay, the reason for the delay, the defendant’s assertion of his right, and prejudice to the defendant.” Id. Under the first of these factors, there is no question that a delay of years is substantial; courts have found violations of due process based on comparable or shorter periods of delay. See, e.g.,United States v. One Motor Yacht Named Mercury, 527 F.2d 1112, 1113 (1st Cir. 1975) (twelve months); United States v. One (1) Nissan 300 ZX, 711 F. Supp. 1570, 1572-73 (N.D. Ga. 1989) (eighteen months). Prejudice to the property owners also is self-evident; in addition to the harm of being deprived of access to their bank account, crucial evidence may be lost or forgotten with the passage of time. Courts must demand some extraordinary justification from the IRS to explain this kind of delay. In the mine run of cases, no such extraordinary justification will be available.

My interest is always piqued by any case when the government sues a pile of money, a "motor yacht named Mercury", or a a Nissan 300ZX; especially when one becomes a Supreme Court case. I tend to agree with Mr Johnson's conclusion:

The IRS has seized money from innocent people without warning or serious investigation, and then has held the money for years without providing any opportunity for a hearing before a judge. The IRS has done so despite the fact that the property owners have good reasons for keeping their deposits under $10,000, and thus are not guilty of structuring. And the IRS also has done so despite a federal law that provides hard deadlines to commence forfeiture proceedings—deadlines that the IRS has passed many times over. Indeed, the procedural willfulness of the IRS is so extreme that the agency has violated the foundational protections afforded by due process. Anyone who values the rule of law should be outraged by such conduct.

 

[emilynghiem]

In my day job I try to keep up with the developing case law, and found an interesting post I'd like to share. If you are prone to elevated blood pressure when you hear true stories of gubmint run amok, you should probably skip this one in the interest of your health. ACLU types and Second Amendment fanatics should react to it about the same. The article can be found at IRS Seizure of Assets Using Anti-Structuring Laws

The author is Robert Everett Johnson who is an attorney at the Institute for Justice. He joined the Institute in August 2014, and litigates cases protecting private property, economic liberty, and freedom of speech. These are the people who litigated the Loving v. United States case where it took on the return preparer regulations. The Institute currently represents clients who have had property seized based on the anti-structuring laws.

The blog where this was posted, Procedurally Taxing, is moderated by Professors Leslie Book and Kieth Fogg of the Villanova Law School. Prof Book has served as Director of Villanova's Graduate Tax Program and is a principal author of one of the most highly regarded texts in tax law used law schools and graduate tax programs. Prof Fogg served for more than thirty years in Office of Chief Counsel. For chuckles and grins, they also write the tax blog for Forbes. In Nerdvana they are the tax litigation superstars.

For the facts and circumstances, I can't summarize it better than the article:

The New York Times recently reported about a series of cases in which the IRS has seized money from innocent Americans based on purported violations of so-called “anti-structuring” laws, which make it a crime to deposit less than $10,000 cash in the bank in order to evade bank reporting requirements. Carole Hinders, the proprietor of a Mexican restaurant in small-town Iowa, had almost $33,000 seized after her mother advised her that keeping cash deposits under $10,000 would make life easier for the bank. And three brothers in Long Island—Jeffrey, Richard, and Mitchell Hirsch—had over $400,000 seized after their accountant likewise advised them to keep cash deposits under $10,000.

Now reasonable people would assume that making cash deposits of under $10,000 would be perfectly legal when they are in the ordinary course of business or have some reasonable explanation other than money laundering or other illegal financial dealings. We would expect that the government would have the burden of proving some level of prima facie evidence of improper motive. The IRS does not agree. In these cases it has argued that the pattern of deposits in and of itself justifies seizure of the entire balance in suspect bank accounts without prior judicial process. Mr Johnson and the Institute are representing the taxpayers in these two cases.

The first reaction you probably have is moral outrage. This cannot possibly be constitutional can it? The answer will hinge on what constitutes due process (the government can legally and constitutionally take any property as long as due process is afforded. Consider eminent domain cases and civil forfeiture under drug laws) and in the case of forfeiture laws this is the Civil Asset Forfeiture Reform Act of 2000 (CAFRA). Now I know that this just rolls off the tongue and that every American is intimately familiar with its provisions, but if you make cash deposits of under $10,000 and don't want the IRS to seize your bank account in an administrative action maybe you should become familiar with it.

Let me digress on a side note here. I have political opinions most of you would not agree with and that's fine. But I have been representing taxpayers before the IRS for over 35 years in my day job and have lectured extensively on the CPE circuit. From my collections experience, these cases are not outriders or rogue agents; this is the IRS modus operandi in Collections. If you think this is bad, it doesn't even make my Top Ten for most outrageous collections actions. Reagan had it wrong; the Evil Empire is not located in Moscow, but in the Treasury Building.

Back to Mr Johnson.

In these and other cases, the IRS is seizing money based solely on a pattern of deposits, without warning and without any serious investigation to determine the reason for that pattern. But the IRS should not simply assume that every case that looks like it might involve structuring actually does involve structuring. The IRS should conduct a serious investigation to determine the reason behind a pattern of deposits, and should do so before it swoops in and takes a business’s entire bank account. Too often, the IRS has not taken that basic step.

So the IRS does not think it has to prove improper motive, it feels it can just take the money. This should cause a little excitement among Libertarians at least equal to the outrage of the ACLU.

So what about the procedural safeguards of CAFRA?

In addition to being substantively unjustified, the IRS’s conduct also runs afoul of procedural protections afforded by federal statute and the Constitution. The IRS routinely draws out structuring cases for years: In the case of the Hirsch brothers, the IRS has held the seized currency for over two years, but has not yet commenced any forfeiture proceedings. And in the case of Carole Hinders, although over one year has elapsed since the account was seized, Carole has not yet had an opportunity to present her defense to a judge. This kind of delay causes extraordinary difficulties for businesses that are deprived of their operating capital while awaiting their day in court. And it also makes it easier for the IRS to pressure many property owners into extortionate settlement agreements. In addition to being unfair to property owners, this habitual delay is flatly unlawful.

In the Civil Asset Forfeiture Reform Act of 2000 (“CAFRA”), Congress enacted deadlines to govern these kinds of forfeiture proceedings. See 18 U.S.C. § 983(a)(1). Under CAFRA, the government has a 60-day window to do one of three things: it may send “written notice to interested parties” of a “non-judicial civil forfeiture proceeding”; it may “obtain a criminal indictment containing an allegation that the property is subject to forfeiture”; or it may “file[ ] a civil judicial forfeiture action against the property.” Id. § 983(a)(1)(A).In other words, the government may choose to proceed via administrative forfeiture, criminal forfeiture, or civil judicial forfeiture. If the government does none of these things, however, CAFRA provides that “the Government shall return the property” to “the person from whom the property was seized.” Id. § 983(a)(1)(F). The IRS blew far past these deadlines in dealing with the Hirsch brothers. Instead of commencing forfeiture proceedings in a matter of days after the seizure, the IRS has waited years.

So Mr Johnson is litigating what remedy is available to taxpayers you languish years without a day in court in forfeiture cases. An interesting not is that he is arguing that abuse by the government in delaying these cases should trigger lose of the capacity to argue forfeiture at all.

In United States v. Eight Thousand Eight Hundred and Fifty Dollars ($8,850) in U.S. Currency, 461 U.S. 555 (1983), the Supreme Court set out a multi-factor test to determine when delay is so extreme that it acts as a total bar to further forfeiture proceedings. A court will look “to four factors: length of delay, the reason for the delay, the defendant’s assertion of his right, and prejudice to the defendant.” Id. Under the first of these factors, there is no question that a delay of years is substantial; courts have found violations of due process based on comparable or shorter periods of delay. See, e.g.,United States v. One Motor Yacht Named Mercury, 527 F.2d 1112, 1113 (1st Cir. 1975) (twelve months); United States v. One (1) Nissan 300 ZX, 711 F. Supp. 1570, 1572-73 (N.D. Ga. 1989) (eighteen months). Prejudice to the property owners also is self-evident; in addition to the harm of being deprived of access to their bank account, crucial evidence may be lost or forgotten with the passage of time. Courts must demand some extraordinary justification from the IRS to explain this kind of delay. In the mine run of cases, no such extraordinary justification will be available.

My interest is always piqued by any case when the government sues a pile of money, a "motor yacht named Mercury", or a a Nissan 300ZX; especially when one becomes a Supreme Court case. I tend to agree with Mr Johnson's conclusion:

The IRS has seized money from innocent people without warning or serious investigation, and then has held the money for years without providing any opportunity for a hearing before a judge. The IRS has done so despite the fact that the property owners have good reasons for keeping their deposits under $10,000, and thus are not guilty of structuring. And the IRS also has done so despite a federal law that provides hard deadlines to commence forfeiture proceedings—deadlines that the IRS has passed many times over. Indeed, the procedural willfulness of the IRS is so extreme that the agency has violated the foundational protections afforded by due process. Anyone who values the rule of law should be outraged by such conduct.

I think this is a solid sign or symptom
of what goes wrong when you have an institution with govt power
that doesn't have direct checks and balances by the other branches.

when what they do directly affects other branches that have equal power and interest,
abuses can be more readily checked. Here there is none, so you wonder why the system runs amok?

the Federal Reserve, the credit system, the media, the lawyer associations and bars,
the political parties -- any large collective group that can invoke its own policies and
affect people without direct check tends to run into the abuses,
until stopped by an equal or greater force.

We need checks and balances on govt for a reason.
And when we let Corporations, pseudo govt institutions that are part private and part public,
and political parties do what they want without check,
we get these same problems that our Constitution was designed to rein in with govt.
any large collective group with greater infuence and resources than a regular individual
can get abusive, and when you give the IRS, the Fed, the ACA mandates, the public
schools or public housing "authority" to act as public law without direct check,
you see what you get.

A huge mess until someone cleans it up.

 

[oldfart]

The IRS has seized money from innocent people without warning or serious investigation, and then has held the money for years without providing any opportunity for a hearing before a judge. The IRS has done so despite the fact that the property owners have good reasons for keeping their deposits under $10,000, and thus are not guilty of structuring. And the IRS also has done so despite a federal law that provides hard deadlines to commence forfeiture proceedings—deadlines that the IRS has passed many times over. Indeed, the procedural willfulness of the IRS is so extreme that the agency has violated the foundational protections afforded by due process. Anyone who values the rule of law should be outraged by such conduct.

I think this is a solid sign or symptom of what goes wrong when you have an institution with govt power that doesn't have direct checks and balances by the other branches. When what they do directly affects other branches that have equal power and interest, abuses can be more readily checked. Here there is none, so you wonder why the system runs amok?

Precisely the problem. CAFRA is the check and balance in this instance, requiring the IRS to either return the money, go to court, or make an administrative decision which is immediately appealable to a court. They have failed to do that; so the question in these cases is what remedy the courts will fashion.

the Federal Reserve, the credit system, the media, the lawyer associations and bars, the political parties -- any large collective group that can invoke its own policies and affect people without direct check tends to run into the abuses,
until stopped by an equal or greater force.

We need checks and balances on govt for a reason.
And when we let Corporations, pseudo govt institutions that are part private and part public, and political parties do what they want without check,
we get these same problems that our Constitution was designed to rein in with govt. any large collective group with greater infuence and resources than a regular individual can get abusive, and when you give the IRS, the Fed, the ACA mandates, the public schools or public housing "authority" to act as public law without direct check, you see what you get.

A huge mess until someone cleans it up.

You are speaking globally; I am talking about a teeny little part of the government taking an action that only occurs a few hundred times a year. This situation with seizures of bank accounts without adequate recourse is wrong and should be fixed. More broadly, the entire tax system compliance efforts need to be fixed. This isn't the only or worst problem.