Members of the House Ways and Means Oversight Subcommittee have sent a letter urging the Internal Revenue Service to return money it had seized from a Maryland farming couple simply because they deposited money in the bank in amounts under $10,000.
Randy and Karen Sowers, a couple who run a Maryland dairy farm, were targeted for civil forfeiture after falling under suspicion of structuring their deposits to evade bank reporting requirements.
The IRS seized $29,500 from them in May 2012, invoking so-called “structuring” laws. Structuring laws were intended to target criminals who break their cash deposits into small amounts to avoid bank reporting laws, but the laws have also been applied to innocent business owners.
The IRS changed its policies last October to stop such forfeitures in the future after coming under scrutiny in Congress and the press, but that policy change came too late to help the couple. The IRS announced that it would henceforth limit application of the structuring laws to real criminals, rather than property owners whose only supposed crime is depositing money in the bank in the “wrong” amounts.
The letter from the bipartisan group in Congress urges the IRS to apply its current policy to Randy and Karen Sowers, as well as other property owners who had their money taken before the October 2014 policy change.
“We didn’t do anything wrong, but the IRS took our money anyway,” said Randy Sowers in a statement. “I appreciate the support from Congress. It’s about time somebody looked into giving us our money back. I hope the IRS does the same for everyone they took money from, and not just for me and Karen.”
Last month, the Sowers filed a petition for remission or mitigation asking the IRS to return their money. The petition gives a government agency such as the IRS the discretion to return money it has taken through civil forfeiture.
The letter from Congress was addressed to Treasury Secretary Jacob Lew, as federal statutes governing petitions for remission or mitigation give the Treasury Secretary ultimate authority to grant or deny a petition. Other officials potentially involved in the decision—including Attorney General Loretta Lynch, United States Attorney for the District of Maryland Rod Rodenstein, and IRS Commissioner John Koskinen—were also copied on the letter.
“We all learn in kindergarten: If you’ve taken something that doesn’t belong to you, give it back,” said Robert Everett Johnson, an attorney with the Institute for Justice, a libertarian law firm in Arlington, Va., which represents the Sowers. “The public, Congress, everyone understands that what happened to Randy and Karen was wrong. The question is, will the IRS do the right thing and give the money back?”
The Institute for Justice has succeeded in getting the IRS to drop similar cases in the past and return the money (see IRS Drops Civil Forfeiture Case, Prosecutors Drop iRS Civil Forfeiture Case and Prosecutors Return $447,000 in IRS Civil Asset Forfeiture). Leaders of the House Ways and Means Committee introduced a bipartisan bill last December to protect taxpayers against the inappropriate use of IRS civil asset forfeitures (see Congressmen Introduce Bill to Curb IRS Civil Asset Forfeitures).
In the letter, the lawmakers on the subcommittee described how Sowers had appeared at a congressional hearing in February. “At our hearing, Randy Sowers, a Maryland dairy farmer, testified that after the IRS seized $67,000 from his farm’s account in 2012 because his wife, Karen, often made large cash deposits of proceeds from farmer’s markets,” said the letter. “A bank teller told Mrs. Sowers that it would reduce paperwork if she deposited the funds in increments under $10,000. Mrs. Sowers did so, believing she was making life easier for the teller, not because she intended to violate federal law. Then, in the course of settlement negotiations, Mr. Sowers told their story to a reporter who published an article on the Sowers’ plight. The attorney prosecuting the case then stated in an e-mail that the terms of the settlement agreement were harsher than in other, similar cases because Mr. Sowers had exercised his First Amendment right and spoken to the press. Ultimately, the Sowers settled their case for $29,500 because they needed the remainder of the funds to run their farm.”
They noted that in his testimony, IRS Commissioner John Koskinen apologized to everyone who had been treated unfairly, and several months before the hearing, the IRS changed its policy to prohibit seizures based on suspicions of structuring unless the funds came from an illegal source or there were other, exceptional circumstances.
“That policy change, however, came too late to help the victims of the IRS’s abusive seizure practices,” said the lawmakers in the letter to the Treasury Secretary. “Now, Treasury still holds funds seized from innocent small business owners who settled their cases only because they could not afford to do otherwise. As the Treasury Secretary, you have the opportunity to right the wrong done to these small business owners. As discussed in the attached petition on behalf of Randy and Karen Sowers, you have the discretion to return the seized funds to their rightful owners. 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. The Sowers and others like them should be treated with the same fairness applied to cases going forward. We ask that you grant this petition and review other, similar cases and return the seized funds expeditiously.”
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