New IRS Abuse Tool: Civil Asset Forfeiture Act of 2000, Bankrupting American Small Business Owners



In 2000, President Bill Clinton signed into law the Civil Asset Forfeiture Act.  It was sold to the public as one tool in an arsenal for the War on Drugs.  The idea was to seize the evidence counted as assets of drug offenders before they had a chance to hide them among friends and family.  To this end, police can – and do – seize property and cash based on a preponderance of evidence that authorities claim is part of an investigation of a crime before any indictment or trial occurs.  (Innocent until proven guilty is so unfashionable in the drug war.)

Civil Asset Forfeiture has been famously abused by police departments across the nation since that time.  Because the assets are forcibly seized and do not have to be returned in their entirety, the most popular targets have been cash and vehicles which are absorbed into department budgets or sold for the profit.  (This is an abuse of power that needs to be amended as soon as possible in its own right.)

One of the practices that law enforcement looks for when it comes to gathering evidence of  drug crimes is something called “structuring” where drug dealers and other criminals make daily bank deposits between $5,000 and $9,999 in order to avoid the paper trail that deposits of $10,000 or more in personal accounts creates.  It seems that every time a bank accepts a $10,000 deposit, there is a pile of regulatory paperwork to be filled out plus additional taxes.  In order to avoid this, bank tellers and accountants tell every day business people who use their personal accounts for business purposes, to limit their deposits to under $9,999 per day.

To law enforcement, this looks like preponderance of evidence of crime.  And if it looks this way to police, it looks that way to the IRS as well.  Below $10,000, deposits do not require an immediate tax payment.  So, when a year or two’s worth of deposits between $5,000 and $9,999 every day accumulates, the IRS begins to investigate, and seizes the assets – sometimes life savings of small business owning Americans – prior to any kind of charge, let alone a conviction.  (Yes, this is a violation of 4th Amendment rights, but because the Civil Asset Forfeiture Act reads the way it does, the deposit trail is enough for a warrant and seizure of “evidence.”)

By using the Civil Asset Forfeiture Act as the source of evidence to investigate, well, whatever crime the IRS seems to think is in progress, the most hated agency in the entire Federal Government is confiscating the savings of small business owning Americans at a rate 500 times higher in 2012 than 2005.  (That figure can be found in this article from MSN.)  Avoiding paying taxes any way we can is a great American tradition, but going after small business owners who have done nothing wrong and have no other evidence against them other than non- major asset level bank deposits is beyond unacceptable.  And according to the MSN article, many of the victims of the IRS abuse give up pursuing getting their money back rather than go further into debt fighting.  This story was particularly disturbing:

In one Long Island case, the police submitted almost a year’s worth of daily deposits by a business [Bi-County owned by the Hirsch brothers], ranging from $5,550 to $9,910. The officer wrote in his warrant affidavit that based on his training and experience, the pattern “is consistent with structuring.” The government seized $447,000 from the business, a cash-intensive candy and cigarette distributor that has been run by one family for 27 years….


[The attorney for the family] has argued that prosecutors violated a strict timeline laid out in the Civil Asset Forfeiture Reform Act, passed in 2000 to curb abuses. The office of the federal attorney for the Eastern District of New York said the law’s timeline did not apply in this case. The federal attorney’s office said that parties often voluntarily negotiated to avoid going to court, and that Joseph Potashnik, the Hirsches’ first lawyer, had been engaged in talks until just a few months ago. But Mr. Potashnik said he had spent that time trying, to no avail, to show that the brothers were innocent. They even paid a forensic accounting firm $25,000 to check the books.


Bi-County has survived only because longtime vendors have extended credit — one is owed almost $300,000, Mr. Hirsch said. Twice, the government has made settlement offers that would require the brothers to give up an “excessive” portion of the money, according to a new court filing…. “We weren’t going to take a settlement, because I was not guilty.”

No honest, hard-working business owner should ever have to tolerate this.

As much consternation and vitriol was generated over the IRS refusing non-profit status to conservative political groups, using a law which may very well be illegal anyway to confiscate the hard earned money of honest and upright Americans deserves more scrutiny.   Using the Civil Assets Forfeiture Act for IRS cases is plain and simply an abuse of power.  Too bad the Obama Administration would never put a stop to it.

About the Author

Cultural Limits
A resident of Flyover Country, Cultural Limits is a rare creature in American Conservatism - committed to not just small government, Christianity and traditional social roles, but non-profits and high arts and culture. Watching politics, observing human behavior and writing are all long-time interests. In her other life, CL writes romance novels under her nom de plume, Patricia Holden (@PatriciaHoldenAuthor on Facebook), and crochets like a mad woman (designs can be found on Facebook @BohemianFlairCrochet and on Pinterest on the Bohemian Flair Crochet board). In religion, CL is Catholic; in work, the jill of all trades when it comes to fundraising software manipulation and event planning; in play, a classically trained soprano and proud citizen of Cardinal Nation, although, during hockey season, Bleeds Blue. She lives in the Mid-Mississippi River Valley with family and two cute and charming tyrants...make that toy dogs.