Opinion IRS Seizes First, Asks Questions Later It’s time for Congress to review the IRS’s forfeiture program.

Larry Salzman and Robert Everett Johnson are attorneys at the Institute for Justice, which represented Hinders. Salzman is a co-author of Seize First, Question Later: The IRS and Civil Forfeiture.

When Carole Hinders answered a knock at the front door of her home in August 2013, she was confronted by two IRS agents. They told her they had just cleaned out the entire bank account of the restaurant, Mrs. Lady’s Mexican Food, that Hinders had owned and operated in tiny Spirit Lake, Iowa, for the past 30 years. The IRS seized more than $32,000.

While Hinders stood in shock, the IRS agents told her that her cash deposits looked suspicious. Based on that suspicion alone, the IRS had authority to seize her entire bank account using a federal legal procedure known as civil forfeiture.


Hinders protested that she’d get a lawyer and fight the seizure. She still remembers the disdainful response of one of the agents: “Well, you can try.”

The government never alleged that Hinders’ money was the proceeds of illegal activity. In fact, Hinders has never been in trouble with the law in her life. The IRS took her money on the basis of an obscure banking law that requires banks to report all cash transactions of more than $10,000 to the U.S. Treasury Department. This banking law makes it illegal for account holders to “structure” deposits of less than $10,000 to avoid the filing of a report.

Even a casual investigation by the agents would have revealed that Hinders’ restaurant only accepted cash, which necessitated frequent cash deposits. But, seeing a pattern of deposits under $10,000, the IRS surmised that Hinders was evading the reporting law and grabbed her money on the principle of “seize first, ask questions later.”

Hinders is far from alone. Documents obtained using the Freedom of Information Act indicate that from 2005 to 2012, the IRS seized more than $242 million for suspected structuring violations in more than 2,500 cases. At least a third of those cases, like Hinders’, arose from nothing more than a series of cash transactions under $10,000, with no other criminal activity even alleged by the government.

The cavalier response by the IRS agent in Hinders’ case reflects a disturbing reality: The IRS and other federal agencies can use civil forfeiture to seize and keep a person’s cars, cash and other property without ever charging that person with a crime. To get property back, the person would have to prove his or her innocence in expensive and protracted litigation against the U.S. Department of Justice. The process can take years to complete.

Many business owners cannot go for months or years without access to their working capital, so they agree to coercive settlement terms proposed by the government. For instance, when Randy and Karen Sowers had over $64,000 seized from their business by the IRS, they agreed to allow the government to keep about half. Randy and Karen are dairy farmers in Maryland, and they sell their products for cash at farmers’ markets. The only thing they did wrong was make sub-$10,000 cash deposits at the bank, but they ultimately decided they could not afford to fight the IRS.

Legislation enacted in 2000, the Civil Asset Forfeiture Reform Act, was supposed to help property owners by enacting deadlines to ensure that government cannot drag out the civil forfeiture process. But government routinely disregards those deadlines. Under CAFRA, the government is supposed to commence forfeiture proceedings within 60 days of seizing property. But in one case, involving three brothers on Long Island, the government held almost half a million dollars for over 2½ years without taking any step to commence forfeiture proceedings — and, thus, without giving the brothers any opportunity to present their case to a judge.

Data obtained from the IRS for 2005-12 indicate that the average structuring-related forfeiture proceeding took about a year to complete. The longest such proceeding took more than 6½ years. These delays ratchet up the pressure for property owners to agree to settle.

The aggressive tactics adopted by law enforcement in structuring cases are, perhaps, unsurprising given that the proceeds of forfeited property are funneled back to the very agencies responsible for the forfeiture — an arrangement that gives law enforcement a perverse financial incentive to seize as much as possible.

Under federal law, funds seized by the IRS are deposited in the Treasury Forfeiture Fund. Those funds are then available, without any appropriation by Congress, for use by the IRS to fund law enforcement activities including seizures of additional property. The result is a vicious cycle, in which abuse of innocent Americans like Hinders makes it possible for government to seize even more property.

Indeed, the amount of money held in the Treasury Forfeiture Fund and an analogous fund maintained by the Department of Justice grew from $763 million in 2001 to nearly $3.2 billion in 2012.

In Hinders’ case, the IRS ultimately agreed to return the money. But only after 16 months of litigation. Hinders was able to fight the case thanks to free legal representation from the Institute for Justice, a national public interest law firm that litigates to protect property rights. Fighting the seizure might have cost Hinders more than twice what was seized, had she hired her own attorney.

Congress is just now waking up to the abuse of civil forfeiture laws.

Last month, Sen. Rand Paul (R-Ky.) and Rep. Tim Walberg (R-Mich.) introduced the Fifth Amendment Integrity Restoration Act, which would make it harder for the government to take property from people who have never been charged with, let alone convicted of, any crime, and easier for innocent owners to get the property back when it is wrongfully seized.

The only sure-fire way to reform civil forfeiture is to eliminate it entirely and to replace it with criminal forfeiture, under which individuals must be convicted of a crime before their property can be taken. Short of that, meaningful reform would include eliminating the financial incentive for law enforcement to pursue civil forfeiture by requiring that forfeited property be deposited in a general fund, as well as removing the threat of delay from the government’s arsenal by mandating a prompt judicial hearing after any property seizure. Congress also should reform the structuring laws, in particular, by adding a requirement that government prove that seized money came from an illegal source.

Nobody should have their money taken by the government merely because they deposited hard-earned cash in the bank. Reform is urgently needed to protect innocent, hardworking Americans from their own government.