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Are government’s asset forfeiture practices even legal?

On Behalf of | Jun 18, 2016 | Asset Forfeiture, Firm News

If you paid attention in civics or social studies in school, you’ll recall the U.S. Constitution and Bill of Rights includes some clear tenets. Among them is a right to be free from government search and seizure of property without due process.

There are some exceptions to the rule. For example, civil forfeiture allows authorities to seize assets if they believe they were accrued through criminal activity. They don’t have to bring charges to do it and the burden then falls to the owner to prove his or her innocence. Cases involving asset forfeiture in bankruptcy follow different rules and questions of that sort need the attention of experienced legal counsel.

The history of asset forfeiture by government goes back to when piracy was a big issue. Authorities used it to scuttle criminal activities by taking offending ships out of action. More recently, law enforcement has successfully used forfeiture to crimp suspected drug trafficking and other organized crime. The practice has proven so effective that Congress has even opened the door to allowing forfeiture to curb possible fraud and other white collar crime.

The problem, however, is that some agencies have gone a little too far, taking property when there may be no apparent evidence of crime. One of them is the IRS.

In recent testimony before Congress, an Institute for Justice attorney said the IRS has taken an estimated $43 million from 618 individuals since 2007. In many instances, targets were small business owners who drew suspicion because they made bank deposits under the $10,000 threshold that requires banks to report to the IRS. However, a lot of times, those businesses had been asked by the bank to limit the deposit amounts so it wouldn’t have to fill out the paperwork.

The IRS acknowledges that it has some 700 such cases in its files, though it disputes the amount of money involved. In addition, recently, the IRS informed Congress that it is changing its policies on such forfeitures and will be returning money to taxpayers who may be entitled to returns.

One lawmaker says this is good news after two years of pressure and two congressional hearings. It may be worth noting, though, that it will still up to the owner to prove that the assets seized weren’t the fruit of illegal activity.


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