Members of Congress ask IRS to return money seized from dairy farmers

[August 21, 2015]  By Eric Boehm | Watchdog.org
 
 It’s not every day that progressives like U.S. Rep. Charlie Rangel, D-N.Y., and tea party favorites like U.S. Rep. Kristi Noem, R-S.D., can find common cause.

That’s how out-of-line the Internal Revenue Service has been when it comes to civil asset forfeiture.

Rangel and Noem were two of the nine lawmakers who recently signed a letter to Treasury Secretary Jacob Lew, asking him to make things right after the IRS seized $67,000 from a pair of Maryland dairy farmers, despite not charging them with any crimes.

Randy and Karen Sowers ultimately settled their case with the federal government and ended up losing more than $29,000.

“Treasury still holds funds seized from innocent small business owners who settled their cases only because they could not afford to do otherwise,” the members of Congress wrote to Lew.

The IRS took the money from the Sowers in 2012. The couple had, according to the IRS, made a series of suspicious cash deposits and, thanks to federal laws that allow law enforcement agencies to go after such deposits, that was enough to freeze their assets and seize their cash.

The couple was accused of “structuring” their deposits. That’s the name given by law enforcement to supposedly-suspicious-but-actually-completely-legal deposits of less than $10,000 at a single time.

Since larger deposits are given more scrutiny by banks and law enforcement, criminals trying to hide large stashes of money tend to avoid depositing more than $10,000 at once, law enforcement officials claim.

The only problem is the Sowers don’t appear to be criminals by any sense of the word. They’re just farmers who do a lot of business, in cash, at local farmers markets and decided they would rather keep that money in a bank than stuffed inside a mattress.

They’re in the process of suing the IRS over the seizure.

“The statute that prohibits structuring was designed to help interdict money laundering, drug trafficking and terror financing schemes, not innocent Americans who simply make frequent cash deposits,” wrote the members of the committee.
 

RELATED: Congress, Supreme Court scrutinize civil asset forfeiture rules for federal agencies

The IRS has changed its policy regarding investigations into structuring, but those changes came too late to help some targets of those federal probes.

The lawmakers who wrote to Lew said the IRS policy change amounts to an admission the agency’s previous policy was wrong.

“We didn’t do anything wrong, but the IRS took our money anyway,” Randy Sowers said in a statement provided by attorneys at the Institute for Justice, a libertarian law firm representing the Sowers in their case against the federal government. “I appreciate the support from Congress. It’s about time somebody looked into giving us our money back.”

The IRS seized more than $240 million between 2005 and 2012, according to the Institute for Justice. At least a third of those cases were based on nothing more substantial than a series of cash transactions of less than $10,000.

Again, it’s worth noting those deposits are entirely legal under federal law.

The IRS’ practice of going after people like the Sowers was the subject of a congressional hearing in February. At the hearing, IRS Commissioner John Koskinen apologized to people who had been treated unfairly before the October 2014 policy change, but those apologies did not come with a promise to reimburse the seized assets.

States have been battlegrounds over forfeiture laws in recent years, but the issue has only bubbled up at the federal level in the past few months.

Before stepping down last year, U.S. Attorney General Eric Holder announced some, mostly cosmetic, changes to how the Department of Justice would be allowed to use forfeiture. President Barack Obama’s pick to replace Holder, Loretta Lynch, faced tough questions during her confirmation hearing about the aggressive use of forfeiture by attorneys working under her in New York.