Structuring seizures no longer threaten innocent American business owners. Nick Sibilia writes:
Under the Bank Secrecy Act of 1970, banks must report any cash transactions greater than $10,000. But if someone frequently deposits or withdraws their cash in amounts under $10,000, the IRS could seize it for “structuring.” Even though their money was earned legitimately and despite the fact that they were never charged with a crime, in 2012, the IRS seized nearly $63,000 from Randy and more than $446,000 from Jeff. It took years of litigation and high-profile coverage before they won their money back.
Structuring can be a Kafkaesque nightmare for small-business owners, especially for entrepreneurs like Jeff and Randy who work in cash-heavy industries: Jeff runs a convenience store distribution business with his brothers on Long Island, while Randy is a dairy farmer in Maryland.
Their cases weren’t isolated incidents. Between 2005 and 2012, the IRS used civil forfeiture to seize nearly $200 million in over 2,100 cases. Roughly half of all seizures involved amounts under $34,000—hardly the proceeds of the sprawling criminal enterprises structuring laws were supposed to target.
But under the RESPECT Act, the IRS can now only seize property for structuring if it’s “derived from an illegal source” or if the money were structured to conceal criminal activity.
According to a 2017 report by the Treasury Inspector General for Tax Administration, the IRS “enforced structuring laws primarily against legal source funds and compromised the rights of some individuals and businesses.” Out of a sample 278 structuring cases, in 91% of those investigations, TIGTA “did not find evidence that the structured funds came from an illegal source or involved any other illegal activity.”
With the president’s signature, the RESPECT Act finally codifies a change in policy by the IRS. In response to multiple lawsuits filed by the Institute for Justice (including on behalf of the Hirsch brothers), as well as a front-page article in The New York Times, the IRS first announced it would stop pursuing “legal source” structuring forfeiture cases in October 2014.
Structuring cases dropped sharply: The value of assets seized for structuring plunged from $31.8 million in 2014 to $6.2 million in 2015, TIGTA reported. Although this policy change was a welcome step forward, it could have been revoked at any time by a future IRS commissioner or reversed under a new administration.
[Nick Sibilia, “Trump Signs New Law to Protect Small Business Owners from IRS Seizures,” Forbes, July 10]
