IRS accused of misusing its power to snare farmers

Associate Editor

WASHINGTON (June 15, 2016) — The Internal Revenue Service abused a law meant to catch drug runners and terrorists to instead punish small business owners and farmers — including two from Maryland — a congressional subcommittee said late last month.
The House Ways and Means Oversight subcommittee held its second hearing May 25 on the IRS’s use of a law enforcement tool called civil asset forfeiture that allowed the agency and others to seize cash from citizens’ bank accounts when it suspected the deposits were structured to avoid federal reporting requirements.
“The issue that we are talking about today should be a national outrage,” said Rep. Mike Kelly, R-Pa., according to a subcommittee statement. “It is stunning to me the arrogance of the IRS.”
The controversial practice ensnared two Maryland farmers: Randy Sowers, owner of South Mountain Creamery in Middletown, and Calvin Taylor, owner of a family farm in Preston on the Eastern Shore. Sowers has been publicly fighting for more than a year to have about $30,000 he ultimately forfeited to the agency in 2012 returned to him. Neither was ever proven guilty of a crime.
Civil asset forfeiture allows the IRS and selected federal and state law enforcement agencies to seize cash from bank accounts if it’s believed the money has been deposited to avoid the $10,000 threshold that requires the bank to report the deposit to the IRS.
The process is used to catch criminals who deal primarily in cash such as drug dealers, money launderers, tax evaders and the like.
At the hearing, Taylor said he ultimately forfeited nearly $42,000 to the government because he said a prosecutor told him he could face criminal charges if he didn’t agree to the deal. He admitted he deposited nearly $700,000 in cash from 2008 to 2011 into a bank account in increments just below $10,000 because a bank employee once told him deposits more than $10,000 were reported to the IRS.
Taylor said he didn’t know structuring his deposits that way would seem suspicious “and who wants to get reported to the IRS?” he told the committee, according to his testimony.
“I had no choice but to agree to the [Department of Justice] and IRS keeping our legally earned money,” he said. “I faced potential criminal charges for crimes I did not know I had committed, but that a U.S. prosecutor had nonetheless threatened to bring against me. … The potential cost of defending myself was astronomical, and it greatly exceeded our family’s resources.”
Sowers’ money was seized after he told investigators his wife deposited, in total, roughly $300,000 in weekly increments just beneath $10,000 from April to December 2011.
But he said she structured the deposits that way at the request of a teller who said the bank wanted to avoid the paperwork-heavy process of reporting the cash deposits to the IRS.
There are more than 600 pending cases involving individuals and families who were forced to forfeit assets even though they were never charged with a crime or found guilty of one, the subcommittee said in a statement.
More than $43 million was seized in those cases.
“We have before no criminal suspicion, assets that have been seized, 618 cases,” said Rep. Pat Meehan, R-Pa., to several IRS and Justice Department officials at the hearing, including IRS Commissioner John Koskinen. “Because… justice delayed is justice denied. We are looking at years of delay for some of these individuals.”
IRS and Justice Department officials were “unable” to answer the question, the subcommittee said, but promised to report back how they would review and resolve outstanding cases.
“[Your non-answer] is not good enough,” the subcommittee chairman, Rep. Peter Roskam, R-Ill., said to Koskinen and other officials. “It’s obtuse. It’s evasive. It’s condescending. Not to us. But it’s condescending to these people [who have been victims].”
Roskam also singled out Sowers and Taylor.
“To the Taylors and to the Sowers, we are sticking with you,” he said. “You reflect a larger group and we are going to do our best to make sure that a coequal branch of government is held to account for what we think is an abuse.”