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Chairman Jenkins Opening Statement at Hearing on Internal Revenue Service and U.S. Department of Justice Efforts to Return Taxpayers’ Seized Funds

June 20, 2018

WASHINGTON, D.C. –  House Ways and Means Oversight Subcommittee Chairman Lynn Jenkins (R-KS) delivered the following opening statement at a Subcommittee Hearing on Internal Revenue Service and U.S. Department of Justice Efforts to Return Taxpayers’ Seized Funds.

CLICK HERE to watch the hearing.

Remarks as prepared for delivery:

“Over the last three years, the Subcommittee has undertaken tireless work examining the IRS’s use of its civil asset forfeiture authority, including holding two hearings on this topic last Congress.  Today’s hearing serves as the third and will focus on the review process by the Department of Justice for civil asset forfeiture petitions referred to the Department by the IRS. 

“To remind our audience today how we got here, a few years ago reports began to emerge that the IRS Criminal Investigation division was seizing what appeared to be legally sourced funds based solely on allegations of structuring.  By intentionally structuring currency transactions to be below $10,000, taxpayers avoid reporting requirements set forth under the Bank Secrecy Act.  To ensure individuals don’t do this, structuring itself was made a crime.  However, the law was not put in place simply so the Government could enforce reporting requirements; it was put in place as a tool to be useful in addressing criminal behavior, such as tax evasion, money laundering, terrorism, or drug trafficking.

“During the course of our investigation, the Subcommittee heard from numerous small business owners who had their bank accounts seized for no reason other than making deposits under $10,000.  There was no underlying criminal behavior such a drug trafficking or money laundering.  These seizures, as later confirmed by the Treasury Inspector General for Tax Administration or “TIGTA,” were indeed primarily made against legal source funds, with the IRS compromising the rights of some individuals and businesses in the process.

“As a result, this Subcommittee has worked with the IRS over the past few years to ensure better outcomes for these taxpayers.  I won’t say that these outcomes are fair or just, because many people spent years fighting the government over this issue and some lost their livelihoods in the process.  These are events that cannot be erased and the years cannot be returned, but it is my hope that we can at least get these taxpayers their money back.

“While it may have taken a while, I was encouraged to see the example put forth by the IRS, which has gone beyond what was legally required to make things right. 

“We have seen the IRS conduct extensive outreach to those who have a right to petition for the return of their funds. 

“We have seen the IRS change internal policy to no longer pursue seizures solely based on structuring charges – policy changes that were made retroactive to assist those who first brought this issue to light. 

“And ultimately, we have seen the IRS return the vast majority of the seized funds to taxpayers, recommending DOJ do the same. 

“Which brings us to why we are here today.  While I was pleased to see the IRS finally do what is right for most of the taxpayers caught up in this issue, I was discouraged to see that DOJ has not taken the same approach.  Although the Department instituted a similar policy change to no longer pursue seizures solely based on structuring charges, it has elected not to make it retroactive.  This decision harms the very taxpayers that it was intended to help.  Furthermore, the Department has chosen to deny all but approximately 16 percent of the petitions it received, despite the IRS recommending that 76 percent be granted with the funds returned to their rightful owners.

“As a result, I remain deeply concerned that taxpayers whose funds were seized solely based on structuring charges, and whose petitions were referred to DOJ, received vastly different outcomes from similarly situated taxpayers, whose petitions were reviewed by the IRS. 

“In closing, I know today we may hear the argument that the law is the law and that structuring unto itself is a crime.  But I would also remind the agencies here before us today that both of you have had documented instances – and in the case of the IRS, systemic process failures outlined by TIGTA – that highlight the fact that these seizures were deeply flawed, and at times unlawful.  The rights of the individuals and small business owners at times were subverted, and yet, it does not appear DOJ took any of this into account when it overwhelmingly denied most of these petitions.

“To that end, I look forward to hearing from our witnesses as we examine why DOJ has chosen to pursue this route.  I want to thank our witnesses for being here today and I look forward to their testimony.”