The RESPECT Act: Will Congress Pass Legislation to Limit IRS Civil Forfeiture in “Structuring” Cases?

By Michael A. Villa, Jr. on July 14, 2017

 

The RESPECT Act (H.R. 1843), also known as the Restraining Excessive Seizure of Property through the Exploitation of Civil Asset Forfeiture Tools Act, was originally introduced in the House of Representatives in March 2017. The House Ways and Means Committee recently unanimously approved the RESPECT Act, which prohibits the IRS from carrying out seizures relating to a currency structuring transaction unless the property to be seized is from an illegal source or the funds were structured for the purpose of concealing the violation of another criminal law. It also requires notice and a post-seizure hearing for such currency structuring seizures.

“Structuring” is the practice of conducting financial transactions in a pattern calculated to avoid the filing of certain records and reports required by the Bank Secrecy Act (BSA) and/or 26 USC § 6050I (IRS Form 8300). For example, the BSA requires financial institutions to file a currency transaction report if an individual deposits or withdraws over $10,000 in currency in a transaction. If an individual has currency of $12,000.00 and chooses to deposit $6,000 on Monday and $6,000 on Tuesday, he or she may be accused of “structuring” the transaction to avoid the currency transaction report.

The RESPECT Act, if adopted as law, will limit the IRS’s ability to seize property in a currency structuring investigation to cases in which the IRS has probable cause to believe funds were structured to avoid the BSA reporting requirements and that the funds were derived from an illegal source or that the funds were structured for the purpose of concealing a different violation of criminal law, other than structuring transactions to evade BSA reporting requirements.

Assuming the IRS does in fact seize property that it believes meets the above criteria, then within 30 days of seizing the property, the IRS must: (1) make a good faith effort to find all owners of the property, and (2) notify the owners of the post-seizure hearing rights established by H.R. 1843. The IRS may apply to a court for one 30-day extension of the notice requirement if it can establish probable cause of an imminent threat to national security or personal safety.

If the property owner requests a court hearing within 30 days after the date on which notice is provided, the property must be returned unless the court holds an adversarial hearing within 30 days of the request and finds that there is probable cause to believe that the property was derived from an illegal source or the funds were structured to conceal the violation of a criminal law other than a structuring violation.

The RESPECT Act essentially attempts to limit the IRS’s ability to seize first and ask questions later in a currency structuring investigation. Assuming the RESPECT Act becomes law, it is potentially another tool to defend yourself or your client against structuring allegations.

You can follow the progress of H.R. 1843 (here).

Additional information on IRS currency structuring guidance can be found at:

    -Read the Meadows Collier Blog post from June 30, 2016, "IRS Announces Procedure for
     Seeking a Return of Property Seized in Legally Sourced Structuring Cases,
" (here).

    -IRS Website - Part 4. Examining Process; Chapter 26. Bank Secrecy Act; Section 13.
     Structuring (here).

    -Treasury Inspector General for Tax Administration, "Criminal Investigation Enforced
     Structuring Laws Primarily Against Legal Source Funds and Comprised the Rights of Some
     Individuals and Businesses," March 30, 2017, Reference Number:  2017-30-025 (here).

For any questions on IRS forfeiture matters or any other civil or criminal tax-related matter, please feel free to contact me at (214) 749-2405 or mvilla@meadowscollier.com.
 

     





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