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IRS Announces Procedure for Seeking a Return of Property Seized in Legally Sourced Structuring Cases

By Aaron P. Borden and Michael A. Villa, Jr. on June 30, 2016

On June 16, 2016, the IRS announced a new procedure for taxpayers who have had their property seized to file a petition for remission or mitigation. The IRS has identified more than 700 taxpayers that it believes may qualify, and the IRS has been notifying these taxpayers by mail over the past month. An example of the letter the IRS sent out is available (Click Here). The 700 taxpayers identified by the IRS had their property forfeited from October 1, 2009 to October 17, 2014. In addition to the 700 identified by the IRS, the program is open to other qualifying taxpayers as well. Taxpayers receiving a letter have 60 days from the receipt of the letter to file a petition for remission or mitigation.

The petition will be reviewed according to the guidance provided in 28 C.F.R. 9.5, and I.R.M. and Taxpayers must establish that the underlying funds came from a legal source and there is no evidence that the requesting party engaged in other criminal activity, such as tax evasion, money laundering, or other crimes. In administrative forfeiture cases, the IRS has announced its intention to return property directly to the affected property owners. In judicial forfeiture cases, the IRS has announced its intention to recommend to the Department of Justice that the property be returned to the affected property owners. In the judicial forfeiture cases, the Department of Justice will have final authority on any return of property.

The IRS’s new procedure is in response to the Committee on Ways and Means Subcommittee on Oversight’s scrutiny of the IRS’s asset seizures in structuring cases. The letter sent to Taxpayers by the IRS indicate that a petition for remission or mitigation must be submitted within 60 days of receipt of the letter; as a result, affected taxpayers and their advisors should act now to take advantage of this procedure. If you have any questions regarding the IRS’s new procedure, please contact Michael A. Villa, Jr. or Aaron P. Borden at (214) 744-3700.