IRS Asset Seizure Bill Clears Ways and Means Committee

For over 50 years, Bloomberg BNA’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...

By Kaustuv Basu

July 7 — A bipartisan measure that would require the IRS to show probable cause of illegality before seizing assets passed by voice vote in the House Ways and Means Committee.

The bill (H.R. 5523), sponsored by Reps. Peter Roskam (R-Ill.) and Joseph Crowley (D-N.Y.), would require the Internal Revenue Service to find probable cause that funds came from an illegal source or criminal activity before seizing assets because of structuring, or making bank deposits of less than $10,000 to bypass reporting requirements.

Committee Chairman Kevin Brady (R-Texas) said at the markup July 7 that the IRS had frozen bank accounts of small-business owners simply because of transactions that looked suspicious. “Mr. Roskam’s bipartisan legislation puts in place important safeguards to help ensure the IRS’s civil asset forfeiture authority cannot be used to wrongfully seize the assets of honest taxpayers,” he said.

The bill would also require the IRS to give notice of civil forfeiture within 30 days of seizing assets, in most cases. If the recipient asks for a court hearing within 30 days, the IRS must return the property unless the court finds probable cause of illegal activity. The measure excludes interest on wrongly seized funds from income tax if a court finds that the agency must return the funds and any accrued interest.

Changing the Statute

Committee ranking member Sander Levin (D-Mich.) said at the markup that the bill would codify current policy at the IRS.

The IRS and the Department of Justice stopped pursuing the seizure and forfeiture of “legal source” activity funds in 2014. But forfeited funds from previous cases weren't automatically returned.

IRS Commissioner John Koskinen said in a letter released June 14 that the agency would notify 700 taxpayers that they could petition to get refunds on money seized from them between October 2009 to October 2014 (115 DTR G-6, 6/15/16).

Roskam said it was “good news” that the IRS had changed its policy. “Let’s change the underlying statute so this never happens again,” he said.

To contact the reporter on this story: Kaustuv Basu in Washington at

To contact the editor responsible for this story: Brett Ferguson at

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.