In 2013, the IRS drained every penny from the bank account of a Georgia small business owner, taking $940,000 of cash with no warning and no formal criminal charges.
That small business owner was Andrew Clyde, who would go on to fight the IRS for his money, win election to the U.S. House of Representatives and lead a successful charge to reform federal civil asset forfeiture law.
“I personally believe they thought I was an easy target,” Clyde said. “All they really wanted was money.”
Clyde, who runs a small gun shop in rural Athens, saw most of his inventory cleared out in the wake of a gun-buying frenzy sparked by Obama-era gun control efforts. But the IRS turned Clyde’s successful year against him with accusations of suspected money laundering. Under civil asset forfeiture laws at the time, that single unfounded allegation was enough to justify the theft of nearly a million dollars by the IRS.
The civil asset forfeiture process exists at the federal, state, and local levels. It allows government agencies like the IRS and various police departments to seize assets they believe to be directly or indirectly connected to criminal activity. But CAF cases are filed in civil court, not criminal. The burden of proof is on the defendant to prove a negative – that they are not involved in illegal activity – even if they are never charged with a crime.
Armed with the truth of his innocence, Clyde was able to successfully fight the IRS in a six-month battle for his rights. He rejected multiple settlement offers from the IRS – one of which would have returned less than a third of his stolen cash – and ultimately walked away with all but $50,000 of his hard-earned money back in his account.
Clyde was fortunate to have the time and the wherewithal to continue a protracted contest with the government. But other victims of civil asset forfeiture struggle to regain their rightfully earned money from powerful institutions like the IRS. Since cases are filed in civil court, defendants have no right to an attorney. Low-income victims tend to retreat in the face of a lengthy bureaucratic process that can lead to tens of thousands of dollars in legal fees, often exceeding the value of the very item they seek to recover.
These pervasive problems led Clyde to urge Georgia Reps. John Lewis and Doug Collins to pass civil asset forfeiture reform at the federal level for the first time in nearly 20 years. Signed into law by President Trump in 2019 as part of the Taxpayer First Act, the Clyde-Hirsch-Sowers RESPECT Act allows property owners to challenge asset seizures at a prompt, post-seizure hearing. Before the RESPECT Act, victims would wait months or even years before their case could be heard by a judge.
The law also curbs the power of the IRS to seize cash for the vaguely defined offense of “structuring.” Banks are required to report cash transactions greater than $10,000. But if an individual or business frequently deposits or withdraws lower amounts from their account, the IRS had broad authority to seize that cash for structuring. The two other individuals after whom the RESPECT Act is named, Jeff Hirsch and Randy Sowers, were respectively deprived of $446,000 and $63,000 under structuring allegations. They only saw their funds returned after years of expensive, high-profile litigation.
A 2017 report by the Treasury Inspector General for Tax Administration revealed that the IRS “enforced structuring laws primarily against legal source funds and compromised the rights of some individuals and businesses.” In fact, in a sample of 278 structuring cases, 91% of those investigations carried no evidence connecting the seized funds to illegal activity.
The RESPECT Act codifies into law a restriction on forfeiture for currency structuring, permitting the practice only when the funds are proven to be derived from an illegal source or used to cover up illegal activity.
“With the RESPECT Act finally becoming law, law-abiding citizens can rest easy knowing they no longer have to fight the federal government just to prove their innocence,” said Rep. Collins, who sponsored the legislation.
Though this legislation specifically targets IRS civil asset forfeiture, much work remains to be done. The attempted theft of Andrew Clyde’s business revenue is just one example among thousands. At both the federal and state level, government agencies – especially police departments – retain sweeping authority to seize property with no warrants, no warning, and no criminal charges. In 2014, police departments seized more than $5 billion in property value from American citizens – more than every criminal burglary committed that year.
Several states have since passed model legislation reforming the practice of civil asset forfeiture. Four states have abolished the practice outright, with Maine becoming the fourth earlier this year. Meanwhile, sixteen states require a criminal conviction for most property forfeitures. These laws substantially protect the rights of innocent American citizens from the whims of the government.
Congress and the thirty states that have not yet enacted their own civil asset forfeiture reform – including Clyde’s home state of Georgia – should work to implement concrete and workable protections against government abuse.