Tag: Tax Law

The IRS Lies, Steals, Extorts

Why do we need to outlaw asset forfeiture without trial? Why do we need to abolish structuring laws? Why do we need to burn the IRS down and salt the Earth?

This is why:

Last October, in response to the outrage provoked by “structuring” cases in which the government took people’s money because their bank deposits were too small, the IRS said it would no longer do that unless there was evidence that the money came from an illegal source. In March the Justice Department announced a similar policy for seizures based on structuring, which entails making deposits of less than $10,000 with the intent of evading bank reporting requirements. Yet both the IRS and the DOJ are continuing to pursue the forfeiture of $107,000 that belongs to Lyndon McLellan, the owner of a convenience store in rural North Carolina, based on nothing but suspicion of structuring.

As in other structuring cases, McLellan lost his money because of well-intentioned but bad advice from a bank teller. The teller told McLellan’s niece, who usually handled L&M Convenience Mart’s deposits, she could save the bank burdensome paperwork by keeping the deposits below $10,000, the reporting threshold. Based on the resulting pattern of deposits, the IRS cleaned out McLellan’s bank account a year ago, even though there was no evidence that the money came from anything other than his perfectly legal business, which combines a store with a gas station and restaurant. The Institute for Justice, which is suing the IRS and the DOJ on McLellan’s behalf, notes that “the government filed its forfeiture complaint in December 2014, two months after the IRS announced it would not forfeit money in cases like this one.”

Reminder: when Elliot Spitzer, who had prosecuted people for structuring, structured payments to his madam to avoid detection, he wasn’t punished at all. This law is frequently applied to people who can’t afford to fight it or make a ruckus. The only reason McLellan can fight this is because the IJ — one of the more singularly awesome organizations in the country — is fighting on his behalf.

It gets worse. North Carolina congressman George Holding grilled the IRS commissioner about this case. This pissed off the federal prosecutor. You see, the warrant is under seal by the court. Ostensibly, this is to “protect” the defendant but in reality it protects the government from having their scumbag behavior exposed (see here for where these seals have been used to silence Scott Walker supporters when they have been subjected to midnight raids and fishing expeditions to try to find some evidence … any evidence … of wrong-doing). Similar gag orders were used to try to silence the late Siobhan Reynolds when she opposed government efforts to crack down on pain-killer use.

Of course, when sealed records are leaked by prosecutors — such as when Barry Bond’s sealed testimony in the BALCO case was leaked — no one cares.

Anyway, the prosecutor’s response has to be read to be believed:

I’m a bit concerned. At your request, I provided you a copy of the application for seizure warrant, which remains under seal with the Court, and now it appears it has been made available to a congressional committee? I do not know who did that, and I am accusing no one, but it was not from our office and could only have come from your clients. That was certainly not my intent in making this available. My intent was for you and your clients to be able to actually know the facts so you could review them and have an intelligent discussion with me. Whoever made it public may serve their own interest but will not help this particular case.

Your client needs to resolve this or litigate it. But publicity about it doesn’t help. It just ratchets up feelings in the agency.

Not unreasonable. But … wait for it.

My offer is to return 50% of the money. The offer is good until March 30th COB.

In other words, “shut the hell up and we’ll give you back the half the money”. And remember, if it weren’t for the support he’s receiving from the IJ, this would likely be the best outcome for McClellan.

A few weeks ago, John Oliver — whose commentary I normally find funny and occasional insightful — defended the IRS. He pointed out, correctly, that they didn’t make the tax law so ridiculously byzantine and that they barely have the resources to deal with the ungodly mess Congress has handed to them. He pointed out that for every dollar we spend on the IRS, we get six back. I don’t find it particularly persuasive since that means more money extracted from our citizens (sometimes in error and frequently at the expense of people like McClellan, who can’t afford to fight).

But this illustrates perfectly why people hate the IRS and the prosecutorial machinery that surrounds them. This is an agency that once had “Seizure Fever — Catch It!” posters printed up. This is an agency that zealously uses the unconstitutional powers Congress gives them. This is an agency that has happily complied with Presidential requests for targeted political audits and harassment. And now it is an agency that lied about what they were doing, seized someone’s assets and threatened him when he went public with it.

So yeah, we need to burn the tax code down. Yes, we need to pass laws to stop asset forfeiture — it’s clear that we can’t rely on the agencies to do it on their own. But once we do that, we also need to tear down the IRS and replace it with something else. They are too used to using and abusing the power our Congress and our Courts have stupidly given them.