Rep. Mike Kelly Compares IRS Asset Seizures To Torture As Agency Apologizes

WASHINGTON -- The commissioner of the IRS offered an apology of sorts Tuesday for seizing the assets of taxpayers absent any evidence of a crime, but not before one angry congressman compared the agency's actions to torture.

Commissioner John Koskinen appeared before the Ways and Means Committee to explain why the agency had seized hundreds of thousands of dollars from business owners simply because they made cash deposits under $10,000. It happened, he explained, under banking secrecy laws that bar people from hiding deposits of more than $10,000 -- which must be reported to federal authorities -- by breaking them into separate smaller payments.

In order to seize the bank accounts of several businesses highlighted in the hearing, the agency simply had to assert that the businesses were making numerous deposits under $10,000, and claim the deposits were evidence of "structuring" payments to avoid detection. No other proof was required.

One business was a Maryland dairy farm that earned much of its income from cash sales at farmers' markets. One was an Iowa Mexican restaurant that did its business in cash. Another was a New York candy store. A third was a Georgia gun shop whose owner had an insurance policy that only covered losses outside of his premises of up to $10,000. So he kept all his cash deposits under that amount.

In each case, according to testimony at the hearing and outside reporting, the IRS went to prosecutors to seize the bank accounts, and did so.

None of the owners were subsequently accused of crimes. But they had to fight to get their money back, or settle and let the government keep some of it.

The circumstances disturbed all the lawmakers on the oversight subcommittee chaired by Rep. Peter Roskam (R-Ill.), but they seemed to especially anger Rep. Mike Kelly (R-Pa.), who owns car dealerships around Butler, Pennsylvania.

"Access to capital, access to cash, is the same as having access to [blood to] keep your body running," Kelly said.

"It is incredible that this organization can do that, on a suspicion of wrongdoing -- shut somebody down, seize their assets, and put them in a position where they can't possibly survive," Kelly told Koskinen. "You talk about waterboarding, this is waterboarding at its worst."

Koskinen had not mentioned the now-banned torture technique that was used in post-9/11 interrogations, so it was unclear why Kelly brought it up. But Koskinen assured Kelly and other outraged lawmakers that the IRS had changed its asset seizure policy in the wake of the Iowa case.

He said that in the future the IRS would only seize such assets if it appeared the money was likely coming from criminal activity or in "exceptional circumstances."

He also offered a vague apology, saying he is sorry if any taxpayers were mistreated.

"I'm sorry the mistakes happened, if they happened, and I'm happy to apologize to say if taxpayers have gotten themselves into a situation that is not their fault, they are not consciously structuring, they're not avoiding taxes -- there are a lot of people structuring to avoid letting us know what they earn -- if they paid their taxes, they weren't doing anything consciously illegal, and they got wrapped up in the system, that was a mistake and I apologize for that," Koskinen said.

Still, not everyone believed that the agency would stop seizing assets in similar circumstances in the future.

In his description of the new policy -- which only affects the IRS and not other federal or local agencies that enforce banking laws and seize assets -- Koskinen said that "exceptional circumstances" could be defined as a pattern of making many deposits of under $10,000.

Robert Johnson, an attorney who has assisted such businesses at the libertarian Institute for Justice, said that at first he thought the IRS had left a troubling loophole in its new policy by adding the exceptional circumstances clause. After hearing Koskinen describe it, he was more alarmed.

"Almost every case we see here today would qualify as exceptional under that policy," he said.

Johnson added that data collected from 2005 to 2012 by the Institute for Justice suggests the IRS has been overzealous in seizing assets: Of the $242 million grabbed during that period, the agency ultimately did not keep $116 million.

Koskinen noted that about 60 percent of the people who have their assets taken never show up to contest the seizure, suggesting that indeed they are criminals.

The committee pledged to pursue legislation -- first offered last year -- that would curb the IRS' ability to seize assets without proof of a crime.

Watch the video above.

Michael McAuliff covers Congress and politics for The Huffington Post. Talk to him on Facebook.



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