On Tuesday the Civitas Institute posted an article on its website about one example of recent IRS abuses in civil forfeiture cases. This particular case involved a small businessman in the town of Fairmont, N.C. Lyndon McLellan owns and operates a local convenience store in Fairmont. Last summer, his entire business bank account, totaling $107,702.66, was seized by the Internal Revenue Service.
The article reports:
Here’s how it works. Generally, any person who receives more than $10,000 in cash in a single transaction or a series of related transactions must complete a “Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business.” Transactions are only considered “related” if they occur within a 24-hour period or if the recipient knows, or has reason to know, that each is one of a series of connected transactions. The idea is that large cash transactions might tend to have a criminal purpose, so the IRS requires recipients of such cash to declare their non-criminal purpose. This is not the rule that McLellan allegedly broke, because he received money in amounts that were less than $10,000 at a time and therefore was not required to report anything.
Instead, the IRS is alleging that Mr. McLellan did something called “structuring.” This is where cash transactions are structured in such a way as to avoid the $10,000 reporting requirement. The law exists because, once the IRS instituted the requirement, criminals could have easily structured cash payments in increments of $9,999 to fly under the radar.
However, Mr. McLellan’s case demonstrates a fundamental problem. Intended to catch criminals, the law ensnares small-business owners who are not trying to avoid reporting requirements, but are either simply trying to avoid burdensome paperwork or have no idea the structuring rule exists. This is why the IRS and Justice Department recently announced that they would cease using “structuring” as a reason to go after small business owners who are not suspected of crimes. So why is McLellan still having to fight for his hard-earned money?
First, the new rules were announced after Mr. McLellan’s assets were seized, and no provision was made for their mandatory retroactive application. Therefore, the announcement did not require any action on his case by anyone at the federal level.
I have done numerous stories on civil forfeiture in the past. If you put ‘civil forfeiture’ in the search engine on this website, you can see that this illegal seizure of property has gone on for some time.
The story at Civitas further reports:
Second, the federal prosecutor involved, Steve West, has declined to dismiss Mr. McLellan’s case. To be clear, he does have the power to drop the charges. Just this past December, federal prosecutors in Iowa dropped the charges against small-business owner Carole Hinders in a similar case. However, West has told McLellan’s attorney he needs to either resolve or litigate his case, and that no amount of publicity will lead to its dismissal. This despite the fact that Congress and the IRS commissioner have specifically said his case fails to follow new federal forfeiture policies.
West’s idea of “resolving” the case would be for McLellan to enter into a settlement with the IRS in which he loses only half of his money – almost $60,000! It took McLellan over 13 years to earn this sum, and he is not giving it up without a fight.
This is no way to treat small business owners.
Meanwhile, the IRS and Justice Department recently announced that they would cease using “structuring” as a reason to go after small business owners who are not suspected of crimes. New Mexico has passed a law abolishing civil asset forfeiture. Civil asset forfeiture has been used as nothing more than a tool to take assets from innocent people. Everyone who has been involved in this practice needs to be kicked out of office as soon as possible.