The heavy hand of the IRS
Earnest moralists lament Americans' distrust of government. What is regrettable is that government does much to earn distrust, as Terry Dehko, 70, and his daughter Sandy Thomas, 41, understand.
Terry, who came to Michigan from Iraq in 1970, did what immigrants often do: He went into business, buying Schott's Supermarket in Fraser, Mich., where he still works six days a week. Sandy has a master's degree in urban planning but has worked in the store off and on since she was 12.
She says that in 2013 IRS agents “just walked into the store” and announced that they had emptied the store's bank account. The agents believed, or pretended to believe, that Terry and Sandy were or could be conducting a criminal enterprise when not selling groceries.
What pattern of behavior supposedly aroused suspicion? Terry and Sandy regularly make deposits of less than $10,000 in the bank across the street. Federal law requires banks to report cash deposits of more than $10,000. It also makes it illegal to “structure” deposits to evade such reporting.
Because 35 percent of Schott's Supermarket's receipts are in cash, Terry and Sandy make frequent trips to the bank to avoid having large sums at the store. Their insurance policy covers no cash loss in excess of $10,000.
In 2010 and 2012, IRS agents visited the store and examined Terry's and Sandy's conduct. In 2012, the IRS notified them that it identified “no violations” of banking laws. But on Jan. 22, 2013, Terry and Sandy discovered that the IRS had obtained a secret warrant and emptied the store's bank account of more than $35,000.
The IRS used “civil forfeiture,” the power to seize property suspected of being produced by, or involved with, crime. The IRS could have dispelled its suspicions of Terry and Sandy by simply asking them about the reasons — prudence, and the insurance limits — for their banking practices. It had, however, a reason not to ask obvious questions before proceeding.
The civil forfeiture law is an incentive for perverse behavior: Predatory government agencies get to pocket the proceeds from property they seize from Americans without even charging them with, let alone convicting them of, crimes.
Sandy remembers her father exclaiming, “Aren't we in the United States? We did nothing wrong.” They did something right in discovering the Institute for Justice's activities against civil forfeiture abuse. IJ says that what was done to Terry is done routinely across the nation.
Civil forfeiture proceeds on the guilty-until-proven-innocent principle, forcing property owners to hire lawyers and engage in protracted proceedings against a government with limitless resources just to prove their innocence. Says IJ: “To make matters worse, forfeiture law treats property owners like random bystanders and requires them to intervene in the lawsuit filed by the government against their property just to get it back.”
The IRS offered to return 20 percent of Terry's money. Such extortion often succeeds when the IRS bullies bewildered people not represented by IJ, which forced the government to return all of Terry's money.
IJ's countersuit seeks an injunction to prevent such IRS thefts and extortions. Meanwhile, earnest moralists might consider the possibility that Americans' distrust of government is insufficient.
George F. Will is a columnist for The Washington Post and Newsweek.