FTR' update: IRS says it will 'curtail' seizures of cash from small businesses

On Oct. 1, TheBlaze TV's For the Record aired "Seized," an investigation into a little-known federal power known as civil asset forfeiture. It allows the government to seize cash and property from people and businesses suspected of ties to criminal activity without ever filing charges or obtaining a conviction.

These seizures result from businesses appearing to "structure deposits" or repeatedly depositing amounts of money just under the $10,000 threshold where documentation must be sent to the Internal Revenue Service. Intentionally setting up your deposits to keep them under $10,000 and avoid alerting the IRS is a crime, but many business owners say they had no idea their deposit patterns were putting them on the radar of federal authorities.

In "Seized" For the Record interviewed small-business owners from Michigan and New Mexico who had their cash taken and held for more than six months — all without ever being charged with a crime. Then, those small-business owners must prove their innocence before getting some or all of the cash back.

Larry Salzman, an attorney at the Institute for Justice, a nonprofit civil liberties law firm that specializes in forfeiture cases, explained to For The Record that it can be a huge blow to many small business owners.

"The process of civil forfeiture, this having to prove your own innocence, means that to get your property back you might have to go through a year-long case in federal court, fighting against the full might of the Department of Justice," Salzman said. "More than 95 percent of civil forfeiture cases never go to court, because people walk away from their property, or they’re forced into settlements."

On Saturday, the New York Times reported that the IRS is now promising to reduce the frequency of those types of seizures:

The I.R.S. announced that it would curtail the practice, focusing instead on cases where the money is believed to have been acquired illegally or seizure is deemed justified by “exceptional circumstances.

Civil asset forfeiture was originally designed to take money from suspected terrorists and drug dealers, but has quickly grown quickly to encompass other types of suspected crimes as well.

Part of the reason may be that some of that seized cash gets passed along to local law enforcement to spend on whatever they want. It's a practice known as "equitable sharing." According to the Justice Department, those equitable sharing payments skyrocketed nearly 250% between 2002 and 2013.

Some members of Congress have tried to reel in the practice. Sen. Rand Paul (R-Ky.) introduced the Fifth Amendment Integrity Restoration Act in July.

Learn more about civil asset forfeiture by watching "Seized" on demand on TheBlaze TV.