Source: https://www.irs.gov/irm/part9/irm_09-007-013
Timestamp: 2019-05-22 09:16:05
Document Index: 726889956

Matched Legal Cases: ['§7321', '§7301', '§7302', '§7301', '§7302', '§6050', '§6103', '§7302', '§2462', '§7301', '§7302', '§7324']

9.7.13 Title 26 Seizures for Forfeiture | Internal Revenue Service
9.7.13.2.1 Authority Granted in Title 26 USC 7301
9.7.13.2.2 Authority Granted in Title 26 USC 7302
9.7.13.3.1 Seizures Pertaining to Internal Revenue Code 6050I
9.7.13.3.2 Burden of Proof
9.7.13.4.1 Pre-Seizure Involvement of Area Counsel
9.7.13.4.2 Disclosure of Tax Return or Return Related Information
9.7.13.4.3 Contacts with Small Business Self Employed Unit
9.7.13.4.4 Title 18 Forfeitures in Tax or Tax-Related Investigations
9.7.13.4.4.1 General Provisions
9.7.13.4.4.2 Appropriate Application of Title 18 Forfeiture Provisions in Tax or Tax-Related Investigations
9.7.13.4.4.3 Requesting Approval for Title 18 Forfeitures in Tax or Tax-Related Investigations
9.7.13.4.5 The Relation Back Doctrine
9.7.13.4.6 Seizing Potentially Contaminated Property
9.7.13.4.7 Seizing Perishable Goods
9.7.13.5.1 Warrant of Arrest In Rem
9.7.13.5.2 Seizure Warrant
9.7.13.5.3 Title 26 Seizures Incident To Lawful Arrest or Search
9.7.13.5.4 Adoptive Seizures
9.7.13.6.1 Currency
9.7.13.6.2 Financial Accounts
9.7.13.6.3 Financial Instruments
9.7.13.6.4 Personal Property
9.7.13.6.5 Real Estate - Title 26 Forfeiture
9.7.13.6.6 Appraisal of Seized Property
9.7.13.7.1 Statute of Limitations
9.7.13.7.2 Property Subject To Judicial Forfeiture Under Title 26
9.7.13.7.3 Obtaining Approval to Forfeit
9.7.13.7.4 Notice of Intent to Forfeit
9.7.13.7.5 Notice of Seizure
9.7.13.7.6 Administrative Forfeiture
9.7.13.7.7 Judicial Forfeiture
9.7.13.8.1 Petitions for Remission or Mitigation of Forfeiture
9.7.13.8.2 Claim and Cost Bond
9.7.13.8.2.1 Processing a Cost Bond
9.7.13.8.3 Offers in Compromise
9.7.13.9.1 Disposition Instructions for Assets Other than Currency
9.7.13.9.2 Funds Generated from the Sale of Forfeited Assets
9.7.13.9.3 Official Use of Forfeited Property
9.7.13.9.4 Disposition of Contaminated Property
9.7.13.9.5 Disposition of Perishable Goods
(1) This transmits revised IRM 9.7.13, Title 26 Seizures for Forfeiture
(1) Subsection 9.7.13.4.4.(2) is revised to reflect that the use of forfeitures in tax and tax-related investigations may require approval by the Department Of Justice, Tax Division.
(2) Subsection 9.7.13.4.4.1(3) is revised to update the procedures for handling seizures for forfeiture in judicial cases.
(3) Subsection 9.7.13.4.4.3 is revised to update the process for requesting approval for forfeitures pursued under Title 18.
(4) Subsections 9.7.13.6.1(2) and 9.7.13.8.2.1(b) are revised to delete all references to obsolete Form 4008, Seized Property Report.
(5) Position titles have been updated throughout the section to reflect the new organizational titles that were effective with the October 1, 2011, reorganization of Criminal Investigation.
(6) Additional revisions, deletions, and grammatical changes were made throughout the section, that did not result in substantive changes but contributed to procedural clarity of the subject matter.
This IRM supersedes IRM 9.7.13, dated May 15, 2008.
The authority to seize property subject to forfeiture under any provision of Title 26 is granted to the Secretary of the Treasury in 26 USC §7321. The Secretary's authority is then delegated to the Commissioner of Internal Revenue Service in Treasury Order 150-10. Delegation Order 9-1, Seizure and Forfeiture of Personal Property, further delegates seizure authority to special agents.
The two primary statutes under the Internal Revenue Code (IRC) by which property can be forfeited are IRC §7301 and §7302.
9.7.13.2.1 (05-15-2012)
Authority Granted in Title 26 USC §7301
9.7.13.2.2 (05-15-2012)
Authority Granted in Title 26 USC §7302
In wagering investigations, the currency or "bank" that was maintained by the operator of the business, was forfeited since the currency was needed in order to provide a sufficient supply of ready cash to meet the demands of the wagering business, that is, to pay off its winners.
assets that are the proceeds of the Title 26 violation (i.e., fraudulent refund checks)
9.7.13.3.1 (05-15-2012)
Seizures Pertaining to Internal Revenue Code §6050I
As is the case with any seizure action, the first determination to make is whether the United States is likely to prevail in the ensuing forfeiture action. One step that will help achieve this goal is properly planning the seizure and anticipating any potential weaknesses and pitfalls that could prevent a successful forfeiture. Early consultation with Area Counsel and the United States Attorney's Office (USAO), subject to appropriate disclosure limitations contained in subsection 9.7.13.4.2 below, will assist in laying the proper groundwork for our actions. With Title 26 forfeitures, the seized property contractor utilized in our Title 18 seizures cannot be used. Therefore, the steps taken to secure, store, maintain, and dispose of seized and forfeited property differ from the Title 18 seizures that result from our investigations. In addition, as with other areas of Title 26 seizures, guidance and instructions come from existing Federal regulations, and not from other sources, such as the Treasury Executive Office for Asset Forfeiture.
Property that is seized and eventually forfeited in a Title 26 forfeiture belongs solely to the Internal Revenue Service. Proceeds must be deposited into the General Fund and are not subject to sharing with other law enforcement agencies. Arrangements for obtaining services and paying expenses will be up to the individual field office and should be addressed in the pre-seizure stage of the action. For example, most expenses (i.e., towing, locksmiths, etc.) can be paid with a government issued credit card. Also, in some cases, other arrangements can be made. For example, Agency Wide Shared Services (AWSS) will likely be able to help locate existing government space for storage. Expenses incurred relative to a Title 26 forfeiture are not subject to reimbursement by the Treasury Forfeiture Fund.
ensuring that SBSE does not file any liens after the seizure without Criminal Investigation's (CI's) knowledge
9.7.13.4.4 (05-15-2012)
Additionally, the use of such forfeitures in tax and tax-related investigations may require approval by the DOJ, Tax Division pursuant to the provisions of Tax Division Directive 128.
9.7.13.4.4.1 (05-15-2012)
Seizures for forfeiture in tax or tax-related investigations must be reviewed by Area Counsel, have the concurrence of the Director, Field Operations, and be approved by the Chief, CI. If approved, the Chief, CI will then refer the matter to the requesting SAC. If a judicial case, the field office will prepare a transmittal memorandum and forward the request to Tax Division for authorization to pursue a judicial forfeiture action pursuant to Directive 128.
9.7.13.4.4.3 (05-15-2012)
A memorandum from the Special Agent in Charge (SAC); through the Director, Field Operations; to the Associate Director, Warrants and Forfeiture will be prepared. The memorandum will contain the following information:
The SAC will forward the above documents, together with a copy of the seizure warrant and affidavit (if a seizure has already been made) to his/her Director, Field Operations for concurrence. The Director, Field Operations will forward the request to the Associate Director, Warrants and Forfeiture. The Associate Director, Warrants and Forfeiture will seek the advice and recommendation of Division Counsel regarding the request.
The Associate Director, Warrants and Forfeiture will prepare a memorandum to the Chief, CI through the Director, Operations Policy and Support. If approved, the Chief, CI, will refer the matter to the requesting SAC. If a judicial case, the field office will prepare a transmittal memorandum and forward the package to DOJ, Tax Division to pursue a judicial forfeiture.
The Relation Back Doctrine maintains that the government's interest in a particular piece of property is established at the time it is used illegally, unless the statute states otherwise. Technically, at that instant, all rights and legal title to the asset pass to the government. Seizure and forfeiture proceedings, which must be undertaken, simply formalize the transfer of ownership that has already taken place. Accordingly, any liens placed on the property after the date the asset is used illegally are technically liens filed against government property. While third parties generally cannot acquire a legally recognizable interest in the asset after its illegal use, the Supreme Court has ruled that a good faith purchaser for value can assert an innocent owner defense prior to the government obtaining a judgment of forfeiture. In all instances, Area Counsel shall be consulted prior to releasing a tax lien or to releasing the seized property to satisfy a tax lien.
A seizure warrant is another viable method for making a Title 26 seizure. Consult with Area Counsel since most Title 26 seizures will require the advice of Division Counsel. In a judicial matter involving return information in which no Ex Parte Order has been obtained, Area Counsel can assist in preparing the affidavit for the warrant. This is to ensure compliance with the disclosure provisions of 26 USC §6103.
9.7.13.6.1 (05-15-2012)
The majority of case law that addresses Title 26 forfeiture of currency involves the seizure of currency from wagering operations. The courts have upheld the forfeiture of currency when it could be shown the currency was involved in illegal gambling and that it was being used to further the illegal activity, and not merely the proceeds of the activity. It must be shown that it was an "active aid" in the violation. This same logic should be used for other Title 26 forfeiture situations.
Domestic and foreign currency seized for Title 26 forfeiture, except when held as evidence or a collectible asset, is to be deposited into the IRS suspense account within five days of seizure. The currency should be converted into a cashier's check or money order made payable to the "Internal Revenue Service" and forwarded to Internal Revenue Service, Beckley Finance Center, 110 N. Heber St., Beckley WV 25802, Attention: Seized Asset Accountant. A copy of the AFTRAK Seizure Asset Transcript Report, used to record the seizure on AFTRAK should accompany the check.
If currency is seized solely for evidentiary purposes or as part of a Title 26 investigation, written approval must be obtained in order to retain the currency in IRS custody. If the amount is less than $5,000.00, a written request from the USAO, or a memorandum signed by the SAC, must be obtained and maintained in the seizure file. If the amount equals or exceeds $5,000.00, written approval must be obtained from the Director, Operations Policy and Support and maintained in the seizure file. If only a portion of the seized currency has evidentiary value, only that portion with the evidentiary value should be retained.
Unless the account is frozen, immediately upon seizure of the account, the financial institution should be directed to prepare a cashier's check for the value of the account, made payable to the "Internal Revenue Service" . The check should be deposited into the IRS suspense account by following the procedures listed in subsection 9.7.13.6.1(2) above.
Unlike Title 18 forfeitures in which financial instruments, promissory notes, and currency are typically forfeited as proceeds of a specified unlawful activity, Title 26 forfeitures require that the asset be used, or intended to be used, to facilitate the crime (i.e., to be an active aid in furtherance of the crime). This requirement and the lack of a tracing provision have made it very difficult to forfeit financial instruments (i.e., postal money orders, personal or business checks, stocks and bonds, etc.) and cashier's checks, using Title 26 statutes.
When the check is made payable to cash or the payee is left blank, the instrument shall be photocopied and the check should be forwarded to the Director, Field Operations with a request that it be endorsed in his/her capacity. The check will be presented to the drawee bank, if possible, or to a cooperating financial institution and utilized to purchase a cashier's check made payable to the "Internal Revenue Service" . The cashier's check should then be deposited to the IRS suspense account by following the procedures listed in subsection 9.7.13.9.1(2) below.
When the check is made payable to a designated payee, a letter should be sent from the Director, Field Operations to the drawee's financial institution advising that the check being presented was seized pursuant to 26 USC §7302. The letter should also request that the check be certified until completion of the forfeiture proceedings. The cashier's check written for seized postal money orders, traveler's checks, stocks and bonds, and airline tickets, and for US savings bonds should be made payable to the " Internal Revenue Service" instead of the "US Treasury Department" .
Real Estate - Title 26 Forfeiture
For Title 26 forfeitures, the statute of limitations is governed by 28 USC §2462, which states that civil forfeiture proceeding must be commenced within five years from the date "when the claim first accrued." There have been conflicting court decisions on the issue of defining that term, so it is best to interpret this date as the date when the violation occurred.
Within 30 calendar days after receipt of the referral, Area Counsel will provide a Law and Fact Memorandum to the SAC. This period will include the time for review by Division Counsel. Area Counsel's memorandum will render an opinion on the legal basis, or lack thereof, for forfeiture and provide the SAC with a recommendation whether or not the property should be forfeited.
If Area Counsel's Law and Fact Memorandum recommends against forfeiture and the SAC disagrees, a conference will be arranged so that both parties can discuss the matter. If Area Counsel's position is unchanged, the SAC will again be notified by memorandum.
The SAC may protest Area Counsel's position by preparing a report setting forth the reasons for disagreement, and forwarding it for the concurrence of the Director, Field Operations. This report will be forwarded to the Chief, CI, and a copy sent to Area Counsel. The Chief, CI, will negotiate the matter with Division Counsel and notify the SAC of the final decision.
The Notice of Intent to Forfeit Letter will be mailed by certified or registered mail to all known potential claimants. The letter will explain the claimant's right to file a Petition for Remission or Mitigation of Forfeiture, a Claim and a Cost Bond, or an Offer in Compromise. The notice will also specify the IRS statute upon which the forfeiture is based, the newspaper in which the notice of seizure will be published, the dates of publication, the final claim date, and the forfeiture date.
9.7.13.8.1 (05-15-2012)
Where the remission of forfeiture is granted, the recipient can, within 20 days after notice is received, pay the costs and expenses of the seizure and forfeiture as directed by the Director, Operations Policy and Support and obtain possession of the property.
The Director, Operations Policy and Support can also enter into an agreement with the petitioner to place the forfeited asset into official use. In those instances, the IRS will pay the petitioner the appraised value of the asset less the amount of any costs. Similarly, if the petitioner is a creditor, the payment will be up to the remaining balance of the loan.
The bond may be in cash, certified check, cashier's check, postal money order, or satisfactory surety bonds. Checks and money orders are to be made payable to the Internal Revenue Service.
9.7.13.8.2.1 (05-15-2012)
Unless Area Counsel directs otherwise, the cash, check, or money order that is received for the bond, should be forwarded to the Beckley Finance Center, 110 N. Heber St., Beckley WV 25802 and deposited into the IRS Suspense Account following the procedures explained in subsection 9.7.13.6.1(2) above. The AFTRAK Seizure Asset Transcript Report, pertaining to the original seizure should accompany the deposit. The memorandum that transmits the check and AFTRAK Seizure Asset Transcript Report should explain that the check represents a bond that was posted relative to a previously seized asset. The bond should remain on deposit until such time as instructions are received from the USAO at the conclusion of the judicial forfeiture action.
9.7.13.8.3 (05-15-2012)
Pursuant to Delegation Order 9-1, the Director, Operations Policy and Support is the deciding or determining official on whether or not to accept any Offer in Compromise. Upon receipt of an offer, it should be reviewed by the field office and by Area Counsel and then forwarded to Headquarters.
All personal property is to be sold " as is" and with no guarantee or warranty implied or expressed.
All prospective bidders must complete a Bidder Registration Form (at the time of registration if auctioned, or with the submission of the bid if a negotiated sale or sealed bid). Completion of this form represents the bidder's certification that the bidder and/or the party(s) that the bidder may represent are not the individual(s) from whom the property was seized.
9.7.13.9.3 (05-15-2012)
Property forfeited under Title 26 can be put into official use by following the procedures set forth in IRM 9.7.8, Disposition of Seized and Forfeited Property. The following differences should be noted:
The restriction for "law enforcement purposes only" does not apply; the property may be placed into use by CI or by any other IRS function.
As with any other Title 26 forfeiture, all costs to clean up and dispose of contaminated property will be the responsibility of the IRS. Once potentially contaminated property has been seized, an environmental study should be immediately initiated. If it is determined that the cost to correct any problems exceeds the property's net equity, then the SAC should quick release the property. The exception to this rule would be if there is an overriding law enforcement purpose.
When property seized under any provision of 26 USC §7301 or §7302 is liable to perish or become greatly reduced in price or value, special considerations are made in accordance with 26 USC §7324. If perishable goods are seized, the owner of the property can have the property returned in lieu of having it sold by the government by posting a bond equal to its appraised value. The bond should be a corporate surety bond. However, if the owner is able to show the inability to furnish a corporate surety bond, it may be made with individual sureties or with collateral such as currency, postal money orders, certified or cashier's checks, or other monetary instruments. If the bond is not posted, then the property can be sold. Pursuant to Delegation Order 9-1, the authority to dispose of property was delegated to the Director, Field Operations. The sale should be as soon as practical and should be a public sale. In lieu of a public sale, an asset may be disposed of immediately after seizure by a stipulated sale between parties or by an interlocutory sale ordered by the court.
IRS is responsible for all expenses associated with a Title 26 forfeiture. These amounts are not reimbursable from the Treasury Forfeiture Fund. The AFC is responsible for coordinating, at the earliest date possible, with the field office's fiscal function to ensure proper funding options.
Exhibit 9.7.13-1
Exhibit 9.7.13-2