7 August 2001

See contents of full IRS Handbook of Criminal Investigation: http://cryptome.org/irs-ci/irs-ci.htm

Handbook 9.7
Asset Seizure and Forfeiture


Chapter 14
Title 26 (Code) Seizures for Forfeiture

Contents

[9.7] 14.1  (04-30-1998)
OVERVIEW

  1. There are only two methods of Code forfeitures, administrative and civil judicial. There is no provision for criminal forfeitures. Only property used or intended to be used to facilitate a violation of the Internal Revenue laws can be forfeited. Proceeds of such a violation is not forfeitable.
  2. This Chapter deals with the authority of IRS special agents to seize and forfeit, the statute of limitations for code forfeiture, the property subject to forfeiture, methods of seizure, procedures for approval, District Counsel's role, disclosure ramifications, the forfeiture process, and closing procedures. The following sections are covered:
    • Authority To Seize Assets For Forfeiture Under The Code
    • Authority To Forfeit Assets Under The Code
    • Delegated Authority To Seize Property For Code Forfeitures
    • Statute Of Limitations For Code Forfeitures
    • Property Subject To Code Forfeiture
    • Property Not Subject To Title 26 (Code) Forfeiture
    • Limitation On Code Forfeitures--No Tracing Provision
    • Property Subject To Administrative Forfeiture Under Title 26 (Code)
    • Property Subject To Judicial Forfeiture Under Title 26 (Code)
    • Code Forfeitures Pertaining To IRC 6050I Violations
    • Evidence To Support Code Seizures/Forfeitures (Burden Of Proof)
    • Methods To Effect Seizures For Code Forfeiture
    • Procedures To Obtain Approval For Code Forfeitures
    • Advice Of Legal Counsel In Title 26 (Code) Forfeitures
    • Disclosure Of Tax Return Or Return Related Information In Title 26 (Code) Forfeitures
    • Pre-Seizure Responsibility For Code Forfeitures
    • Processing Seized Assets For Code Forfeitures
    • Appraisal Of Seized Property--Title 26
    • Expenses Incidental To A Code Forfeiture
    • Closing Code Forfeiture Proceedings
    • Restraining Actions In Title 26 (Code) Seizures/Forfeitures
    • Petitions For Remission Or Mitigation Of Forfeiture--Title 26
    • Claim And Cost Bonds--Title 26
    • Offers In Compromise--Title 26 Seizures
    • Declaration Of Forfeitures For Title 26
    • Disposition Of Forfeited Assets--Title 26
    • Disposition Instructions For Assets Other Than Currency--Title 26 Forfeitures
    • Funds Generated From The Sale Of Forfeited Assets
    • Official Use Of Forfeited Property--Title 26 Forfeitures
    • Payment For Information And Applications For Rewards Relating To Code Forfeitures

[9.7] 14.2  (04-30-1998)
AUTHORITY TO SEIZE ASSETS FOR FORFEITURE UNDER THE CODE

  1. IRC 7321 provides the authority to seize properties subject to forfeiture. It states: any property subject to forfeiture under any provision of this title may be seized by the Secretary or his delegate.

[9.7] 14.3  (04-30-1998)
AUTHORITY TO FORFEIT ASSETS UNDER THE CODE

  1. The two primary statutes under the Internal Revenue Code by which property can be forfeited are sections 7301 and 7302.
  2. IRC 7301 provides for the forfeiture of taxable property which is removed, concealed, or deposited to defraud the United States of the tax, or is possessed with the intent to avoid payment of the tax. It also provides for the forfeiture of assets used to manufacture, contain, or transport taxable properties which are the object of the fraud or evasion scheme.
  3. IRC 7302 provides for the seizure and forfeiture of any property intended for use in violation of the provisions of the Internal Revenue laws; or regulations prescribed under such laws, or which has been so used. The wording of IRC 7302 is very broad. Although section 7302 authorizes the seizure and forfeiture of any property used or intended to be used to facilitate a violation of any of the Internal Revenue laws, it is not to be used as a substitute to the collection of taxes. Consequently, most Code forfeiture cases have involved property used to violate the following laws: wagering tax provision in IRC sections 4401 and 4411; sale of motor fuels, IRC sections 4081 and 4091; equipment used in tax fraud schemes; and can apply to other items, i.e. sale of tires, IRC 4071.
  4. For example, IRC section 7301 has been used to seize property for violations of the motor fuels excise tax laws. Motor fuels are considered a taxable property under 7301(a). It follows that storage facilities for fuel, 7301(d); trucks used to transport fuel, 7301(e); and other assets, 7301(c), such as computers used to track sales, etc., are all forfeitable if the fuel excise tax has been or is intended to be evaded.
  5. These same assets can be forfeited under IRC section 7302 as property intended to be use in violation of Internal Revenue laws or its regulations.
  6. Other applications of section 7302 have occurred. In U.S. v One 1954 Rolls Royce Silver Dawn , 777 F.2d 1358 (9th Cir. 1985), a car which was the alleged investment object of a fraudulent tax shelter was forfeited. Computers and other equipment used in false refund operations have also been forfeited.
  7. The issue of using forfeiture to recoup fraudulently obtained refunds and other cash associated with such schemes is in flux. Cash cannot be forfeited if it is the proceeds of the refund scheme. However, if the cash is being used as an active aid to facilitate the scheme, it could be subject to forfeiture. Until further guidance is provided, the issue of forfeiting assets associated with a refund scheme, other than office and other support equipment, will be decided by the Assistant Chief Counsel (Criminal Tax) on a case-by-case basis.
  8. Theoretically, IRC section 7302 can be used to forfeit assets attributable to violations of IRC section 6050I, Form 8300, filing requirements. However, the absence of a tracing provision in Section 7302 makes these forfeitures very difficult to support.

[9.7] 14.4  (04-30-1998)
DELEGATED AUTHORITY TO SEIZE PROPERTY FOR CODE FORFEITURES

  1. The Chief Counsel Directive Manual (CCDM) (31)810 details the delegations for judicial and administrative Code forfeitures set forth below.
  2. Authorization must be obtained from the Assistant Chief Counsel (Criminal Tax) for any proposed Code forfeiture, except if it pertains to a wagering violation
  3. In addition, all non-wagering judicial Code forfeitures must be referred to the Tax Division, Department of Justice (DOJ), by the Assistant Chief Counsel (Criminal Tax), or his/her delegate (IRC section 7401 and 28 CFR 0.70(a)). Failure to comply with this review and referral requirement can result in the dismissal of the government's forfeiture case and an award of attorney's fees U.S. v 87 Skyline Terrace , 26 F.3d 923 (9th Cir., 1994).

[9.7] 14.4.1  (04-30-1998)
Delegated Authority for Judicial Forfeiture

  1. Pursuant to 26 CFR 403.26(b), as modified, the Assistant Chief Counsel (Criminal Tax), or his/her delegate, must authorize the institution of judicial Code forfeiture proceedings.
    1. With respect to wagering violations under IRC section 7302, Regional Counsel's authority to provide advice to CI and to refer judicial forfeitures to DOJ, as set forth in 26 CFR 403.26(b) can be delegated to the Assistant Regional Counsel (Criminal Tax), District Counsel, Deputy District Counsel, and/or Assistant District Counsel, without further delegation.
    2. The Associate Chief Counsel (International) is also authorized to delegate such authority to the Assistant Chief Counsel (Technical) and to the Assistant Chief Counsel (Litigation), who may further delegate the authority to Branch Chiefs.
  2. With respect to IRC 7301 or non-wagering section 7302 forfeitures, the authority for forfeiture proceedings remains with the Assistant Chief Counsel (Criminal Tax).
  3. All recommendations for judicial forfeitures under IRC sections 7301 or 7302 (except for wagering violations) must also be authorized by the Tax Division, DOJ. The Tax Division has not delegated this authority to the United States Attorneys.
  4. If the IRC section 7302 forfeiture is based on a wagering violation, the referral will be to the United States Attorney for the judicial district in which the seizure is made.

[9.7] 14.4.2  (04-30-1998)
Delegated Authority for Administrative Code Forfeitures

  1. Pursuant to Delegation Order No. 157 (revised 4/25/94), District Directors, Regional Inspectors, and the Assistant Commissioner (International) have the authority to administratively declare the forfeiture of personal property. Counsel provides guidance and assistance to the District Director in regard to whether the property will be declared
    forfeited.

[9.7] 14.4.3  (04-30-1998)
Delegated Authority Pursuant to Delegation Order 157 (Revised 4/25/94)

  1. Delegation Order No. 157 addresses the authority granted to the Commissioner of Internal Revenue by 26 CFR 403.1 through 403.65, IRC 7325, and Treasury Department Order 150-10 that has been delegated to specific IRS employees concerning Code forfeitures.
  2. The authorizations listed below may not be redelegated. However, any authority granted by this delegation order will officially be conferred to any person acting in that position. Those employees who have been delegated specific authority by this order are as follows:

[9.7] 14.4.3.1  (04-30-1998)
Special Agents and Inspectors

  1. Special Agents and Inspectors are authorized:
    1. To seize personal property for forfeiture to the United States when the property is involved, used, or intended to be used, in violation of the internal revenue laws other than Chapters 51, 52, and 53 of the IRC of 1986 (these chapters pertain to alcohol, tobacco, and firearms/explosives taxes which are enforced by the Bureau of Alcohol Tobacco and Firearms).
    2. To estimate the value of seized personal property, and if valued at $100,000 or less, to prepare a list and obtain an appraisal and to attest to the list and appraisal.
    3. To publish notice.
    4. To have a notice of sale be placed in accordance with 26 CFR 403.55 and to readvertise the property, when necessary, in accordance with 26 CFR 403.57.

[9.7] 14.4.3.2  (04-30-1998)
The District Director, the Assistant Commissioner (International), and the Regional Inspector

  1. The District Director, the Assistant Commissioner (International), and the Regional Inspector are authorized:
    1. To make determinations concerning type and conditions of cost bonds as provided in 26 CFR 403.27.
    2. To dispose perishable goods as provided in 26 CFR 403.30.
    3. To declare personal property forfeited by executing Form 1570, Declaration of Forfeiture.
    4. To acquire for official use seized property as provided in 26 CFR 403.44.
    5. To determine that seized property shall be sold at public auction as provided in 26 CFR 403.55.
    6. To order the destruction of any coin-operated gaming device under the provisions of 26 CFR 403.65.

[9.7] 14.4.3.3  (04-30-1998)
The Assistant Commissioner, CI, Director, National Operations Division, CI, and the Assistant Chief Inspector (Internal Security)

  1. The Assistant Commissioner, CI, Director, National Operations Division, CI, and the Assistant Chief Inspector (Internal Security) are authorized:
    1. To allow or deny petitions for remission or mitigation of forfeiture
    2. To accept or reject any offers in compromise of the liability to forfeiture of personal property
    3. To make the necessary determinations and notifications, as provided in 26 CFR 403.43
    4. To authorize the Assistant Commissioner (International), the District Directors, or Regional Inspectors to notify the petitioner or offeror of the action taken on the petition or offer.

[9.7] 14.5  (04-30-1998)
STATUTE OF LIMITATIONS FOR CODE FORFEITURES

  1. Although the statute of limitations for both Title 26 and Title 18 forfeitures is 5 years, these titles are governed by separate statutes which distinguish the starting point at which the statute of limitation begins.
  2. For Title 26 forfeitures, Title 28 USC 2462 is the governing statute. This statute states that the civil forfeiture proceeding must be commenced within 5 years from the date when the claim first accrued. This is different from the language for Title 18 forfeitures which state that the proceeding must be commenced within 5 years after the time when the alleged offense was discovered. This has been interpreted to mean discovered or possesses the means to discover.
  3. There have been conflicting court decisions on the issue of determining the date when the claim first accrued. It is the safest course to interpret this date as when the violation occurred. This is consistent with the relation back theory which governs Code forfeitures and states that the ownership of the property vests with the Government on the date the property was used to facilitate the offense.

[9.7] 14.6  (04-30-1998)
PROPERTY SUBJECT TO CODE FORFEITURE

  1. The language of IRC sections 7301 and 7302 does not limit what type of property can be forfeited under its auspices. However, the Code forfeiture regulation, 26 CFR Part 403.1 only addresses forfeiture of personal property and Delegation Order No. 157 only authorizes special agents to seize personal property. It is unclear whether real property can be forfeited using Title 26. Consequently, the Assistant Chief Counsel (Criminal Tax) must approve any proposed seizure of real property prior to the seizure. The approval of the Assistant United States Attorney will not suffice.

[9.7] 14.7  (04-30-1998)
PROPERTY NOT SUBJECT TO TITLE 26 (CODE) FORFEITURE

  1. Assets that are the proceeds of the Title 26 violation.
  2. Non-gaming amusement machines because there is no annual Special Occupational Tax imposed on such machines.
  3. Evidentiary records, such as books, ledgers, papers, and similar property.
  4. In addition, leased property will generally not be forfeited; the basis for forfeiture is the lessee's conduct, usually the lessor will be an innocent owner.

[9.7] 14.8  (04-30-1998)
LIMITATION ON CODE FORFEITURES--
NO TRACING PROVISION

  1. Unlike 18 USC 981 forfeitures, IRC 7301 and 7302 do not have a tracing provision. Only the actual property used or intended to be used in a fraudulent tax scheme is forfeitable. If the property is sold, traded, or exchanged for other property, then the other property is not forfeitable under the IRC.

[9.7] 14.9  (04-30-1998)
PROPERTY SUBJECT TO ADMINISTRATIVE FORFEITURE UNDER TITLE 26 (CODE)

  1. Title 26 USC 7325 authorizes property with a value of $100,000 or less to be forfeited administratively provided no claim and cost bond has been filed. The $2,500 value limit set out in 26 CFR 403.26 is outmoded.

[9.7] 14.10  (04-30-1998)
PROPERTY SUBJECT TO JUDICIAL FORFEITURE UNDER TITLE 26 (CODE)

  1. Judicial proceedings are used in Code forfeitures when:
    1. The property value exceeds $100,000.
    2. When other policy considerations dictate initiation of judicial forfeiture, for example, the use of grand jury derived information and such information is governed by the secrecy provisions of Federal Rules of Criminal Procedure (F.R.Cr.P.) 6(e).
    3. An acceptable Claim and Cost Bond has been filed.
    4. When the asset is real property.

[9.7] 14.11  (04-30-1998)
CODE FORFEITURES PERTAINING TO TITLE 26 IRC 6050I VIOLATIONS

  1. Counsel's analysis concludes that in transactions that violate IRC 6050I, the purchased item is not forfeitable because it is also not an instrument of the crime.
  2. Since there is no tracing provision for Code forfeitures, you cannot forfeit the cash used to purchase the property that formed the basis for the violation unless the cash is in its original state.
  3. A business may be subject to forfeiture if it can be shown that the primary reason for the existence of the business is to facilitate IRC 6050I violations. This would be a very rare case and would require advance planning with District Counsel and the Assistant Chief Counsel (Criminal Tax).
  4. In addition, two recent court cases have ruled that currency is not an instrument of the crime in similar cases to IRC 6050I violations, and, therefore, not forfeitable. ( U.S. v Bajakajian , 84 F.3d 334 (9th Cir.1996) and U.S. v Dean , 80 F.3d 1535 (11th Cir. 1996).

[9.7] 14.12  (04-30-1998)
EVIDENCE TO SUPPORT CODE SEIZURES/
FORFEITURES (BURDEN OF PROOF)

  1. Although the burden of proof under IRC sections 7301 and 7302 required to support the seizure is probable cause, several court cases have ruled that the burden of proof for forfeiture of the property is preponderance of the evidence ( Nocita vs. U.S. , 258 F.2d 199 (9th Cir. 1958), U.S. v. One 1955 Mercury Sedan , 242 F.2d 429 (4th Cir. 1957), and U.S. v. $7,382 in United States Currency , 718 F.2d 776 (5th Cir. 1983).

[9.7] 14.13  (04-30-1998)
METHODS TO EFFECT SEIZURES FOR CODE FORFEITURE

  1. The methods to effect code seizures for forfeiture are:
    1. Warrant of Arrest in rem.
    2. Seizure incident to lawful arrest or search.
    3. Seizure warrant pursuant to the Federal Rules of Criminal
      Procedure.
    4. Adoptive seizures. BE AWARE THERE ARE NO SHARING PROVISIONS FOR CODE FORFEITURES.
  2. In very unusual circumstances, property taken by private individuals and submitted to the Service may possibly be seized with Warrants of Arrest In Rem or Seizure Warrants after the circumstances are reviewed by District Counsel and the Chief, CI.

[9.7] 14.13.1  (04-30-1998)
Warrant of Arrest in Rem

  1. Warrants of Arrest in rem are used to seize property for Code forfeitures when the proceedings are civil judicial. Proceedings in rem are governed by Supplemental Rules for Admiralty and Maritime Claims.

[9.7] 14.13.2  (04-30-1998)
Code Seizures Incident To Lawful Arrest Or Search

  1. IRC 7302 explicitly provides for forfeiture of property seized pursuant to search warrants issued as authorized in 18 USC Chapter 205 and the Federal Rules of Criminal Procedure. While IRC 7301 is silent on the use of search or seizure warrants, it is the preferred method.
  2. Property seized incident to an arrest or a search warrant or other lawful search would generally be property that would likely be removed or destroyed if not seized, such as contraband.
  3. When property is seized incident to an arrest or a lawful search, special agents must prepare a memorandum stating the facts and circumstances detailing the probable cause to believe that the property is subject to forfeiture under IRC section 7301 or 7302. This memorandum must be sent to District Counsel for review and preparation of a Law and Fact memorandum or for a referral to DOJ, Tax Division, or, in gambling-based cases, to the United States Attorney's office.
  4. A more detailed description of these methods will be found in Chapter 2 of this Handbook and Handbook 9.4, Chapter 13.

[9.7] 14.14  (04-30-1998)
PROCEDURES TO OBTAIN APPROVAL FOR CODE FORFEITURES

  1. To obtain the required authorization for judicial Code forfeitures, CI will assist District Counsel in preparing a written request to the Assistant Chief Counsel (Criminal Tax) who, in turn, will authorize District Counsel to send a referral letter to DOJ, Tax Division.
  2. To obtain the required authorization for administrative Code forfeitures, CI will assist District Counsel in preparing a law and fact memorandum which will be submitted for approval by the Assistant Chief Counsel (Criminal Tax) (Exhibit 3-1). The AFC will, within 10 calendar days from the date of seizure, forward the Seized Property Package to District Counsel.
  3. This package will be forwarded to the Assistant Chief Counsel (Criminal Tax), who will review the proposed forfeiture within 3 workdays of receipt. If authorization is granted, Assistant Chief Counsel (Criminal Tax) will notify District Counsel to issue the Law and Fact
    Memorandum.
  4. Within 30 calendar days after receipt of the seizure package from CI, District Counsel will provide a Law and Fact Memorandum to the District Director, Attention: Chief, CI. This period will include the time for review by the Assistant Chief Counsel (Criminal Tax). The memorandum from District Counsel will render an opinion on the legal basis, or lack thereof, for forfeiture and provide to the District Director a recommendation whether or not the property should be forfeited.
  5. If District Counsel recommends against forfeiture, Counsel will notify the Chief, CI. If the Chief, CI, disagrees, a conference will be arranged at which CI will be able to present their views. If Counsel's position is unchanged, the District Director will be notified by memorandum.
  6. The Chief, CI, may protest Counsel's position by preparing a report setting forth the reasons for disagreement for the concurrence of the District Director. This report will be forwarded to the Assistant Commissioner, CI. A copy of the report will be provided to District Counsel. The Assistant Commissioner, CI, will negotiate the matter with the Assistant Chief Counsel (Criminal Tax) and notify the Chief, CI, of the conclusion.

[9.7] 14.15  (04-30-1998)
ADVICE OF LEGAL COUNSEL IN TITLE 26 (CODE) FORFEITURES

  1. Special agents must discuss all potential Code forfeitures with District Counsel before acting to seize the property. Although there are similarities between Title 18 and Code judicial forfeitures actions, the process of getting to the forfeiture stage is dissimilar. Hence, the necessity for close coordination with District Counsel.
  2. District Counsel will assist in preparing an affidavit for the seizure warrant for an administrative forfeiture action or for a judicial forfeiture action involving return information in which no Ex Parte Order has been obtained. This is to ensure compliance with the disclosure provisions of 26 USC 6103.
  3. The Assistant Chief Counsel (Criminal Tax) will review all Petitions for Remission or Mitigation of Forfeiture. Counsel's role in the handling of these actions by claimants is discussed in Chapter 9 of this Handbook.
  4. District Counsel will review the documents associated with a Claim and Cost Bond to determine if they are acceptable. (See Chapter 9 of this Handbook for the procedures for handling a Claim and Cost Bond.)
  5. District Counsel will be involved in all pre-seizure activity regarding proposed Adoptive Seizures under Title 26 to the same degree as under Title 18.

[9.7] 14.16  (04-30-1998)
DISCLOSURE OF TAX RETURN OR RETURN RELATED INFORMATION IN TITLE 26 (CODE) FORFEITURES

  1. Code forfeitures are related to tax administration and are subject to the disclosure restrictions contained in IRC 6103. Therefore, in Code forfeiture cases special agents may access tax information pursuant to IRC, 6103(h)(1). Disclosure to DOJ and the U.S. Attorney's office (USAO) for the purpose of obtaining a Title 26 seizure warrant is permitted pursuant to IRC 6103(h)(2) and (3).
  2. Any tax return or tax return information may be disclosed to appropriate Counter Technology, Incorporated (CTI) contractors for the purpose of carrying out the provisions of its contract with the IRS (Statement of Work H.2, IRSAP 1052.224-70(c) Disclosure of Information).

[9.7] 14.17  (04-30-1998)
PRE-SEIZURE RESPONSIBILITY FOR CODE FORFEITURES

  1. Pre-seizure planning is imperative to a successful Code seizure forfeiture action. Close coordination will be necessary with several IRS functions to ensure the forfeiture action is properly concluded. These functions include District Counsel, the Facilities Management Branch, and the Collection Division.
  2. District Counsel must be involved with all Code forfeitures at the pre-seizure stage. For administrative Code forfeitures, District Counsel reviews the seizure warrant affidavit, prepares the Law and Fact Memorandum, reviews the Claim and Cost Bond, if filed, and prepares the transmittal letter to the DOJ, Tax Division, or the USAO if the Claim and Cost Bond is legally sufficient. For judicial Code forfeitures District Counsel prepares the memorandums requesting approval by the Assistant Chief Counsel (Criminal Tax) and referring the case to the DOJ or, gambling-based cases, to the USAO for initiation of a judicial forfeiture complaint. District Counsel will also determine whether outstanding IRS liens against the forfeited property should be released or enforced.
  3. District Counsel also will be involved in all pre-seizure activity regarding proposed Adoptive Seizures under Title 26 to the same degree as under Title 18.
  4. The Facilities Management Branch must be contacted to obtain towing, storage, and appraisal services. They will also transfer the asset to GSA for disposal of once it has been declared forfeited. EG&G cannot be used as the property manager for Code seizures.
  5. The special agent responsible for the seizure will coordinate the activity with the Collection Division. This will ensure that seized property:
    1. Cannot be forfeited and used to satisfy an outstanding tax liability.
    2. Collection Division does not file liens against the property after seizure without CI's knowledge and concurrence.
    3. Liens filed prior to seizure are timely released, if appropriate, under the Relation Back Doctrine.
  6. The Relation Back Doctrine maintains that property is actually forfeited at the time it is used illegally, unless the statute states otherwise. At that instant, all rights and legal title to the asset pass to the government. Seizure and formal proceedings simply confirm, or proclaim, the forfeiture that has already taken place. Therefore, any liens placed on the property after the date the asset is used illegally will be a lien filed against government property. Theoretically, no third party can acquire a legally recognizable interest in the property after the illegal use. However, the Supreme Court ruled that a good faith purchaser can assert an Innocent Owner defense prior to the government obtaining a judgment of forfeiture U.S. v. 92 Buena Vista Ave., Rumson, N.J. 113 S.Ct. 1126 (1993). In all instances, District Counsel shall be consulted prior to releasing a tax lien or to releasing the seized property to satisfy a tax lien.

[9.7] 14.17.1  (04-30-1998)
Perishable Goods-Title 26 Seizures

  1. 26 USC 7324 authorizes the Secretary of the Treasury to dispose of property that "is liable to perish or become greatly reduced in price or value by keeping, or when it cannot be kept without great expense." The District Director is delegated this authority under Delegation Order No. 157 to dispose of perishable goods. Motor fuel is an example of perishable goods whose value may significantly decrease if not disposed of as soon as possible after its seizure.
  2. Pursuant to 26 USC 7324 (3), the property owner has the opportunity to receive the property back by posting a cost bond in an amount equal to the Fair Market Value of the property (see 26 CFR 403.30). (This bond is separate from the bond that would be required if a Claim is filed.) The bond should be a corporate surety bond. However, if the owner is able to show to the satisfaction of the Commissioner or his delegate that he is unable to furnish a corporate surety bond, the cost bond may be made with individual sureties or with collateral such as cash, postal money orders, certified or cashiers checks, and other monetary instruments (26 CFR 403.27, 28, & 29).
  3. If a cost bond is not filed, the District Director is authorized to sell the property "as soon as practical" at a public sale (26 USC 7324(4). Upon sale of the goods, the proceeds, less the costs of seizure and sale, shall be paid to the court to abide its final order, decree, or judgment. This issue must be discussed with the USAO prior to sale to determine if the court will accept the proceeds of the sale. Should the court elect to have the proceeds retained by the Service, they shall be deposited in the IRS suspense account.
  4. In lieu of a "public sale" , an asset may be disposed of immediately after seizure by a stipulated sale between the parties or an interlocutory sale authorized by a court order.

[9.7] 14.17.2  (04-30-1998)
Potentially Contaminated Property

  1. With the expansion of Code forfeitures to include motor fuel excise tax violations, there is a high probability that environmentally contaminated property may be seized for forfeiture, i. e. tank farms, barges, gasoline stations, and fuel trucks. The potential liability and poor marketability of potentially contaminated property leaves it a very undesirable asset to seize. It is the policy of the Departments of Treasury and Justice that property, which is contaminated or potentially contaminated with hazardous substances, may be seized and forfeited only upon a determination by the U. S. Attorney in the district where the property is located. This decision will be made in consultation with the seizing agency and Facilities Management. As with other Code forfeitures, all costs to clean up and dispose of the contaminated property will be borne by the IRS.
  2. Once a potentially contaminated property has been seized, an environmental study should be initiated immediately. If it is determined that the cost to correct any problems discovered would exceed the property's net equity, the Chief (CI) should quick release the property, unless there is an overriding law enforcement purpose.

[9.7] 14.18  (04-30-1998)
Non-Divisible Or Divisible Property--Title 26 Seizures

  1. Seized property can be non-divisible or divisible. A car is an example of non-divisible property. Once a car has been used to facilitate a violation of Title 26, the entire car is forfeitable. The owner can not argue that the car was only used 50 percent of the time in the scheme to violate Title 26 and obtain 50 percent of the value of the car back upon
    forfeiture.
  2. Divisible property is an asset that can be divided into smaller parts, but still retains the characteristics of the larger asset. Examples of divisible property are currency or product, such as gasoline or diesel fuel. It is possible that only a portion of the total assets seized was used as an active aid to violate Title 26.
  3. To seize the divisible property, the government is only required to present a prima facie case as to the forfeitability of a portion of the property. However, the owner has the opportunity to provide some basis upon which the government can separate a portion of the property that was not used or intended to be used to violate Title 26. Once the owner is able to do this, that portion of the property that is not connected to the illegal operation must be returned to the owner. However, in preparing its prima facie case, the government must make a reasonable attempt to ascertain what portion of the property was used or intended to be used to further the illegal activity.

[9.7] 14.19  (04-30-1998)
PROCESSING SEIZED ASSETS FOR CODE FORFEITURES

  1. The following subsections are the procedures when processing seized assets for Code forfeiture. The procedures are similar to those for Title 18 forfeitures, except as noted below.

[9.7] 14.19.1  (04-30-1998)
Currency

  1. The majority of case law that addresses the Code forfeiture of currency originates from wagering operations. The courts have upheld the forfeiture of currency when it could be shown the subject was involved in illegal gambling, and the currency was being used to further the illegal activity, not that it was the proceeds of the activity. This same logic should be used for other Code forfeiture scenarios.
  2. Domestic and foreign currency (except when held as evidence or held as a collectible asset) seized for Code forfeiture should be deposited into the IRS Suspense Fund within 5 days of seizure.
  3. The use of safe deposit boxes, or other similar methods of storing seized currency, is no longer acceptable, except when necessary for overnight storage or in storing currency to be held intact for evidentiary purposes.
  4. Currency seized solely as evidence is to be placed on the General Ledger by sending a copy of the Form 4008 to the ARC, Fiscal Management Branch. The Fiscal Management Branch must also be notified by the AFC when the currency is no longer being held as evidence so it can be removed from the General Ledger.

[9.7] 14.19.2  (04-30-1998)
Financial Accounts

  1. Financial accounts include checking, savings, money market, mutual funds, and brokerage accounts, including those accounts frozen at the financial institution.
  2. Immediately upon seizure of the account, have the financial institution wire transfer the seized funds to the IRS Suspense Account via the Fed Wire System.
  3. If the financial institution will not wire the funds, obtain a cashier's check made payable to the IRS. The cashier's check should then be deposited to the IRS Suspense Account.

[9.7] 14.19.3  (04-30-1998)
Financial Instruments

  1. Unlike Title 18 forfeitures, in which financial instruments, promissory notes, and currency are typically forfeited as proceeds of a specified unlawful activity, Code forfeitures require that the asset was used, or intended to be used, to facilitate the crime, to be an active aid. This requirement and the lack of tracing provisions 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.
  2. If business, personal, or bank checks are seized, the seizing agent should act expeditiously to insure the funds are preserved. In addition to notifying the bank upon which the seized check was drawn, the following procedures should be followed:
    1. When the check is made payable to cash or the payee is left blank, the instrument shall be photocopied; the Chief, CI, will request that the District Director endorse the check in his or 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 IRS; and the cashier's check deposited to the IRS Suspense Account utilizing the procedures set forth for seized currency.
    2. If the check is to a designated payee, the Chief, CI, shall prepare a letter to the drawee's financial institution for the District Director's signature. The letter will advise the financial institution that the check being presented was seized pursuant to (inset Code Section), and request that it be certified until completion of the forfeiture proceedings.
  3. The procedures for Code forfeitures are generally the same as Title 18 forfeitures, except that the cashier's check should be made payable to the IRS in lieu of the U.S. Treasury Department for seized Postal money orders, traveler's checks, stocks and bonds, and airline tickets, and for U. S. savings bonds.

[9.7] 14.20  (04-30-1998)
Real Estate--Code Forfeiture

  1. IRC 7301 and 7302 do not prohibit the forfeiture of real property. However, IRS Delegation Order No. 157 only authorizes special agents to seize "personal" property for forfeiture. In addition, the Code forfeiture regulations, 26 CFR 403.1, and its subsidiary sections, only address "personal" property. Therefore, under no circumstances are Code seizures of real property to be attempted without the Assistant Chief Counsel's (Criminal Tax) prior approval. The approval of the AUSA will not suffice. If real property is authorized to be seized for forfeiture, the same real estate transfer and handling procedures should be followed as with Title 18 seizures except Facilities Management Division will be involved instead of EG&G.

[9.7] 14.21  (04-30-1998)
APPRAISAL OF SEIZED PROPERTY--TITLE 26

  1. Upon seizure for Code forfeiture, all assets must be appraised to assess their current fair market value. The Secretary has delegated to the Commissioner authority to estimate the value of seized property, prepare lists, obtain appraisals, and provide attestations (26 CFR 403.26(a)(2)).
  2. Delegation Order 157 (Rev.6), dated April 25, 1994, authorizes special agents to estimate the value of seized personal property, and if valued at $100,000 or less, to prepare a listing of the seized property and to obtain an appraisal. Should the seized property be valued at more than $100,000, the Assistant Chief Counsel (Criminal Tax) may initiate the authorization of judicial Code forfeiture proceedings through the DOJ, Tax Division.
  3. When estimating if the value of the seized property exceeds $100,000, the special agent must aggregate the value of all the property seized from one owner at one location.
  4. Should the seized property be valued at $100,000 or less, 26 CFR 403.26 and Section 7325(1) require that the appraisal be made by three sworn appraisers who shall be respectable and disinterested citizens of the United States residing within the internal revenue district wherein the seizure was made.
  5. In addition, a list of the properties seized, Form 226-A (Exhibit 8-1), including the properties' descriptions should be prepared in duplicate.
  6. All Forms 226--A relating to one owner should be associated, for purposes of appraisal. Appraisers should be used to appraise two or more lots of seized property when circumstances permit.
  7. The appraisers may be compensated by the IRS for their services. 26 CFR § 403.50 sets the hourly rate which may be paid to appraisers at $15.00 per hour.
  8. Obtain the necessary funds to pay for the cost of appraisals through the normal procurement process using Form 1334 or a District VISA card.
  9. When a petitioner seeks relief in a Title 26 seizure, it is based upon the value of the property as determined by the three appraisals. Should the petitioner request that the property be reappraised, he must make a written request, and hold himself liable for any costs of such reappraisal (26 CFR 403.45).

[9.7] 14.21.1  (04-30-1998)
Distribution of Form 226-A In Code Seizures

  1. The Form 226-A will be prepared in an original and four copies and distributed as follows:
    1. Original to District Counsel with the seizure report, Form 4008.
    2. One copy forwarded to the appropriate DI.
    3. One copy to the individual from whom the seizure was made.
    4. One copy to the ARC, Fiscal Management, together with Form 4008 and the memorandum advising Fiscal Management what items are to be placed on the General Ledger.
    5. One copy retained in the seizure file.

[9.7] 14.22  (04-30-1998)
EXPENSES INCIDENTAL TO A CODE FORFEITURE

  1. IRS is responsible for all expenses associated with a Code forfeiture. These amounts are not reimbursable from the Treasury Asset Forfeiture Fund. The special agent and/or AFC is responsible for coordinating at the earliest date possible with the district's fiscal function to ensure proper funding options.
  2. Expenses may not be obligated by contract personnel.

[9.7] 14.23  (04-30-1998)
FORFEITURE PROCESS FOR CODE FORFEITURES

  1. The same process used for Title 18 forfeitures is used for Code forfeitures. However, different forms are used for the processing of the forfeiture. They are as follows:
    1. Notice of Seizure Letter (Exhibit 14-1). This letter will be sent to any and all parties believed to have an interest in the seized property within 5 working days of the seizure.
    2. A transmittal letter to District Counsel requesting a Law and Fact Memorandum (Exhibit 3-1). This will be prepared within 10 working days of the date of seizure.
    3. If a Law and Fact Memorandum is received that recommends forfeiture, the AFC will mail Intent to Forfeit letters (Exhibit 14-2) to any potential claimants within 10 days.
    4. The Intent to Forfeit Letter will be mailed by certified or registered mail. It will be mailed to any potential claimant. The letter will explain the availability of Petitions for Remission or Mitigation of Forfeiture; the availability of Claims and Cost Bonds, and the availability of Offers in Compromise.
    5. The letter will also specify the IRS provisions upon which the forfeiture is based; the newspaper in which the Notice of Seizure will be published and the dates of publication; the final Claim Date; and the Forfeiture Date. A copy of the Notice of Seizure to be published will also be enclosed.
    6. The AFC must also arrange an advertisement of Notice of Seizure in a publication that appears in the judicial district where the property was seized. The advertisement must appear once a week for 3 consecutive weeks. The first advertisement should be coordinated to be published at the same time as the mailing of the Intent To Forfeit letters.
    7. The final Claim Date will be 30 days from the first date of publication of the Notice of Seizure.

[9.7] 14.24  (04-30-1998)
CLOSING CODE FORFEITURE PROCEEDINGS

  1. A Code forfeiture proceeding may end with any one of the following actions:
    1. Declaration of Forfeiture by the District Director (Administratively) or Order of the Court (Judicially).
    2. Declination of forfeiture action by District Counsel--Administrative.
    3. Remitted to the Owner.
    4. Mitigated.
    5. Offer in Compromise.
    6. Settlement by USAO.*
    7. Plea Agreements.
    8. Transfer to another Federal, State, or Local agency.
    NOTE:
    *Settlement of judicial forfeitures will be by the USAO, but should be undertaken in consultation with the IRS. There must be a statutory basis for the forfeiture. Any settlement negotiated by the USAO should parallel IRS guidelines.

[9.7] 14.25  (04-30-1998)
RESTRAINING ACTIONS IN TITLE 26 (CODE) SEIZURES/
FORFEITURES

  1. The following procedures for relief are available to persons holding an interest in seized property to be forfeited pursuant to Title 26 Forfeiture statutes:
    1. Petition for Remission or Mitigation of Forfeiture
    2. Claim and Cost Bond
    3. Offer in Compromise

[9.7] 14.26  (04-30-1998)
PETITIONS FOR REMISSION OR MITIGATION OF FORFEITURE--
TITLE 26

  1. Although there is no standard format for a petition, it must meet the standards set forth in 26 CFR 403.37 and 403.38. See section 9.3 in Chapter 9 of this Handbook for the requirements.
  2. In addition, the petition:
    1. Should contain an acknowledgment to pay any costs assessed as a condition of its approval. (26 CFR 403.38(f) sets forth some potential costs.)
    2. Must be filed in triplicate with the District Director for the district in which the property was seized.
    3. Must be filed no later than 3 months after the seized property has been disposed of, e.g., sold or placed into official use (26 CFR 403.39).
  3. If the Chief, CI, believes the petition is deficient in any manner, the Chief will allow the petitioner a reasonable time to submit a corrected petition (26 CFR 403.42).
  4. Upon receipt of a petition, it will be handled and processed following the guidelines for a Title 18 seized asset (See Section 9.6, Chapter 9 of this Handbook).
  5. 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 Assistant Commissioner, CI, and obtain possession of the property.
  6. If the petitioner does not comply with the conditions imposed upon the release of the property pursuant to Title 19 USC 1613 and 1618, the property may be sold after forfeiture. Following the sale, the proceeds shall be used to pay all costs of the seizure and forfeiture. Any remaining balance shall be paid to the petitioner. If the petitioner is a creditor, then the petitioner would only receive the remaining balance up to the outstanding balance of the loan. The remainder will be deposited to the General Fund.
  7. The Assistant Commissioner (CI) can also enter into an agreement with the petitioner to place, the forfeited asset into official use. In those instances, the Service will pay the petitioner the appraised value of the asset less the amount of the costs. Similarly, if the petitioner is a creditor, the payment will be up to the remaining balance of the loan.

[9.7] 14.27  (04-30-1998)
CLAIM AND COST BONDS--TITLE 26

  1. Pursuant to 26 CFR 403.26, any person claiming an interest in the property seized may file a claim and cost bond prior to the final claim date.
  2. Although there are no provisions in Title 26 statutes or regulations for foregoing the filing of a cost bond by the claimant proceeding In Forma Pauperis, the policy of the IRS is to afford any potential claimant the maximum opportunity to retrieve their property. Therefore, the forfeiture letter sent to potential claimants shall reference this proceeding as an option. Form 9365 (Exhibit 9-5), Application to Proceed In Forma Pauperis, will also be included with the forfeiture letter. The procedures for reviewing In Forma Pauperis applications are set forth in Chapter 9 of this Handbook.
  3. The sureties of a Claim and Cost Bond must meet these requirements:
    1. The bond amount shall be in the amount of $2,500.
    2. The bond must be conditioned that, in case of condemnation of the property seized, the obligors shall pay all the costs and expenses of the proceedings to obtain such condemnation.
    3. 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 United States)
    4. United States bonds, notes, or other obligations on which the interest and principal are unconditionally guaranteed by the United States (U.S. bonds which are not transferable are not acceptable (See Treasury Department Circular 154 and 31 CFR Part 225))
    5. A corporation holding a Certificate of Authority from the Secretary of Treasury as being an acceptable surety, and which has process agents in the judicial district where the person resides or the obligation is to be performed, and where the bond is returnable or filed. Corporate surety bonds are subject to the limitations prescribed by Treasury Department Circular 570, as amended.

[9.7] 14.27.1  (04-30-1998)
Processing Cost Bonds--Title 26 Forfeitures

  1. The following procedures will be used to process cost bonds.
    1. CI will inform District Counsel when transmitting the Claim and Cost Bond that it has received an actual bond from a claimant. The bond will be retained in the custody of CI until the forfeiture package has been routed to the DOJ, Tax Division, or the USAO and advice has been received from the assigned AUSA on how he or she wants it processed (e.g., retained by CI, turned over to the U.S. Marshal).
    2. If cash, check, or money orders are received from a claimant for the bond, the instruments shall be deposited into the IRS Suspense Account, and held there until such time as instructions are received from the USAO as is referenced in paragraph (a) above.
  2. If any of the property for which a cost bond was filed is judicially forfeited:
    1. Judgment for allowed costs should be included in the judgment of forfeiture, or sought by separate motion and order.
    2. The costs allowed should be recovered from the amount of the Cost Bond and any amount remaining from the bond should be returned to the claimant.
  3. The U.S. Attorney has the authority to waive the costs incurred in the settlement of judicial forfeiture cases and to return the bond.
  4. If none of the property for which the cost bond was filed is forfeited, the entire amount deposited as the cost bond should be returned to the claimant, along with the property.

[9.7] 14.28  (04-30-1998)
OFFERS IN COMPROMISE--
TITLE 26 SEIZURES

  1. When an offer in compromise is received, regarding property subject to administrative forfeiture, the forfeiture process will continue as scheduled. However, the forfeited property is not to be placed into official use, transferred, or sold until final action on the petition or offer in
    compromise.
  2. Pursuant to Delegation Order No. 157, the Assistant Commissioner, CI, or Director, Office of National Operations, CI, is the deciding or determining official on whether or not to accept any offer in compromise (26 CFR 403.43). Upon receipt of an offer in compromise, it shall be reviewed by the district and forwarded to Headquarters.

[9.7] 14.29  (04-30-1998)
DECLARATION OF FORFEITURES FOR TITLE 26

  1. The forfeiture date is 30 days after the first day of publication of the Notice of Seizure.
  2. For an administrative forfeiture, the Chief, CI, will forward the seizure package with the completed Form 1570, Declaration of Forfeiture (Exhibit 5-1), to the District Director.
  3. For a judicial forfeiture, a Final Order of Forfeiture must be obtained from a civil judicial proceeding. Although the settlement of the judicial forfeiture will be by the USAO, it will be undertaken in consultation with the IRS and parallel IRS guidelines.
  4. If it is the intention of the IRS to sell the forfeited property, ensure the Order of Forfeiture signed by the court reflects this provision.
  5. The signed Form 1570 or Final Order of Forfeiture will be distributed by memorandum, signed by the Chief, CI, as follows:
    1. Original--Seized Property File
    2. Copy--ARC(RM) Attn: Facilities Management Branch
    3. Copy--District Counsel

[9.7] 14.30  (04-30-1998)
DISPOSITION OF FORFEITED ASSETS--TITLE 26

  1. Property disposed of either administratively or judicially under the provisions of Title 26 (Code) may be disposed of as follows:
    1. Deposited into the General Fund (currency, negotiable instruments, proceeds of any financial account or proceeds from the sale of seized property).
    2. Placed into official use.
    3. Returned to owner, claimant, or petitioner.
    4. Destroyed pursuant to court order, or in the case of coin-operated gaming devices, an order by the District Director (see 26 CFR 403.65 and Delegation Order No. 157).
    5. Transferred to GSA for disposition.

[9.7] 14.31  (04-30-1998)
DISPOSITION INSTRUCTIONS FOR ASSETS OTHER THAN CURRENCY--TITLE 26 FORFEITURES

  1. Property may be sold. The sale of administratively forfeited property at public auction shall be the responsibility of the Chief, Facilities Management Branch.
  2. The procedures and terms of the sale shall be in accordance with 26 CFR 403.55 through 403.62. The most pertinent parts of these regulations are:
    1. A notice of sale must be placed in a newspaper of general circulation published in the judicial district wherein the seizure was made.
    2. The sale shall not occur sooner than 10 days from the date of the publication of the notice.
    3. Each asset must be sold separately if competitive bids are
      solicited.
    4. All personal property is to be sold "as is" and with no guarantee or warranty implied or expressed.
    5. The United States reserves the right to reject any bid.
    6. 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.
    7. The only acceptable forms of payment shall be cash, cashier's check, certified check, or postal order, in the amount of the accepted bid.
  3. Sale of judicially forfeited property would normally be the responsibility of the U.S. Marshal. However, the U.S. Marshal's office will most likely request that the IRS maintain custody of the forfeited property and conduct the public sale. If this occurs, AFCs and agents must work closely with the USAO to ensure that the order issued by the court reflects that the property is to be sold by the IRS.
  4. Although there is no provision for equitable sharing with other federal law enforcement agencies, once an asset has been placed into official use, these agencies can apply for the property through GSA regulations (41 CFR 101-48).
  5. Once the property has been disposed of, the AFC must update all Forms 4008S and forward them to AFTRAK SPU, to reflect disposition of the assets, including the sales price if disposed of by sale; otherwise AFTRAK will default to the appraisal value.

[9.7] 14.32  (04-30-1998)
FUNDS GENERATED FROM THE SALE OF FORFEITED ASSETS

  1. Net proceeds (sale proceeds less storage, maintenance, and other management costs) from the sale of personal or real property which has been forfeited pursuant to Title 26 are deposited into the general fund, as if such monies were a collection of Internal Revenue taxes (26 USC 7406, 7809(a)).

[9.7] 14.33  (04-30-1998)
OFFICIAL USE OF FORFEITED PROPERTY--TITLE 26 FORFEITURES

  1. Property forfeited under Title 26 (Code) can be put into official use by following the procedures set forth in Chapter 10, Section 10.7. The following differences should be noted:
    1. 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.
    2. The payment of any outstanding liens or costs associated with placing the forfeited property into official use will be paid from agency funds and not reimbursed from the Treasury Forfeiture Fund.

[9.7] 14.34  (04-30-1998)
PAYMENT FOR INFORMATION AND APPLICATIONS FOR REWARDS RELATING TO CODE FORFEITURES

  1. Payments to informants for information and payments of rewards to informants relating to Title 26 (Code) forfeitures are governed by the procedures set forth in Handbook 9.4.3.
Exhibit [9.7] 14-1  (04/30/98)
Notice of Seizure Letter
>
INTERNAL REVENUE SERVICE
DEPARTMENT OF THE TREASURY
District
Director Criminal Investigation
Person to Contact:
( Name of Receiver ) Special Agent ( name of agent )
( Address of Receiver ) Telephone Number:
( City, State, Zip ) (xxx) 123-4567
Refer Reply To:
CP:CI:x:xxx
Date:
( enter today's date )
Dear ( Party(s) in Interest ):
The records of this office indicate that you might have an interest in certain monetary instruments or other property which was seized by the Internal Revenue Service at ( place of seizure ) on ( date of seizure ). The property is being considered for forfeiture under the provisions of:
      [ ] Title 26 I.R.C. § 7301, involving     [ ] Wagering Tax
    [ ] Excise Tax
      [ ] Title 26 I.R.C. § 7302     [ ] Form 8300
    [ ] Other Tax
Title 26 I.R.C. § 7301 provides for the forfeiture of taxable property which is removed, concealed, or deposited to defraud the United States of the tax, or is possessed with the intent to avoid payment of the tax. It also provides for the forfeiture of assets used to manufacture, contain, or transport taxable properties which are the object of the fraud or evasion scheme.
Title 26 I.R.C. § 7302 provides for the seizure and forfeiture of "any property intended for use in violation of the provisions of the internal revenue laws, or regulations prescribed under such laws, or which has been so used" may be seized and forfeited to the United States Government.
The particular property seized is described as follows:
( Complete Description of Property )
The value of the property is estimated at ( insert appraised $ amount )
The Internal Revenue Service is currently reviewing the facts in the case to determine if the above-described property should be forfeited to the government.
If it determined that the property should not be forfeited, it will be returned. If it is determine that the property should be forfeited, you will be notified by letter, and the options available to you for relief from the forfeiture will be explained.
Should you know of any other person or entity having an interest in this property, have them contact the above-named Internal Revenue Service employee.
Chief, Criminal Investigation Division
Exhibit [9.7] 14-2  (04/30/98)
Sample Notice of Intent to Forfeit Under Title 26 (Code)
>
INTERNAL REVENUE SERVICE
DEPARTMENT OF THE TREASURY
District
Director Criminal Investigation
Person to Contact:
( Name of Receiver ) Special Agent ( name of agent )
( Address of Receiver ) Telephone Number:
( City, State, Zip ) (xxx) 123-4567
Refer Reply To:
CP:CI:x:xxx
Date:
( enter today's date )
Dear ( Party(s) in Interest ):
The records of this office indicate that you might have an interest in certain property which was seized for forfeiture by the Internal Revenue Service at ( place of seizure ) on ( date of seizure ). The property was seized because it was used or intended for use in violation of Internal Revenue laws, specifically ( insert Code section ) of the Internal Revenue Code (26 U.S.C.). Under Code section 7302, it is unlawful to have or possess property used or intended for use in violation of Internal Revenue laws, and no property rights exist in any such property.
Administrative forfeiture proceedings under Code section 7325 and 26 C.F.R. have been initiated on the property described below:
( Complete Description of Property )
The value of the property is ( insert appraised $ amount )
Notice of these proceedings, as required by law, is scheduled for publication beginning on ( insert first publication date ), in the ( insert name of the publication ). A copy of the notice is enclosed for your information. THIS PROPERTY IS SCHEDULED FOR FORFEITURE BY THE DISTRICT DIRECTOR ON THE 30TH DAY AFTER THE 1ST PUBLICATION DATE.THE FORFEITURE DATE IS (insert forfeiture date) .
If you have an interest in the seized property, you may obtain administrative review from the Internal Revenue Service or a judicial determination in court. If you desire a judicial determination of the matter (having the forfeiture transferred to a United States District Court), a claim of ownership and cost bond must be received by this office before the close of business on ( the final claim date ). You are cautioned that the timely filing of a claim of ownership is a necessary condition for obtaining a judicial determination. The claim of ownership and cost bond should be executed in triplicate.
TO CONTEST THE ADMINISTRATIVE FORFEITURE
BY THE INTERNAL REVENUE SERVICE
Without the timely filing of a claim of ownership and cost bond by you or any other person, transferring the case to U.S. District Court, the property will be forfeited administratively by the District Director, Internal Revenue Service, ( name of district ) District, on ( date of forfeiture ).
The claim of ownership must include the seizure number, description of the property seized, the date of the seizure, the location of the seizure, and a statement setting forth your ownership interest in the property for each item claimed.
The cost bond amount must be in the amount of $2,500.00 (26 U.S.C. 7325(3)). The bond should be one of the following:
1. A certified check, cashier's check, or postal money order made payable to the "United States Department of the Treasury."
2. United States bonds, notes, or other obligations on which the interest and principal are unconditionally guaranteed by the United States. United States bonds which are not transferable are not acceptable.
3. A corporation holding a certificate of authority from the Secretary of the Treasury as being acceptable surety, and which has process agents in the judicial district where the person resides or the obligation is to be performed, and where the bond is returnable or filed.
The claim of ownership and cost bond should be sent to the above-listed address, Attn: District Asset Forfeiture Coordinator.
ADMINISTRATIVE REVIEW
Administrative review is obtained by filing with this office, a written petition for remission or mitigation of forfeiture of the property under Code section 7227 and 19 U.S.C. 1618. This request may be filed any time before the final dispositoin of the property. You may also file with this office, by ( insert final claim date ), the final claim date, an offer in compromise under Code section 7122 to settle the forfeiture liability incurred by the property. The petition must include the seizure number, description of the property seized, the date of seizure, proof of your ownership interest in the property, the facts and circumstances that you believe justify the return of the property, and must be signed and sworn to under oath by you. You are advised that any petition or offer in compromise filed is subject to investigation.
Should the Assistant Commissioner (Criminal Investigation) find that the forfeiture was incurred without willful negligence or without any intention on the part of the petitioner to defraud the revenue or to violate the law, or finds the existence of such mitigating circumstances as to justify the remission or mitigation of such forfeiture, may remit or mitigate the same upon such terms and conditions as he/she deems reasonable and just.
WARNING CONCERNING FORFEITURE PROCEDURE
The administrative forfeiture is not normally subject to judicial review. If a claim of ownership and cost bond are timely filed, any pending petition for remission or mitigation of forfeiture of the property or an offer in compromise to settle forfeiture liability will be transferred to the Department of Justice for the appropriate action. You are cautioned that the timely filing of a petition for remission or mitigation of forfeiture does not extend the time for filing a valid claim of ownership and a cost bond.
Should you have any questions concerning this matter, please contact the person listed on the first page of this document.
Chief, Criminal Investigation Division
Enclosure: Copy of public notice

Internal Revenue Manual  

Hndbk. 9.7 Chap. 14 Title 26 (Code) Seizures for Forfeiture

  (04-30-1998)


05/02/2001 14:30:09 EST