Title 26 USC §7301 provides for the forfeiture of taxable property which is in the custody of any person intending it to be sold, 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 the taxable property that is the object of the fraud or evasion scheme.

As an example, 26 USC §7301 has been used to seize property for violations of the motor fuels excise tax laws. Motor fuels are considered a taxable property under 26 USC §7301(a). Accordingly, it follows that any equipment that is used (such as computers used to track sales) under 26 USC §7301(c), any storage facilities for fuel under 26 USC §7301(d), and any trucks that are used to transport fuel under 26 USC §7301(e), are all forfeitable if the fuel excise tax has been, or is intended to be, evaded.

Title 26 USC §7302 provides for the forfeiture of any property used, or intended for use, in violation of the provisions of the Internal Revenue laws or regulations prescribed under such laws. It is the more commonly used statute for a Title 26 forfeiture. The wording of 26 USC §7302 is very broad. Although 26 USC §7302 authorizes the seizure and forfeiture of any property used, or intended to be used to violate any of the Internal Revenue laws, it is not to be used as a substitute to the collection of taxes. Consequently, most Title 26 forfeitures have involved property used to violate the provisions of the wagering tax laws (26 USC §4401, §4411, and §4412), the sale of motor fuels (26 USC §4081 and §4091), and, to a lesser degree, the equipment used in these tax fraud schemes. Forfeiture can also apply to other sections, such as the sale of tires (26 USC §4071).

The same assets listed in subsection 9.7.13.2.1(2) above, can also be forfeited under 26 USC §7302 as property intended to be used to facilitate a violation of the Internal Revenue laws or its regulations. In addition, other applications of 26 USC §7302 have occasionally occurred. For example:

Theoretically, 26 USC §7302 can be used to forfeit assets attributable to violations of IRC 6050I (Form 8300, Report of Cash Payment over $10,000 Received in a Trade or Business, filing requirements). However, as explained in subsection 9.7.13.3.1 below, the absence of a tracing provision in 26 USC §7302 makes these forfeitures very difficult to support. Unless the seizure occurs immediately after the transaction requiring the filing of a Form 8300, the money involved in the transaction would typically have already been deposited into the bank or else used in a subsequent transaction that would necessitate tracing.

In transactions that violate IRC §6050I, the purchased item is not forfeitable because it is not an instrument of the crime.

A business could be forfeitable if it could be shown that the primary reason for the existence of the business is to facilitate IRC §6050I violations. This would be very rare and would require advance pre-seizure planning with Area Counsel (Criminal Tax) assigned to your field office.

The burden of proof to seize property under Title 26 is probable cause. Although probable cause is technically all that is needed to forfeit property, several court cases have ruled that a preponderance of evidence is required before the asset can be forfeited.

Area Counsel must be involved in all Title 26 forfeitures at the pre-seizure stage of the potential action.

For administrative seizures, they will review the affidavit for the seizure warrant and related Enforcement Action Review form prior to providing written advice to the SAC.

Area Counsel can also assist by determining such things as whether an existing IRS lien affects the seizure, and if it should be released or enforced.

Although Area Counsel can recommend that a forfeiture action be initiated, most have to be referred to Division Counsel for approval.

Title 26 forfeitures are related to tax administration and are subject to the disclosure restrictions contained in 26 USC §6103. Therefore, in Title 26 forfeiture investigations special agents may access tax information pursuant to 26 USC §6103(h)(1). Disclosure to the Department of Justice (DOJ) and the USAO for the purpose of obtaining a Title 26 seizure warrant is permitted pursuant to 26 USC §6103(h)(2) and (3).

Tax return or tax return information may be disclosed to appropriate contract employees 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).

The special agent responsible for the proposed seizure is also responsible for coordinating any action that might be anticipated by the Small Business Self Employed Unit (SBSE). Some determinations that can be made include:

It is the general practice of CI that Title 18 seizure/forfeiture authority will not be used in tax or tax-related investigations. However, there may be instances where Title 18 seizure/forfeiture provisions are appropriate in tax or tax-related investigations. The purpose of this section is to provide guidance on the use of these statutes in tax investigations.

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.

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.

Since Title 26 seizures include motor fuel excise tax violations, it is possible that potentially contaminated property, such as a motor fuel tank, farm, barges, gasoline stations, fuel trucks, etc., could be seized. Pre-seizure planning is imperative because of the potential liability and poor marketability of this type of property. It is the policy of the Department of Treasury and DOJ that property contaminated, or potentially contaminated, can only be seized and forfeited with the approval of the USAO in the judicial district where the property is located. The decision whether to seize should be made in consultation with Area Counsel and AWSS. Further information relative to this topic is contained in subsection 9.7.13.9 below.

Procedures relative to the seizure of perishable goods are explained in 26 USC §7324. If perishable goods are seized, special concessions are made to the owner of the property who can have the property returned in lieu of having it sold by the government. These concessions should be considered as part of pre-seizure planning. Area Counsel and AWSS should also be consulted prior to seizure. Further information is contained in subsection 9.7.13.9 below.

A Warrant of Arrest in rem is used to seize property for Title 26 forfeitures when the proceedings are civil judicial. Proceedings in rem are governed by the Supplemental Rules for Admiralty and Maritime Claims. In addition to the USAO, Area Counsel must also be consulted so that they can review the affidavit for the warrant. They must also obtain concurrence from Division Counsel before a forfeiture action can be initiated.

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.

Title 26 USC §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 26 USC §7301 is silent on the use of search or seizure warrants, they are the preferred methods.

If a determination is made that property seized incident to an arrest or a lawful search is subject to forfeiture, the matter must be referred to Area Counsel for their advice. A memorandum, stating the facts and circumstances and fully detailing the evidence that supports forfeiture should be included in the advisory request to Area Counsel. Equally applicable to Title 26 action the Treasury Executive Office of Asset Forfeiture recommends that property seized incident to an arrest or search warrant, be re-seized utilizing a seizure warrant if it is subsequently determined the property is subject to forfeiture.

Although possible, adoptive seizures will be rare since there are no provisions for sharing with state, local, or Federal agencies. In Title 26 forfeitures, adoption requests must be reviewed by Area Counsel and are subject to the same review and approval as with Title 18 adoptions.

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.

The use of safe deposit boxes or other similar methods of storing seized currency is no longer acceptable, except when necessary for temporary storage or in storing currency to be held for evidentiary purposes.

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.

If seized currency being held as evidence is later deposited to the IRS suspense account, then its evidentiary value no longer exists and some action needs to be taken within 60 days of the date of deposit.

Financial accounts include checking, savings, money market, mutual funds, and brokerage accounts. They can be either seized or frozen at the financial institution.

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.

If business, personal, or bank checks are seized, the seizing agent should act expeditiously to ensure the funds are preserved. In addition to notifying the drawee bank, the following procedures should be followed:

Unlike Title 18 seizures, personal property that is seized cannot be placed in the custody of the seized property custodian. Arrangements must be made to store the assets in CI space, preferably in a secure evidence room. For small items such as jewelry, collector coins, etc. a safe deposit box is preferred. For larger items such as vehicles, contact AWSS to determine if any low or no-cost storage is available.

If real property is authorized to be seized for forfeiture, follow the same real estate transfer and handling procedures as with Title 18 seizures except AWSS will be involved instead of the seized property contractor.

Upon seizure for Title 26 forfeiture, all assets must be appraised to assess their current fair market value. Delegation Order 9-1 authorizes special agents to estimate the value of seized personal property, and if valued at $100,000 or less, to cause a listing of the seized property to be prepared and to obtain an appraisal.

If multiple assets are seized, the special agent must aggregate the value of all the property seized from one owner at one location in determining the $100,000 criteria.

If the seized property is valued at $100,000 or less, 26 USC §7325(1) and 26 CFR 403.26 require that a list of the assets, including a description, be prepared. Each item must be appraised by three sworn appraisers, who are respectable and disinterested citizens of the United States residing within the IRS field office wherein the seizure was made.

Appraisers can be paid with a government issued credit card or through the normal procurement process using Form 1334, Requisition for Equipment, Supplies, or Services.

If a petition is filed, the relief allowed will be 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 pay for the costs of such reappraisal.

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.

The method by which a forfeiture is processed primarily depends on the value of the asset that was seized. If the value is $100,000 or less, then the asset should be forfeited administratively. Judicial proceedings are used for Title 26 forfeitures when:

Within ten days following seizure, a referral should be forwarded to Area Counsel assigned to your area. It is the responsibility of the Asset Forfeiture Coordinator (AFC) to ensure that all necessary documents and information are obtained from the case agent and included in the referral to Area Counsel.

After receiving the referral, Area Counsel will review the facts and circumstances of the seizure and the documents provided. If the proposed forfeiture is administrative and pertains to either a violation of IRC §6050I or the wagering tax provisions of 26 USC §4401, §4411, and/or §4412, then Area Counsel can recommend that a forfeiture action be initiated. If it pertains to any other Title 26 matter, then it has to be referred to Division Counsel, who will review the matter within three days. If they concur, then the matter is forwarded to DOJ, Tax Division.

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.

If an administrative forfeiture is recommended by either Area Counsel or Division Counsel, the field office AFC will mail a Notice of Intent to Forfeit Letter (Exhibit 9.7.13-1) to all potential claimants within ten days of receipt of the recommendation. The letter must be mailed within 60 days of the date of seizure.

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.

The Law and Fact Memorandum from Area Counsel that recommends administrative forfeiture of the property will instruct that a notice of seizure must be placed in a newspaper of general circulation in the judicial district where the seizure occurred. The field office AFC is responsible for ensuring that the notice is published within 60 days of the date of seizure.

The notice must be published once a week for three consecutive weeks and the first notice must be coordinated to be published at the same time as the mailing of the Notice of Intent to Forfeit Letter. The notice must describe the items seized, and state the time, place, and cause for the seizure.

The final claim date will be 30 days from the first date of publication of the notice of seizure.

Provided no petitions or claims are received, the forfeiture date is 30 days after the first day of publication of the Notice of Seizure.

In an administrative forfeiture case, a completed Form 1570, Declaration of Forfeiture (Exhibit 9.7.5-1), will be sent to the Director, Field Operations, who is authorized by Delegation Order 9-1 to execute the declaration and forfeit property administratively on behalf of the Internal Revenue Service.

The original Form 1570, Declaration of Forfeiture, signed by the Director, Field Operations will be maintained in the seizure file and a copy will be forwarded to Area Counsel.

In a judicial forfeiture case, a Decree of Forfeiture will be issued by the court as a result of a civil judicial proceeding. Although the processing of the judicial forfeiture will be handled by the USAO, it should be undertaken in consultation with the AFC and should parallel IRS guidelines.

If the IRS intends to sell the forfeited property, the Final Order of Forfeiture signed by the court should reflect this provision.

Although there is no standard format for a petition, it must meet the standards set forth in 26 CFR 403.37 and 403.38.

In addition, the petition:

If the SAC believes the petition is deficient in any manner, the SAC will allow the petitioner a reasonable time to submit a corrected petition.

Upon receipt of a petition, it should be referred to Area Counsel, who will review the petition and will forward it to Division Counsel for review and recommendation to the Chief, CI.

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.

If the petitioner does not comply with the conditions imposed for the release of the property pursuant to 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.

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.

Pursuant to 26 USC §7325 and 26 CFR 403.26, any person claiming an interest in the property seized may file a claim and post a cost bond prior to the final claim date.

Although there are no provisions in the Title 26 statutes or regulations for foregoing the filing of a cost bond, there is sufficient case law that allows a claimant to proceed In Forma Pauperis. Internal Revenue Service policy is to afford any potential claimant the maximum opportunity to retrieve their property. Therefore, the Notice of Intent to Forfeit Letter sent to potential claimants shall reference this proceeding as an option. Form 9365, Application to Proceed In Forma Pauperis, (Exhibit 9.7.13-2) will also be included with the forfeiture letter.

The sureties of a cost bond must meet these requirements:

An Offer in Compromise is an offer proposed by the owner of the property subject to forfeiture, who wishes to negotiate the forfeiture. It can only be proposed in an administrative forfeiture action. It cannot be considered once a case has been referred to DOJ or USAO.

When an Offer in Compromise is received, 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 occurs on the Offer in Compromise.

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.

Property administratively forfeited may be sold at public auction and shall be the responsibility of AWSS. Upon forfeiture, the AFC should contact AWSS and arrange for their assistance in disposing of the assets or in transferring them to GSA for disposal.

The procedures and terms of the sale shall be in accordance with 26 CFR 403.55 through 403.62. These regulations state that:

The sale of judicially forfeited property would normally be the responsibility of the US Marshal Service. However, they 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. The AFC can also contact AWSS and request their assistance.

Although there is no provision for equitable sharing with other Federal law enforcement agencies, once an asset has been placed into official use and subsequently removed from service, interested agencies can apply for the property through standard GSA regulations.

Net proceeds (sale proceeds less storage, maintenance, and other management costs) from the sale of personal or real property which have been forfeited pursuant to Title 26 are deposited into the General Fund.

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:

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.