The Government as Creditor: IRS, FTC, SEC, DOJ Forfeiture and Repatriation Orders

Scope of the chapter. Chapter 4 introduced regulatory and sovereign claimants as creditor class C5 and summarized their principal remedies (see supra ¶¶ 440, 450). This chapter examines the government as creditor in depth: the collection powers of the Internal Revenue Service and the related federal tax crimes, the remedies of the Federal Trade Commission and the Securities and Exchange Commission, criminal and civil forfeiture by the Department of Justice, the repatriation orders that courts issue at the government's request, and the cooperation among governments that extends these powers across borders. It closes with the planning principles for clients whose dominant creditor may be a government.

Why the government is different. The government is unlike any private creditor in five respects.

1. Its claims arise by statute and are often fixed by assessment or order without a prior judgment.
2. Its remedies are administrative as well as judicial. The IRS may lien and levy without going to court.
3. It is not bound by state law. State exemptions, spendthrift statutes and limitation periods generally do not bind the United States as a tax or forfeiture creditor (see supra ¶ 450.01).
4. It has criminal process. The same conduct that frustrates collection may be prosecuted, which gives the government leverage no private creditor has.
5. It cooperates internationally. Treaties, information-exchange agreements and mutual legal assistance give the government access to information and, in some cases, assets abroad.

The planner's position. The treatise takes a clear position: protective planning against the claims of the government for taxes, restitution or the proceeds of wrongdoing is outside the legitimate scope of the discipline (see supra ¶ 150). Planning against regulatory claims that have not arisen, by operating within the law and structuring businesses and assets sensibly, is legitimate. The planner must understand the government's powers in order to advise clients accurately about the limits of protection and to avoid designing structures that would expose the client, and the planner, to criminal liability (see supra ¶ 330).

How to read the chapter. Paragraph 1010 examines the IRS's collection powers, and ¶ 1020 the tax crimes that apply in collection. Paragraph 1030 addresses the Federal Trade Commission and state attorneys general, ¶ 1040 the Securities and Exchange Commission, and ¶ 1050 other federal agencies. Paragraph 1060 covers forfeiture and restitution, ¶ 1070 repatriation orders, ¶ 1080 foreign governments and international cooperation, and ¶ 1090 the planning principles.