IRS blocks stimulus tax relief to people in prison; court orders relief

*Update (10/19/20): Per federal court orders, incarcerated individuals may now apply for stimulus payments.  The current deadline to apply is November 4, 2020.  More information is available at this link.

In response to the public health and economic challenges of COVID-19, Congress in March 2020 enacted the CARES Act.  We have written at length about the Small Business Administration’s unfortunate and unauthorized disqualification of small business owners from Paycheck Protection and disaster relief because of their criminal record.  It turns out that the SBA is not the only federal agency discriminating against people with a record in carrying out the CARES Act.  The IRS has also gotten into the act, in what may be an even more lawless fashion.

The CARES Act authorizes stimulus payments in the form of a tax rebate of $1200 per adult and $500 per child for households with incomes below a certain level.  See P.L. 116-136, sec. 2201.  Specific categories of individuals are excluded from receiving these payments (e.g., any “nonresident alien individual” or an estate or trust), but nothing in the CARES Act excludes people who happen to be in prison or jail or any other detention facility.  Likewise, no federal regulation excludes incarcerated individuals from receiving CARES Act tax rebate payments.

That didn’t stop the IRS from taking matters into its own hands, just as it didn’t stop the SBA.

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CCRC in the Post: Protesting should not result in a lifelong record

CCRC’s Margaret Love and David Schlussel published an op-ed in the Washington Post on Monday: “Protesting should not result in a lifelong criminal record.”  The piece begins:

Sparked by the killing of George Floyd on May 25, protesters across the country have been demonstrating against police violence and racism. As of June 4, the Associated Press tallied more than 10,000 arrests during and after protests, and the number has surely increased.

Most of those arrested will almost certainly be released without charges or have their charges dropped. Others will face charges and may be convicted. Regardless of the outcome, the mere fact of an arrest will leave a person with a criminal record in most states, creating long-term barriers to employment and housing, and in other areas of daily life. Protesters should not wind up with a lifelong criminal record.

States should provide for automatic expungement of records that do not result in a conviction, particularly where the government does not even bring charges. States should also expand the availability of relief for convictions.

. . . .

Our research indicates that automatic or expedited expungement of many non-conviction records is available in 15 states, thanks to recent reforms. Thirty-three additional states expunge or seal certain non-conviction records, but only after a person completes a court or administrative process, often with restrictive eligibility requirements and burdensome procedures, including waiting periods and even contested hearings.

Ironically, in most of these states it is harder to seal the record of an uncharged arrest, which does not find its way into a court document, than to seal charges that are dismissed or acquitted.

The District of Columbia, a center of the protest movement, has one of the most restrictive record-sealing laws in the country, and certainly the most complicated. Two states, Arizona and Wisconsin, do not expunge non-conviction records at all, and there is no statutory authority to expunge federal arrest records. Most states allow some convictions to be sealed, but eligibility criteria and procedural requirements tend to be restrictive.

Fortunately, legislative trends favor automatic expungement of non-conviction and minor conviction records in a growing number of states. In the wake of the current protests, lawmakers should accelerate this process.

. . . .

Read the full op-ed here or in today’s print edition.

SBA eases some criminal history barriers and faces litigation

*UPDATE (7/7/20):  “SBA throws in the towel and Congress extends the PPP deadline”

After Congress authorized hundreds of billions of dollars for small business relief during COVID-19, the Small Business Administration (SBA) imposed restrictions on applicants with an arrest or conviction history.  We have written much in recent weeks about how these barriers, neither required nor contemplated by Congress, impede access to the two major relief programs for small businesses, nonprofits, and independent contractors: the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) program.

Following the introduction of a bipartisan Senate bill to roll back most of these barriers, Treasury Secretary Steven Mnuchin agreed on June 10 to revise the PPP restrictions.  On Friday, June 12, SBA issued new regulations and application forms to ease some of the barriers in the PPP.  The changes are more limited than the proposed Senate bill, and continue to reflect an SBA overreach in its approach to loan applicants with criminal records, at a time when we are nearing the June 30 closing date to apply for this much-needed assistance.

Meanwhile, two lawsuits have been filed against the SBA in federal court in Maryland, asserting that the SBA’s criminal history restrictions are beyond the agency’s authority, arbitrary and capricious, and contrary to the text of the CARES Act.  The first lawsuit, filed on June 10, is brought by The New Civil Liberties Alliance on behalf of a corner store in Hagerstown, Maryland, which was denied PPP assistance based on its owner’s 2004 felony conviction, for which he is on parole.  The second lawsuit, filed on June 16 by the ACLU, Public Interest Law Center, and Washington Lawyers’ Committee for Civil Rights and Urban Affairs, also asserts that the restrictions fall hardest on minority businesses due to the impact of over-criminalization on communities of color.  The suit is on behalf of the owner of an electrical contracting business on parole for a 2012 drug conviction, a graphic designer with pending misdemeanor charges, and a nonprofit that provides job and entrepreneurial training for currently and formerly incarcerated individuals.  None of the business owner plaintiffs in these two lawsuits would be eligible under the SBA’s new policies, which we analyze below.  (Further information on the lawsuits is also below.)

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How to expand expungement: base it in retribution instead of rehabilitation

A thoughtful new article by Brian Murray recommends a new way of conceptualizing expungement that should make it easier for reformers to justify facilitating access to this record relief.  In “Retributive Expungement,” forthcoming in the University of Pennsylvania Law Review, Murray argues that expungement should be seen as a way to end warranted punishment rather than to recognize and incentivize rehabilitation.  The argument goes that if the legal and social disadvantages of a criminal record function as part and parcel of the criminal sentence imposed by the court, as opposed to a loosely related system of civil penalties that are activated by other laws and other actors, then the court has an obligation at some point to discharge it.  While this argument is not new, Murray places it squarely in a modern retributivist framework.

In an earlier era, the drafters of the 1962 Model Penal Code embraced this idea of tying up the loose ends of criminal punishments through court-ordered dispensation, although they chose a more transparent form of remedy in judicial vacatur or set-aside.  Before that, this function of ending punishment was performed by executive pardon.  In modern times, as ubiquitous background checking has made a criminal record a lasting Mark of Cain, most agree that the record should be made unavailable for private and most public purposes at some point, unless disclosure is ordered by the court for some purpose authorized by law.  Facilitating access to this record relief should be easier with the theoretical frame proposed by Murray.

Here is the abstract and a link:

Expungement relief was introduced in the mid-twentieth century to reward and incentivize rehabilitation for arrestees and ex-offenders and to protect their privacy. Recently, many states have broadened their expungement remedies, and those remedies remain useful given the negative effects of public criminal records on reentry. But recent scholarship has suggested an “uptake gap,” meaning many who are eligible never obtain relief. Despite broadening eligibility, petitioners face substantial obstacles to filing, pre-hearing hurdles, waiting periods, and difficult standards of review without the assistance of counsel. And even when expungement is granted, the recipients are basically left on their own to guarantee the efficacy of the remedy. Some of these attributes of expungement were originally conceived as features, designed to ensure only the most rehabilitated received relief, allowing the state to continue to pursue public safety objectives with public criminal records. But the cold reality of expungement procedure leaves many petitioners facing insurmountable obstacles that amplify the effects of the punishment originally imposed.

In exploring this reality, this Article illustrates that expungement procedure is stuck in a rehabilitative and privacy-centric paradigm. While this framework inspired the creation of expungement remedies and recent reforms, it also has justified onerous procedural obstacles and the placing of the burden of persuasion on the petitioner rather than the state. Outside of automated expungement, which is still relatively rare and restricted to only certain types of petitions, most expungement regimes in substance or through procedure invert what should be the state’s burden to justify retention of criminal records that enable extra punishment by state and private actors. An alternative theoretical basis for expungement is necessary to convince policymakers and decision-makers of the need for broader substantive and procedural reform.

This Article suggests a different paradigm: retributive based expungement. It proposes that incorporating retributive constraints that already underlie the criminal system can benefit petitioners. Plenty of arrestees do not deserve stigma and ex-offenders have done their time, meaning punitive stigma from public criminal records can amount to unwarranted punishment. A retributive-minded expungement procedure would all but guarantee expungement in the case of arrests, where the desert basis is questionable, and would place the burden of proof on the state for convictions once desert has been satisfied. As such, this approach can supplement the case for broader eligibility, automated expungement, and favorable pre-hearing procedures that limit the uptake gap. It also has legal and political viability given that many states already maintain retributivist constraints on sentencing and given that huge swaths of the public perceive desert as a crucial component of any criminal justice issue. In fact, some states are already moving in this direction and can serve as a model for the rest of the country. In short, retributivist constraints can trim procedural overgrowth to supplement substantive reforms that already recognize the disproportionate effects of a public criminal record.

Senate bill would deliver relief to small biz owners with a record

*UPDATE (7/7/20):  “SBA throws in the towel and Congress extends the PPP deadline”

After Congress authorized hundreds of billions of dollars for small business relief during COVID-19, the Small Business Administration (SBA) imposed restrictions on applicants with an arrest or conviction history.  These barriers, neither required nor contemplated by Congress, impede access to the two major relief programs for small businesses, nonprofits, and independent contractors: the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) program.

A major development in Congress signals the likely elimination of most of these restrictions, which would make crucial economic assistance newly available to many small business owners with a record.  On June 4, Senators Rob Portman (R-OH), Ben Cardin (D-MD), James Lankford (R-OK), and Cory Booker (D-NJ) introduced the Paycheck Protection Program Second Chance Act.

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CCRC statement on recent events

CCRC stands with those opposing police violence against black people and other forms of racism throughout society.  Black lives matter.

Our organization promotes public discussion of how criminal records are used to hold people back in civil society.  Discrimination based on a record hits the black community harder than any other, thanks to the long history of officials using the criminal law as a weapon to keep black people marginalized and subjugated.

Most recently, we have documented the Small Business Administration’s decisions to exclude many people from COVID-19 relief due to arrest or conviction, which disproportionately harms minority business owners during an already precarious moment.  We have also covered felony disenfranchisement litigation in Florida, where a federal judge held unconstitutional the denial of voting rights to people who have served their time but still owe restitution and fines they cannot afford to pay.

In this time of national turmoil, many protesters have been and will continued to be arrested. Most will be released without charges, some will be charged, and some will be convicted.  But every single one of them will end up with a criminal record.

Very few states make it easy to avoid the stigma that even a bare arrest record produces, even when it is not accompanied or followed by any charges.  Our flagship resource, the Restoration of Rights Project, documents that even those protesters who are released without charges will need to petition a court or agency to seal or expunge the record of their arrest in order to avoid a lifelong record that can create barriers in housing, employment, and education.  In some states, courts or agencies have discretion to deny relief even where the government found no basis to prosecute.

Our Model Law on Non-Conviction Records (2019) recommends that states automatically expunge arrest records that do not result in charges or conviction, as well as charges that do not result in conviction, and that they do it promptly.  While 15 states do provide for automatic or expedited relief following a non-conviction disposition in court, 35 do not.  And, only a handful of states automatically expunge arrests where no charges are filed.  The filing of expungement petitions, costly and cumbersome in normal times, will be especially difficult due to limited access to courts during COVID-19.

It is especially wrong to saddle people who have never even been charged with a lifelong record.  This should be one of the first changes in the criminal law to work for in coming months, and it should be an easy one to accomplish.

For people who are convicted, 38 states have laws that allow at least some misdemeanors to be expunged or sealed; 31 of these states also make certain felonies eligible.  Waiting periods, filing fees, and other requirements apply.  In recent years, 7 states have enacted automatic relief for certain misdemeanors, dispensing with the petition requirement for those who qualify.  But there is no authority to expunge or seal federal records, including records of uncharged arrests; and, the laws on record sealing in the District of Columbia are some of the most restrictive in the country.

In two forthcoming posts, we will survey the laws pertaining to non-conviction and conviction record relief across the country.  At least with respect to non-conviction records, a menu of recommended reforms is already readily available in our Model Law.

Florida felony disenfranchisement law held unconstitutional

This evening the district court issued its opinion in Jones v. DeSantis finding, as expected, that Florida’s system for restoring voting rights to those convicted of a felony is unconstitutional. The opinion is at this link, and its summary by the court is below. Additional details of the decision and the court’s order are reported in this article from the New York Times, and we will report further on the case, including next steps, in a few days.

The State of Florida has adopted a system under which nearly a million otherwise-eligible citizens will be allowed to vote only if they pay an amount of money. Most of the citizens lack the financial resources to make the required payment. Many do not know, and some will not be able to find out, how much they must pay. For most, the required payment will consist only of charges the State imposed to fund government operations—taxes in substance though not in name.

The State is on pace to complete its initial screening of the citizens by 2026, or perhaps later, and only then will have an initial opinion about which citizens must pay, and how much they must pay, to be allowed to vote. In the meantime, year after year, federal and state elections will pass. The uncertainty will cause some citizens who are eligible to vote, even on the State’s own view of the law, not to vote, lest they risk criminal prosecution.

This pay-to-vote system would be universally decried as unconstitutional but for one thing: each citizen at issue was convicted, at some point in the past, of a felony offense. A state may disenfranchise felons and impose conditions on their reenfranchisement. But the conditions must pass constitutional scrutiny. Whatever might be said of a rationally constructed system, this one falls short in substantial respects.

The United States Court of Appeals for the Eleventh Circuit has already ruled, in affirming a preliminary injunction in this very case, that the State cannot condition voting on payment of an amount a person is genuinely unable to pay. See Jones v. Governor of Fla., 950 F.3d 795 (11th Cir. 2020). Now, after a full trial on the merits, the plaintiffs’ evidence has grown stronger. This order holds that the State can condition voting on payment of fines and restitution that a person is able to pay but cannot condition voting on payment of amounts a person is unable to pay or on payment of taxes, even those labeled fees or costs. This order puts in place administrative procedures that comport with the Constitution and are less burdensome, on both the State and the citizens, than those the State is currently using to administer the unconstitutional pay-to-vote system.

 

Upgrades to the Restoration of Rights Project

We are pleased to announce the completion of a major project to upgrade our flagship resource, the Restoration of Rights Project (RRP).  The RRP is a free on-line compendium of legal research that describes and analyzes the laws and practices relating to criminal record relief in the United States.  The improvements we have made will make it easier for our readers to gain both a snapshot and more detailed understanding of how record relief laws and policies operate within each of the 50 states, D.C., 2 territories, and the federal system.  They will also facilitate comparisons of how different states address various types of relief, producing a national-level picture against which each state can measure its progress.

This major undertaking was a collaboration between CCRC staff and four students at Yale Law School: Jordan Dannenberg, Kallie Klein, Jackson Skeen, and Tor Tarantola.  We thank these students, as well as YLS Professor Kate Stith, for their excellent contributions to our mission of promoting public engagement on the issues raised by the collateral consequences of arrest or conviction.

The state-by-state profiles, summaries and 50-state comparison charts from the RRP are what we rely on in preparing periodic and year-end summary reports on new legislation, which we track and add to the RRP in real time throughout the year.  The research and analysis in the RRP also informs our commentary on everything from new court decisions and scholarship to politics and practice, as well as the amicus briefs we file from time to time in significant litigation.  It is the foundation of our work on model legislation.  The RRP provided the raw material for a national overview report of record relief laws and policies, Forgiving and Forgetting in American Justice, which was last revised in August 2018.  Because of this report’s value in identifying overall patterns and emerging trends, we are already at work bringing it up to date with the more than 200 new laws passed since it was last revised.

Through the upgrade project we reorganized and expanded the RRP in three major ways.

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New efforts to channel federal relief to small business owners with a record

*UPDATE (7/7/20):  “SBA throws in the towel and Congress extends the PPP deadline”

After Congress authorized hundreds of billions of dollars in funds for small business relief during COVID-19, the Small Business Administration (SBA) imposed restrictions on applicants with an arrest or conviction history.  These barriers, neither required nor contemplated by Congress, impede access to the two major relief programs for small businesses, nonprofits, and independent contractors during the COVID-19 crisis.  The two programs are the newly created Paycheck Protection Program (PPP) and the ramped-up Economic Injury Disaster Loan (EIDL) program.

Three developments within the past week signal major pushback against or the possible reversal of at least some of these burdensome restrictions, which unfairly deny relief to worthy applicants.

First, at least 65 organizations submitted five public comments in opposition to the SBA’s criminal history restrictions for PPP relief.  Our organization joined 25 other groups in submitting a comment asking the SBA to rescind or modify the regulation on legal and policy grounds, citing recent court decisions that suggest the SBA may lack authority to impose record-based disqualifications at all.

These comments are the most recent expression of what has become a wave of bipartisan opposition to the SBA’s exclusionary policies, and growing coverage of the issues in the press.  We have been collecting relevant documents on our small business relief resource page.

Second, Treasury Secretary Steven Mnuchin signaled in a recent conversation with key Senators that he may be open to easing restrictions on PPP applicants with felony records from the last five years.

Third, the HEROES Act, passed by the House on Friday, includes provisions that would significantly constrain the SBA’s authority to deny applicants based on a record of arrest or conviction in both the PPP and EIDL programs.  If enacted into law, these provisions would mark a turning point in how federal law deals with discrimination based on criminal record.

We discuss these developments in detail after the jump.  Read more

Is SBA denying disaster relief based only on an arrest?

*UPDATE (7/7/20):  “SBA throws in the towel and Congress extends the PPP deadline”

In response to COVID-19, Congress created the Paycheck Protection Program (PPP) and expanded the Economic Injury Disaster Loan (EIDL) program, appropriating hundreds of billions of dollars across these programs to assist small businesses affected by the pandemic and economic crisis.  As we have been pointing out in this space over the past five weeks, the Small Business Administration (SBA), which administers both programs, has imposed broad restrictions on access to relief based on arrest or conviction history, restrictions that were neither required nor contemplated by Congress.[1]

Until now, attention has been focused on small business owners unfairly denied PPP relief based on their record.  Members of Congress and major organizations have written in opposition to PPP regulations and policies that impose barriers based on a record, and dozens of media outlets have covered the issue.  But the EIDL disaster relief program has largely gone under the radar, in part because the SBA has not published guidance about how it is treating EIDL applicants with a record.

In a new development, documents posted anonymously on Reddit last week, and published by Law360 on May 3, purport to be internal SBA guidance for reviewing EIDL applications.  The documents instruct agency staff to deny relief to applicants if they have ever been arrested, unless the arrest was for a misdemeanor and occurred more than 10 years ago.  These leaked documents, also covered in detail by Entrepreneur this morning, would suggest that behind the scenes the SBA is imposing even greater record-related restrictions on COVID-19-related disaster relief than on PPP loans.

Upon review, we believe that this new information about the record-related standards being applied by the SBA to EIDL loans is likely correct.  We have heard from readers who were denied EIDL relief after SBA staff asked them questions over email about their arrest history, questions that correspond exactly to those in the leaked documents.  An SBA spokesperson, given an opportunity to correct the record if it needed correcting, declined to confirm or deny the information.

We have never see a government program in the United States with such broad and arbitrary restrictions based on criminal history.  The purported EIDL guidance is devoid of nuance: it instructs staff to deny relief based on arrest history regardless of offense and regardless of whether the arrest resulted in prosecution, much less conviction.  The look-back period is limitless for felony arrests and a full decade for misdemeanor arrests.  The guidance inevitably produces unwarranted disparities: a person with a decades-old felony arrest that was never charged, or whose arrest resulted in an acquittal, is treated more severely than someone with a more recent misdemeanor conviction.  Finally, the guidance cannot be squared with existing published SBA policies, as discussed below.

In normal times, a sweeping and secretive restriction on disaster relief would be problematic.  In this global public health and economic crisis, it is inexcusable.

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