Thursday, May 26, 2011

Republican Senators Ask IRS To Explain Reported Gift Tax Probe Of 501(C)(4) Contributors

On May 18, six Republicans on the Senate Finance Committee wrote IRS Commissioner Shulman and asked him to explain IRS's reported examination of donors who made transfers to Code Sec. 501(c)(4) organizations without paying a gift tax. The six Republicans are Orrin Hatch, Ranking Member, Jon Kyl (R-AZ), Pat Roberts (R-KS), John Cornyn (R-TX), John Thune (R-SD) and Richard Burr (R-NC).

The letter characterizes the applicability of gift taxes to Code Sec. 501(c)(4) contributions as ambiguous, declares that, historically, IRS has deliberately opted against vigorous enforcement of the gift tax on such contributions, and questions whether IRS's reported enforcement initiative is politically motivated (i.e., initiated at the behest of the Administration). The letter says “enforcement of gift taxes on contributions to 501(c)(4) organizations engaged in public policy debate runs an unacceptable risk of chilling political speech, which receives the highest level of constitutional protection under the First Amendment.”

The letter requests Commissioner Shulman to release names of individuals inside and outside of IRS involved in the decision to pursue the issue and related correspondence, as well as any analysis generated or obtained by IRS regarding the First Amendment implications of applying the gift tax to Code Sec. 501(c)(4) contributions. It does not, however, request an analysis of the gift tax issues involved.

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