IRS taxing donations to 503(c)(4) organizations

The United States government is bound and determined to control who says what and how when it comes to political campaigns.  After the controversial Citizens United ruling, despite the fact that there are still plenty of headaches involved in groups trying to influence elections, the Internal Revenue Service has decided to flex its muscle in putting a stop to what some feel is undue influence by some parties.

The IRS has decided to start charging tax to people who donate money to 503(c)(4) organizations.  The gift tax, which has been around for a while, actually charges a tax to the person who donates the money.  This is rather unusual because non-profit donations have often been seen as tax deductible in most cases, or at least tax neutral.  From the Wall Street Journal:

The letters are especially odd since the purpose of the gift tax has traditionally been used in coordination with the estate tax, to prevent people from avoiding the tax by divesting their wealth before they die. Contributions to 501(c)(4)s aren’t a routine death tax avoidance mechanism, and the contributions now under scrutiny are a pittance compared to overall gift tax revenues. So, hmmm, what could be the reason to start asserting the provision now, and only against a handful of high-profile political donors?

RS spokesman Michelle Eldridge said in a statement last week that the letters are the idea of career IRS employees, not the White House, and that they are part of a larger investigation of gift tax compliance. Count us skeptical that a new targeted enforcement plan, likely coordinated between at least two of the highly compartmentalized divisions of the IRS, was just cooked up by some career guys.

Regardless of where it comes from, it’s another case of government flexing its muscle in an effort to control its citizens.  Make no mistake, the tax code has long been a favorite method of pushing folks to change their behaviors, so this is no different.  The idea of taxing people is one thing, but now they want to tax donors to political organizations.  While many accept that they don’t get a tax deduction for donating to political groups, they at least don’t expect to get taxed for their donations.

Now they have something else to worry about.

 


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