A few months ago the liberal dominated election law email discussion list I subscribe to was agog that a rogue group of IRS auditors had initiated five “examinations” of contributors to Section 501 (c)(4) nonprofit advocacy groups to see if they had paid “gift tax” on the contributions. Contributions to groups like the National Rifle Association, a c4, are not deductible, and generally not taxed, but there is some funky language in the Federal tax code that could be interpreted to mean a tax would have to be paid on the amount of a gift over $13,000 to a c4. Of course, c4s are also sometimes referred to by lazy MSM reporters as “shadowy groups” that don’t have to disclose their donors and that can engage in candidate related communications just short of express advocacy near an election……
I advised my clients not to worry, I didn’t see the examinations as a full scale assault against activities such as critizing the performance of elected officials, which is protected by the First Amendment. I did not read into the examinations that the Obama Administration was launching an attack on public participation of nonprofits. It looked to me to be just some sort of weird, rogue deal, like in the movie “Three Days of tbe Condor.”
Gladly, the IRS ordered the examinations formally “closed” today, understanding that those auditors might be opening up a hornet’s nest just before a presidential election. Bottom line? If you plan on contributing massively to a “shadowy” nonprofit that wants to express it’s view on the performance of an officeholder, you can do so without much concern about getting automatically examined for a gift tax for doing so.