IRS Drops Inquiry Into Past Gifts to Political Nonprofits
The IRS announced Thursday that it will suspend its examination of possible gift taxes owed for prior contributions to nonprofit advocacy groups, which are poised to be influential players in the 2012 elections.
Roll Call reported in May that the IRS had begun enforcing an oft-ignored statute that requires individuals to pay a tax on money given to nonprofit advocacy organizations that are tax-exempt but not charitable in mission. Donors who had given generously to the type of influential nonprofit groups known as 501(c)(4) organizations, which proliferated during the previous election cycle thanks to their ability to shield donors from public disclosure, had begun receiving notices from the IRS that their tax returns are being examined.
“Recently, questions have arisen regarding the applicability of the gift tax to contributions to 501(c)(4) organizations. The Internal Revenue Service has little history to draw from in this area and the limited guidance we previously issued on this matter is almost thirty years old,” the agency wrote in a statement issue. “While we review the need for additional guidance or legislation, we will not use resources to pursue examinations on this issue. Any future action we take will be prospective and after notice to the public.”
For decades, the IRS had done little to collect such taxes, but when nonprofit 501(c)(4) organizations emerged as powerful players in the previous election cycle, they caught the agency’s attention.
Once media reports surfaced that the IRS had begun pursuing enforcement, some Republicans on the Senate Finance Committee asked the agency to provide more details about its decision.
“As we consider this issue, it is possible that Congress may choose to clearly articulate through legislation the applicability of the gift tax to contributions to 501(c)(4) organizations,” the IRS wrote in Thursday’s statement.