Imposing Gift Tax on 501(c)(4) Contributions May Get Fresh Look From IRS
The last time the Internal Revenue Service waded into a fight on politically active nonprofit groups, the agency capitulated quickly and let people make undisclosed, untaxed payments to groups financing campaign ads.
In 2011, under pressure from Republicans, IRS shut down an attempt to impose gift taxes on donations to so-called social welfare organizations. The move led to a “free-for-all” by donors while clearing up decades of ambiguity on how it would enforce the law, said Ofer Lion, an attorney at Hunton & Williams LLP in Los Angeles.
The new controversy surrounding IRS scrutiny of small-government groups focuses attention again on how the agency handles politically sensitive issues. A lack of clear rules and management leave the agency vulnerable to employee misconduct, open to charges of bias, and flat-footed when confronted with an outcry from lawmakers.