After 32 years of IRS work \u2014 and more than $100 million in resolved tax debt \u2014 I've seen just about every version of the problem you're dealing with. I'm Darrin Mish, a tax attorney in Tampa. Here's what you should know.<\/p>\n
IRS Audits Donors on Gift Tax<\/p>\n
The IRS recently sent audit letters to 5 donors who had not filed gift tax forms for donations they had made in 2008 to certain social advocacy groups. \u00a0These groups come under Section 501(c)4 of the tax code, the section that permits groups the right to withhold the identities of their donors who contribute towards political campaign advertisements. \u00a0Since 2008, many political groups were formed under Section 501(c)4 such as American Crossroads, which discloses donors, and Crossroads GPS, which doesn\u2019t, both of which are large Republican organizations.
\nNot to be outdone, the Democrats also plan to start 2 groups of their own \u2013 Priorities USA and Priorities USA Action \u2013 to raise $100 million for the 2012 re-election of President Barack Obama.
\nDonations to such groups are subject to a 35% gift tax, but this requirement has not been strictly enforced by the IRS. \u00a0Until now.
\nThe latest move by the IRS has raised concerns that it could curtail funding ahead of the 2012 presidential elections. \u00a0But the IRS denied that their action was politically motivated. \u00a0In a recent statement, it said, \u201cAll of the decisions involving these cases were made by career civil servants without any influence from anyone outside the IRS,\u201d and that the letters were \u201cnot part of a broader effort looking at donations to 501(c)4s.\u201d
\nThe IRS clarified that the letters were sent by their Estate and Gift Tax unit workers as \u201cpart of their increased efforts in the area of non-filing of gift and estate tax returns\u201d.
\nAccording to the nonpartisan Center for Responsive Politics, last year nonprofit groups including many 501(c)4\u2019s spent almost $300 million in mid-term elections to campaign for elected representatives, most of whom were Republicans.
\nGenerally the lawyers of those who were audited feel that the IRS had been unfair to their clients because they were not informed beforehand about this action of enforcing the gift tax.<\/a> \u00a0The concern is that the action eventually could include donations to the new political organizations that cropped up in the 2010 midterm elections.
\nThis might prompt legal action on 2 grounds. \u00a0Firstly, that the gift tax was not designed to apply to such donations and secondly, that the IRS did not give any notice of enforcement of the tax after decades of inaction.
\nThe IRS\u2019 enforcement of 501(c)4 could also involve a wide range of established issue-advocacy groups, ranging from environmental to anti-tax organizations.<\/p>\n