Mega-Donors Freed From Gift Tax They Never Paid in House Bill

JAPAN SUPER S
Photograph: Bloomberg

The U.S. House voted this week to keep the Internal Revenue Service from hitting the nation’s wealthiest mega-donors with gift taxes for their political contributions.

That might sound pretty good for the Sheldon Adelsons and George Soroses of the world, except for one thing: The IRS has never levied that tax anyway.

That didn’t stop House lawmakers from taking credit for trying to protect their financial benefactors, just as the country heads into a presidential election season. The measure passed on a voice vote.

“Americans who donate to tax-exempt organizations should always be treated fairly and equally by the IRS -— an agency with an infamous track record of targeting individuals for their religious and political beliefs,” Representative Peter Roskam, an Illinois Republican and chairman of the House Ways and Means Oversight Subcommittee, said in a statement.

“Although the IRS claims it is no longer seeking to curb giving to social welfare organizations, we need assurances that this practice will never happen in the future,” Roskam said.

The bill would codify existing IRS practice and remove a potential threat to groups that participate in elections and don’t disclose their donors. A companion bill was recently introduced in the Senate.

The IRS has never imposed gift taxes on donations to groups organized under section 501 (c)(4) of the U.S. tax code. The agency sent letters to donors asking about such donations in 2011 and backed down after Congress complained.

The donations aren’t deductible for income tax purposes. The groups can engage in political activity as long as that isn’t their primary purpose.

The IRS is working on clearer rules governing what those groups can do without jeopardizing their tax exemptions or their ability to avoid disclosing donors.

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