Thursday, July 7, 2011
IRS statement on applicability of gift tax on 501(c)(4) organization contributions
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.
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.
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.
Memorandum from Steven Miller, Deputy Commissioner for Services & Enforcement
Questions have been raised regarding the application of gift tax to contributions to I.R.C. § 501 (c)(4) organizations. This is a difficult area with significant legal, administrative, and policy implications with respect to which we have little enforcement history. My office will be coordinating with the Office of Chief Counsel to determine whether there is a need for further guidance in this area.
Until further notice, examination resources should not be expended on this issue. It is anticipated that any future examination activity would be after the coordination described above and would be prospective only after notice to the public. Thus, the Service shoul'd not expend examination resources initiating referral's or developing audits. Accordingly, all current examinations relating to the application of gift tax to contributions to I.R.C. § 501(c)(4) organi,zations should be closed.
This directive reaffirms and expands the suspension on March 23, 2011, of such examinations by SB/SE Estate and Gift. This directive has no impact on any decision to pursue, or on the scope of, any examination of I.R.C. §§ 501 (c) and 527 organizations, incl'uding the correct application of the tax under I.R.C. § 527(f). Nor does this directive have any impact on other estate or gift tax examinations that do not involve the issue of whether gift tax applies to contributions to I.R.C. § 5011(c)(4) organizations.
- Accounting Today
- The Hill
- New York Times
- NY Times Blog
- Wall Street Journal
- Washington Examiner
Prior TaxProf Blog coverage:
- Are Contributions to 501(c)(4) Groups Subject to the Gift Tax? (Oct. 15, 2010)
- Are Contributions to American Crossroads, Other 501(c)(4) Groups Taxable Gifts? (May 11, 2011)
- NY Times: IRS Moves to Tax Contributions to 501(c)(4) Political Groups (May 13, 2011)
- IRS Denies Political influence in Gift Tax Scrutiny of 501(c)(4) Groups (May 13, 2011)
- Tobin: Application of the Gift Tax to § 501(c)(4) Organizations (May 16, 2011)
- GOP Questions IRS on Applying Gift Tax to Contributions to 501(c)(4) Groups (May 19, 2011)
- Kristan: Is the Gift Tax Law on the Side of 501(c)(4) Donors? (May 19, 2011)
- Gift Tax Seen for Wealthy Donors as IRS Probes Campaign Contributions (May 25, 2011)
- Barone, Froomkin on the IRS's Use of the Gift Tax Against § 501(c)(4) Groups (May 27, 2011)
- IRS Responds to GOP Questions on Application of Gift Tax to 501(c)(4) Groups (June 4, 2011)
- GOP Demands Answers From IRS on Gift Tax Probe of 501(c)(4) Groups (June 15, 2011)