[EL] Constitutionality of applying gift tax to c4 constributions

[Scarberry, Mark]

But of course if I hire an advertising company to put out political ads for me, my payment to the company is not a gift to the company (thus no gift tax), and it is not taxable income to the company except to the extent the payment exceeds the company's costs of creating and distributing the ads. (That is true even if the advertising company is just an individual human being doing business as a sole proprietorship; the issue here is thus not one of (c)(4)s seeking to be treated as persons but complaining about being taxed as if they were natural persons.) To the extent that (c)(4)s spend their receipts on the costs of accomplishing the purposes of their supporters, it makes sense that the (c)(4)s are not taxed on the contributions they receive. Otherwise I am tax-disadvantaged by pooling my money with others' money to accomplish my communicative, First Amendment-protected, purposes. Such a result would benefit those who are rich enough to be able to finance campaign speech on their own, without having to pool their money with like-minded others. 

Mark
 
Mark S. Scarberry
Pepperdine Univ. School of Law
Malibu, CA 90263
(310)506-4667

-----Original Message-----
From: law-election-bounces at department-lists.uci.edu [mailto:law-election-bounces at department-lists.uci.edu] On Behalf Of Paul Lehto
Sent: Friday, May 13, 2011 9:21 AM
To: law-election; Donald Tobin
Subject: Re: [EL] Constitutionality of applying gift tax to c4 constributions

On 5/11/11, DONALD TOBIN <tobin.46 at osu.edu> wrote:
> In addition, I find it somewhat ironic that (c)(4)s and other corporations
> want the benefits of person hood, but now complain when they are being
> treated as an entity or person for tax purposes.

If a natural person (not a c4 or corporation) receives gifts or
donations that are made with the intent of supporting the present and
future continued political activism of that natural person these gifts
or donations enhance First Amendment political speech like supporting
a political ad campaign does.  Nevertheless, these donations are
treated as taxable INCOME by the IRS, not as gifts potentially subject
to the gift tax, mainly because of the intent to support ongoing work or
effort.  I believe this correct, but if a tax expert wants to chime in....

If corporations and persons are to be equal at this level, the issue
is not just gift tax (with its large lifetime exemptions) payable by
donors, but income tax payable by the corporation or "person"
receiving the donation - if the donation comes with the expectation
that it will be used to further the political work or cause.

On the other hand, a true no-strings-attached gift to a political
activist is just that - a gift.  Nevertheless, for the donor, gift tax
would be triggered at the appropriate threshold.


-- 
Paul R Lehto, J.D.
P.O. Box 1
Ishpeming, MI  49849
lehto.paul at gmail.com
906-204-4026 (cell)
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