[EL] "I.R.S. Begins Enforcing Rule on Gifts to Political Nonprofits"

[Ellen Aprill]

Contributions to 501(c)(4)’s are not deductible.  They are not going to be 162 expenses if given directly to a c-4.  

 

The audit you describe seems a wrong conclusion to me as to the lower beer taxes – it seems to me lobbying for which no deduction is allowed under 162(e).  I don’t know what you mean by an unpublished opinion by the IRS – would you be referring to a private letter ruling, the term we use in tax?

 

   Ellen 

 

 

Ellen P. Aprill

John E. Anderson Professor of Tax Law

Loyola Law School

919 Albany Street

Los Angeles, California 90015

Telephone: 213-736-1157

Fax: 213-380-3769

Ellen.Aprill at lls.edu

http://www.lls.edu/academics/faculty/aprill.html 

 

 

 

 

 



 

From: law-election-bounces at department-lists.uci.edu [mailto:law-election-bounces at department-lists.uci.edu] On Behalf Of James Lacy
Sent: Friday, May 13, 2011 10:51 AM
To: Rick Hasen
Cc: <law-election at uci.edu>
Subject: Re: [EL] "I.R.S. Begins Enforcing Rule on Gifts to Political Nonprofits"

 

Notions that this will slow down spending of large corporations or even some unions are overblown.

 

For example, a large corporation that gives to a 501(c)(4) that expresses policy views helpful to their business may actually deduct the non-publicly disclosed contribution on their own income tax forms consistent with IRC Section 162 as a "business deduction".  To the extent the c4 engages in candidate advocacy or explicit lobbying under the IRS definition, the contribution/dues are not deductible.  But they are not taxable.

 

For example, a major national brewer contributed heavily to a nonprofit that advocated in general lower beer taxes, as well as anti-drunk driving advocacy.  The IRS opened an audit to challenge the deductibility, claiming the contributions were self-serving and the organization was not independent.  When the organization proved it was independent, in an unpublished opinion, the IRS allowed the deductions and closed the audit.

 

The Wisconsin Right to Life decision supports a scenario where a large corporation can channel significant funds into a 501(c)(4) that shares it's business viewpoint and uses general funds to criticize the general policy positions and performance in office of an officeholder, and in this scenario the corporation will not have to publicly disclose the contributions, will not have to pay gift taxes, and will be able to deduct it's contributions from income taxes under Section 162.

 

Therefore, this recent IRS action only potentially affects INDIVIDUAL gifts to nonprofits, where Section 162 is inapplicable.

 

All the Koch brothers have to do now is shift their contributions from personal contributions to business contributions, where the organization shares their business outlook and a business deduction expense rational can be articulated.  Then there will be no gift tax.  I think that would be more difficult for Soros, as the business reason to support anti-global warming or save whales seems less credulous to me.

 

James V. Lacy

Confidentiality applies

 

Sent from my iPad


On May 12, 2011, at 2:02 PM, Rick Hasen <rhasen at law.uci.edu> wrote:


"I.R.S. Begins Enforcing Rule on Gifts to Political Nonprofit


The NY Times offers this important report.

Posted by Rick Hasen at 02:00 PM 

-- 
Rick Hasen
Visiting Professor
UC Irvine School of Law
401 E. Peltason Dr., Suite 1000
Irvine, CA 92697-8000
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rhasen at law.uci.edu
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William H. Hannon Distinguished Professor of Law
Loyola Law School
http://electionlawblog.org

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