Someone may already have raised this point, but is there a threat of disparate enforcement? Even if it does not violate the First Amendment to place a tax on the pooling of resources for purposes of engaging in speech, it isn’t at all clear that the IRS will require all donors to (c)(4)s to pay the tax. There is a potential for selective enforcement against those who oppose whoever is in power, even if the professionalism of the current workforce at the IRS would make such targeting unlikely for now. There also is the more interesting question whether the enforcement of the requirement against some, but not all, donors violates the First Amendment (or violates equal protection principles by not treating all who are exercising a fundamental right equally). Perhaps the answer to that question is simple and clear (so that it is not in fact a very interesting question), but I thought it was worth raising. And then there is the question why the IRS is only now starting to enforce the tax when (c)(4)s have become vehicles for political speech. Does that suggest an intent to suppress speech rather than an intent to enforce the tax laws?

Mark S. Scarberry

Professor of Law

Pepperdine Univ. School of Law

Malibu, CA 90263

(310) 506-4667

>From a tax perspective, I don't think this is much of an issue.  The gift tax is a broad based tax on transfer of property not for value.  It is designed to run in conjunction with and/or as a backstop to the estate tax.  Congress has carved out very limited exceptions to the provision.  One is for 527s and one for (c)(3)s.  Congress has the power to carve out such an exception and could carve out a similar one for (c)(4)s.  The fact that it hasn't supports the Service's view that the gift tax is applicable on transfers to (c)(4)s.


We therefore have a broad based tax that applies to transfers that are made without money or money's worth.  To me the statute is clear, and if (c)(4)s want an exception, they should lobby (which they are allowed to do) for a change.


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.


To me, this is not a First Amendment issue, it is a taxing power issue, and Congress clearly has the power to apply a broad based gift tax that includes transfers to (c)(4) organizations. 


I am also not sure that (c)(4)s will have standing to challenge the provision.  (On quick glance I would guess not)  I am sure, however, that someone who doesn't mind being public about the issue can pay and sue for a refund.


Donald


Donald Tobin
Associate Dean for Faculty
  and Bazler Designated Professor in Business Law
Moritz College of law