Subject: Re: [EL] Electionlawblog news and commentary 5/11/11
From: Ellen Aprill
Date: 5/11/2011, 11:22 AM
To: Daniel Abramson
CC: Election Law <election-law@mailman.lls.edu>
People differ on the issue. I personally do not find the case persuasive authority now that we have section 527 and a gift tax exemption for gifts to section 527 organizations. The legislative history of the gift tax exemption for gifts to 527 organizations echoes the language you quote from Carson (see attached memo).
In part, however, the answer depends on whether the gift is to the c-4 as an entity or to its beneficiaries. In the case of a corporation, the tax regs specify that a gift to a corporatoin is treated as a gift to the shareholders in proportion to their respective interests in the corporation, reg. sec.25.2511-1(h)(1), but nonprofit, tax exempt organizations do not have shareholders by definition and I do not find the corporation reg analogous, but I know that others do.
It seems inconsistent not to have a gift tax exemption for gifts to c-4's, when both c-3's and 527's have such an exemption, but Congress has not seen fit to provide such as exemption.
Rick earlier blogged my short memo on these issues, but I attach a slightly revised version.
Ellen
----- Original Message ----- From: Daniel Abramson <danielkabramson@gmail.com> Date: Wednesday, May 11, 2011 11:09 am Subject: Re: [EL] Electionlawblog news and commentary 5/11/11 To: Ellen Aprill <Ellen.Aprill@lls.edu> Cc: Beth Kingsley <bkingsley@harmoncurran.com>, Election Law <election-law@mailman.lls.edu>
> Perhaps someone with more knowledge than I could weigh in on whether > the logic of Carson v. Commissioner, 71 T.C. 252 (1978) would > apply in > this case. It appears to me that the Court’s analysis, while > notionally limited to a contribution to a political candidate, would > be equally applicable to a donation to a social welfare organization > with a specific public policy goal (including supporting or > opposing a > ballot measure). > > In Carson (to which the Service has acquiesced in result only), the > IRS attempted to impose the gift tax on political contributions that > were made before Congress adopted the current exemption for donations > to 527 organizations. The Court held that these > contributions were > not subject to the gift tax. The Court stated that: > > "These facts do not suggest a gift to the candidate, but the use of > petitioner's resources to promote the social framework petitioner > considered most auspicious to the attainment of his objectives in > life. Petitioner focused on the social structure most > conducive to > his economic aspirations; others may focus on a social structure > advancing their own notions of social justice, or conditions > they deem > essential for world peace or public order. In either case, > in the > particular circumstances before us, the individual candidate may > generally be viewed, for purposes of the gift tax, as the means > to the > ends of the contributor." > > In a concurring opinion, J. Hall said, "In most cases, including this > one, political contributions proceed from the donor's desire to see > his own views regarding political policy given effect. I > do not > believe any gift is usually involved for gift tax purposes because > there is rarely, if ever, a desire to benefit the donee in his > personal capacity, but rather only a desire to further the > donor's own > political objectives through the candidate. Such an expenditure, given > solely to be used in facilitating the propagation of views of > political policy which resemble the donor's, is no more a gift > to the > recipient than is an expenditure for a newspaper advertisement a gift > to the paper. In either case, the recipient is primarily > viewed as a > means for propagating the taxpayer's own views. I would > not lay down > as a matter of law that a political contribution may never be a gift. > The question should be left open, for example, whether a father's > substantial contribution to his son's candidacy might be a gift for > gift tax purposes under certain circumstances. Here, > however, no such > facts are involved and no gift tax was due." > > > Daniel > > > > > On Wed, May 11, 2011 at 8:14 AM, Ellen Aprill > <Ellen.Aprill@lls.edu> wrote: > > > > The constitutional arguments seem weak to me -- for income tax > purposes we require that contributions for campaign intervention > (and in most cases for lobbying) come from after-tax income; we > do not say that the constitution requires that these > contributions be deductible so that no tax is imposed. We tax > newspapers along with other corporations (if they have taxable > income which they may not these days). Not all 501(c0(4) > organizations are involved in campaign intervention. Those > contributors who want protection from the gift tax have the > option of contributing to a PAC or other organization subject to > section 527, an alternative channel free of this transfer tax - > and the Supreme Court upheld the alternative channel approach in > Regan v. Taxation with Representation. > > > > I'd love to hear others on why taxing c-4's is > unconstitutional. I have read Rhomberg article and did not find > it convincing. It did not rely on tax cases. > > > > Ellen > > > > Ellen Aprill > > John E. Anderson Professor of Tax Law > > Loyola Law School > > > > ----- Original Message ----- > > From: Beth Kingsley <bkingsley@harmoncurran.com> > > Date: Wednesday, May 11, 2011 5:31 am > > Subject: Re: [EL] Electionlawblog news and commentary 5/11/11 > > To: Lloyd Mayer <lmayer@nd.edu>, Election Law <election- > law@mailman.lls.edu>> > > > > > It is also worth noting that this initiative seems to be > coming out of the Estate and Gift Tax section of the IRS, not > from the Exempt Organizations people. I suspect they have no > idea what they may be stepping into, and how hot an issue this > may be, as estate and gift tax is not usually mixed up with > politics. Just guessing, but I don’t imagine they have even > considered there could be constitutional implications to their > attempt to collect this tax. > > > > > > > > > It will be fascinating to see how this develops. > > > > > > > > > Beth > > > > > > > > > > > > > Elizabeth Kingsley > > > Harmon, Curran, Spielberg & Eisenberg, LLP > > > 1726 M St., NW > > > Suite 600 > > > Washington, DC 20036 > > > 202-328-3500 > > > > > > > > > > > > > From: election-law-bounces@mailman.lls.edu [mailto:election- > law-bounces@mailman.lls.edu] On Behalf Of Lloyd Mayer > > > Sent: Wednesday, May 11, 2011 7:16 AM > > > To: Election Law > > > Subject: Re: [EL] Electionlawblog news and commentary 5/11/11 > > > > > > > > > This issue has been around for decades, but as related in > the Ben Smith column and also discussed at last week’s ABA Tax > Section meeting the IRS appears to have finally decided to > pursue it through audits of a number of large donors to section > 501(c)(4) organizations. Since those donors are reported to the > IRS on the non-public Schedule B to the Form 990 filed by > section 501(c)(4) organizations, the donors are not hard for the > IRS to find. The most significant effect for 2012 will probably > be a chilling one. There are numerous grounds for challenging > application of the gift tax in this context (see two articles by > Barbara Rhomberg, one relating to constitutional issues and one > relating to other legal issues). But many of these donors may > not want to risk an IRS audit, much less public litigation with > the IRS that would reveal not only their identities but the > extent of their gifts. Some lawyers may also find themselves in > trouble, because it is easier to challenge application of the > gift tax depending on how the “donation” is structured. For > example, if it is structured to more closely resemble a payment > for services than a gift, the IRS would find it hard to apply > the gift tax. > > > > > > > > > Lloyd Hitoshi Mayer > > > > > Associate Professor > > > > > Notre Dame Law School > > > > > P.O. Box 780 > > > > > Notre Dame, IN 46556-0780 > > > > > Phone: (574) 631-8057 > > > > > Fax: (574) 631-4197 > > > > > Web Bio: http://law.nd.edu/faculty/lloyd-hitoshi-mayer > > > > > SSRN Author Page: > http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=504775> > > > > > > > > > > > > > > > From: election-law-bounces@mailman.lls.edu [mailto:election- > law-bounces@mailman.lls.edu] On Behalf Of Rick Hasen > > > Sent: Wednesday, May 11, 2011 12:55 AM > > > To: Election Law > > > Subject: [EL] Electionlawblog news and commentary 5/11/11 > > > > > > > > > May 10, 2011 > > > > "IRS gift tax move could hit new anonymous groups" > > > > > Ben Smith notes a very interesting development with > potentially important implications for 2012. What say you, > tax/election law people? > > > > > Posted by Rick Hasen at 09:52 PM > > > > > > > > > _______________________________________________ > > > election-law mailing list > > > election-law@mailman.lls.edu > > > http://mailman.lls.edu/mailman/listinfo/election-law > > > > 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@lls.edu > > http://www.lls.edu/academics/faculty/aprill.html > > > > > > _______________________________________________ > > election-law mailing list > > election-law@mailman.lls.edu > > http://mailman.lls.edu/mailman/listinfo/election-law > >
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@lls.edu http://www.lls.edu/academics/faculty/aprill.html