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