Questions Surround Gift-Tax and Donations to Section 501(c)(4) Groups

Gift taxes apply to contributions to groups listed under Section 501(c)(4) of the tax code if the contribution exceeds $13,000. Further, donors to these advocacy groups cannot take a deduction for their contributions.

In July, the IRS announced it was, for the time being, forgoing any plans to enforce the gift-tax rule concerning donations to Section 501(c)(4) groups. However, as I previously blogged, five donors to Section 501(c)(4) groups received letters from the IRS in July stating that the agency was auditing each of the donors.

Marcus S. Owens, a Washington attorney and former head of the tax-exempt division of the IRS, recently sent the IRS a letter asking the agency to clarify as to whether it would enforce the gift tax on Section 501(c)(4) group donations in the future. Owens claims he fears the IRS is succumbing to pressure from Republican lawmakers who oppose the gift-tax.

An IRS spokeswoman declined to make a statement regarding Owens’ letter other than to reference the IRS statement issued in July.

See Lisa Chiu, IRS Faces New Questions About Gift-Tax Stance, Philanthropy, Aug. 10, 2011.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this article to my attention.