IRS Releases Statement Explaining Recent Gift Tax Audits

Dave Camp, Committee Chairman of the House Ways and Means, asked the IRS to give an explanation as to how it decided to audit the returns of five taxpayers after the taxpayers contributed to a type of non-profit advocacy organization. The organization has increasingly been involved in political activity.

In his letter dated June 3, Camp told Douglas Shulman, an IRS Commissioner, that the agency’s lack of transparency regarding its auditing of gift tax was “deeply troubling.” The letter further states:

Not only does this threaten political speech, it casts doubt on the IRS’ credibility as an impartial enforcer of the nation’s tax law. The IRS’s ability to effectively enforce tax law and work with taxpayers to ensure compliance is not served by auditing unsuspecting taxpayers for violating tax laws the IRS has not acknowledged for decades.

On July 15, the IRS released a statement explaining that the inquiries were not attempts to scrutinize donations to 501(c)(4) organizations. Instead, the IRS stated that the audits were part of gift tax enforcement efforts. The IRS’s statement further stated:

The IRS is an apolitical and non-partisan agency. We are committed to fairly administering the nation’s tax laws. We fully intend to respond to the committee’s request for information and look forward to working with them on this issue.

Ways And Means Chairman Questions IRS On Gift Tax Audits, Private Wealth, Jun. 15, 2011.

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.