By Rick Manning
Recently, Rep. Peter Roskam (R-Ill.) introduced H.R. 1104, the Fair Treatment for All Donations Act, that will protect donations to 501(c)(4), (c)(5), and (c)(6) groups, regardless of their ideological perspective, from any executive action by the Internal Revenue Service (IRS) to apply the gift tax.
Applying the gift tax to these tax-exempt organizations is something that has simply never been done before, and yet the agency may be actively considering such an approach.
In July 2011, the IRS issued the following statement on numerous inquiries the agency was receiving about applying the gift tax to 501(c)(4)s:
“Recently, questions have arisen regarding the applicability of the gift tax to contributions to 501(c)(4) organizations. The Internal Revenue Service has little history to draw from in this area and the limited guidance we previously issued on this matter is almost thirty years old. While we review the need for additional guidance or legislation, we will not use resources to pursue examinations on this issue. Any future action we take will be prospective and after notice to the public. As we consider this issue, it is possible that Congress may choose to clearly articulate through legislation the applicability of the gift tax to contributions to 501(c)(4) organizations.”
Yet, the only questions that have arisen resulted from the agency’s dubious gift tax audits on individuals making donations to 501(c)(4) organizations, starting in 2011 at the same time the IRS was targeting Tea Party and other 501(c)(4) groups.
It is the Congress’ duty to ensure that the IRS can never again selectively apply the gift tax to these tax-exempt entities. The U.S. government is not a weapon to be used to take out political enemies. And yet, this Administration has proven time and again that is exactly how it views the use of executive power.
Here is an agency that once again sees it within its purview to change the law without any role for the legislative branch, and promises to “consider this issue” whether Congress acts or not. It doesn’t dismiss executive action to change of the law out of hand by suggesting that only Congress could apply the gift tax to 501(c)(4) groups.
It leaves the door open, and Congress must swiftly shut it by enacting Rep. Roskam’s important legislation.
Rick Manning is the President of Americans for Limited Government.
