From Paladin Partners Drummond Pike:
Today’s NYT article about IRS interest in pursuing gift taxes on contributions from individuals to “advocacy” 501 c/4 organizations, such as Americans for Prosperity or Crossroads GPS, both decidedly conservative, completes the ascent of corporate interests to dominance in our political system. Written by Stephanie Strom, normally the ambulance chaser of journalists focused on nonprofits, this article reports on the surprising news that the IRS is finally considering enforcing a tax it declared in 1982 to apply to contributions from individuals to 501 c/4 advocacy groups like the NRA, NARAL, and the Sierra Club, organizations whose “primary purpose” cannot be electoral, but rather legislative and policy. Non-primary purpose activities CAN support or oppose candidates but must remain below 49% of total expenditures; under recent rulings, this has permitted large anonymous contributions for what are essentially independent expenditure campaigns for or against candidates.
The end result: contributions to this category of advocacy organizations, that can be made anonymously, may now (after 29 years of silence from the IRS) be subject to a 35% gift tax. The work around, however, is pretty simple: give to a 527 organizations that can do elections work but contributions to which are not subject to tax by statute. The rub, of course, is that contributions to 527’s are reportable. No more silent manipulation of the process.