Gazillions in Gifts

The lead article in today’s New York Times, “IRS Sets Sights on Donors’ Gifts That Push Policy,” represents a welcome attempt by the agency to limit the influence of money in politics by enforcing regulations governing contributions to 501(c)(4) organizations. According to the law, the focus of these groups cannot be primarily political, and there are also limitations on contributors for amounts exceeding $13,000 per year, albeit with a lifetime exemption of up to $5 million.

Many of the larger contributors such as David Koch and George Soros, to name the two most prominent benefactors, a Republican and Democrat respectively, have already exceeded the lifetime exemption, and the new decision by the IRS to send letters regarding non-filing of gift tax forms is viewed as possibly creating a chilling effect on political donations as the 2012 election cycle begins.

The prominent Crossroads GPS, set up by Carl Rove, is a 501(c)(4) organization, and the recent decision by the Supreme Court in Citizens United, allowing unlimited gifts by corporations, was viewed as a potential boon to his organization. With the recent decision by the IRS, some groups may now think twice before contributing.

The gift tax, when it kicks in, is fairly substantial at a 35 percent rate, so once you hit that upper limit of five mil, like the big guys have a long time ago, there is a disincentive to give more, and that’s probably a good thing.