Is The IRS That Hard Up For Cash: Enforcing Gift Tax Laws

By Kyle Young on May 21, 2011, 10:08 am

The 501(c)(4) groups are known as social welfare organizations and have been used in recent elections by political advocacy groups, especially those supporting Republican causes. The IRS hasn’t levied the gift tax, currently with a top rate of 35 percent, on the groups or their donors in recent years. Taxing the organizations, the lawmakers wrote, “runs an unacceptable risk of chilling political speech.” IRS spokeswoman Michelle Eldridge said today that the agency is “reviewing” the letter.

Examinations

“The examinations were started by employees of the Estate and Gift Tax Unit at the IRS as part of their increased efforts in the area of non-filing of gift and estate tax returns,” she said in the May 13 statement. The Republican senators responded in the letter that they found the IRS explanation insufficient. “We would expect that decisions regarding particular enforcement actions would be made by career civil servants,” they wrote. “The more pressing question, not answered to date, is whether political appointees inside or outside the IRS were involved in any way in the decision to prioritize this category of cases.”

Politically Motivated

The IRS has not historically enforced gift taxes on these donations and its decision to do so now may be politically motivated, charged the Republican senators. “President Obama and his White House staff have made it clear that they view these organizations with deep hostility,” the senators wrote. “Retroactive enforcement of the gift tax in this highly politicized environment raises legitimate concerns and demands further explanation.” The IRS previously stated that the examinations were started by the Estate and Gift Tax unit at the IRS “as part of their increased efforts in the area of nonfiling of gift and estate tax returns.”

 

Civil Servants

“We would expect that decisions regarding particular enforcement actions would be made by career civil servants,” wrote the senators, who also sounded concerned about the possible retroactive enforcement of the gift tax. “The more pressing question, not answered to date, is whether political appointees inside or outside the IRS were involved in any way in the decision to prioritize this category of cases.”