IRS Targeting Soros, Conservatives for Political Contributions

Thursday, 12 May 2011 11:57 PM

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Invoking a provision of tax law that has rarely been enforced, the Internal Revenue Service is moving on big political contributors who could owe millions of dollars in contributions to nonprofit advocacy groups playing an increasing role in American politics, The New York Times reports.

Among the names listed in the Times article was liberal billionaire financier George Soros and the Koch brothers, who are well-known contributors to conservative causes. The IRS told the Times it had sent letters to five donors, who were not identified, informing them that their contributions may be subject to gift taxes depending on whether the donations exceeded limits under the tax laws.

Advocacy groups are now drawing more scrutiny, from President Obama as well as others, as they have proliferated and funneled vast sums of money in support of campaigns and causes, without having to publicly disclose their donors, the Times reports.

Other conservative groups could be targeted – groups like Crossroads GPS, which has ties to the Republican strategist Karl Rove, and Americans for Prosperity, backed by David Koch and his brother Charles.

Spokesmen for the Koch brothers and for Soros would not comment to the Times as to whether they had paid gift taxes on these types of donations, or whether they had received letters from the I.R.S.

The timing of the agency’s moves, as the 2012 election cycle gets under way, is prompting some tax law and campaign finance experts to question whether the I.R.S. could be sending a signal in an effort to curtail big donations, the Times reported.

A spokeswoman for the I.R.S., said that the inquiries were initiated by agency employees, not White House or other Obama administration officials, “as part of their increased efforts in the area of nonfiling of gift and estate tax returns.”

The letters informed donors that investigations had been opened to determine why a gift tax form had not been filed, and requested that donors submit records of all donations in the year 2008, according to a redacted copy obtained by The New York Times.

The White House would not comment. Some members of Congress have been asking the I.R.S. to investigate the tax-exempt status of these groups, too, although lawmakers have also cautioned that since the Nixon years, the agency has been strictly prohibited from what could be considered politically motivated inquiries.

Many organizations being scrutinized were established as nonprofit corporations under a section of the tax law, 501(c)(4), and the rules governing them say their primary purpose cannot be political.

In general, individuals incur gift taxes of 35 percent on any amount exceeding $13,000 in a year, with a limit for couples of $26,000. A lifetime exemption covers $5 million in gifts — to be reduced to $1 million in 2013 — but experts say many wealthy donors are likely to have used that in their estate plans, according to the Times.

“Congress specifically exempted donors to 527 organizations from the gift tax in 2000, but it didn’t exempt contributions to (c)(4) groups because there wasn’t an issue at the time,” Alan P. Dye, a lawyer who represents a number of conservative advocacy groups, told the Times.

Now that the Citizens United case permits big donors like corporations and unions to spend money in elections, Dye added, “I think it’s going to be really interesting to see how this plays out in Congress or the courts.”



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