Often parents if they are able, give money to their children. Anyone can give up to $14,000 to another person annually without triggering the “gift tax”. If money is subject to gift tax, something like 40% of the eligible amount will need to be paid to the IRS by the giver. The gift tax is related to the estate tax; both are designed to target large accumulations of family wealth.
Not covered by the gift tax are 501c (3) charities. (The number refers to a section of the tax code). One can give as much as one wishes to the Red Cross or HopeSchool without incurring the gift tax. On the contrary, when you make a donation to one of these organizations, you may claim a tax deduction.
There are no specific gift tax rules about 501c (4), (5), and (6) organizations. The (4), (5), and (6) sound high minded in the code. They are stated as civic leagues, social welfare, chamber of commerce, labor and the like. In this category is Citizens United, the conservative group that makes documentaries and advertisements that often show public figures in a negative light. 501 c (4) may be actively involved in lobbying. After the Supreme Court decision, we know that they may accept donations without limit. They are also able to shield their donors’ identities.
In April of 2015, the House of Representatives quietly passed legislation to exempt contributions to these organizations from gift tax and sent it on to the senate. There is apparently support for this type of legislation from both sides of the aisle. Naturally, businesses, unions, the Koch brothers and other big contributors would like to see the issue clarified as not triggering the gift tax. For its part, the IRS has stated its position as not wanting to spend resources challenging donors on this issue. We recall the “egg in the face” that the IRS suffered from targeting tax exemptions of Tea Party groups.
My feeling is that it is a shame that the Supreme Court struck down limits on political donations. Maybe applying the gift tax in these instances could help to rebalance the scales again?
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