Friday, November 26, 2010
Ellen P. Aprill, Professor of Law and and John E. Anderson Chair in Tax Law at Loyola Law School, Los Angeles, has posted Section 501(c)(4) Organizations, the Gift Tax, and Election Law Disclosure on SSRN. Here is a copy of the abstract:
Recent discussions of whether gifts to section 501(c)(4) organizations that engage in candidate-related activity are subject to the federal gift tax have failed to make clear an important distinction. This important distinction is whether the contributor is making the gift to the organization as a whole or making the gift for its candidate-related activities and, in particular, for its candidate-related advertisements. The distinction can matter not only for gift tax liability, but also for disclosure obligations under campaign finance laws.
Contributors of large sums close to an election are caught between the proverbially rock and hard place: the more that they position themselves to avoid gift tax liability, the more likely that they may become obliged to disclose their contributions under the campaign finance laws, and vice versa. As this short piece explains, if donors take the position that their gifts are for particular candidate-related activities rather than to the organization in support of its activities generally, they have a good argument that the gift tax does not apply, but a weaker argument for avoiding disclosure obligations under campaign finance laws. It is possible to have the best of both worlds, however, and a determination from the FEC this past spring makes it clear how best to achieve that outcome even for contributions used for mass media advertising close to an election.