WSJ: IRS Mulled Gift Tax on Tax-Exempt Political Groups

The IRS contemplated placing a gift tax on large contributions to tax-exempt political organizations in 2011, recently surfaced emails have revealed, according to The Wall Street Journal.

The emails came to light during the GOP probe into the IRS crackdown on conservative groups, fueling Republican concerns that the agency tried to quash politically active tax-exempt organizations.

Republican Rep. Darrell Issa of California, the outgoing chairman of the House Oversight and Government Reform Committee, said the emails "demonstrate that the IRS sought to use the gift tax as one part of a larger effort" to curtail political speech.

The emails were included in a year-end report from Issa’s committee about the IRS targeting scandal that was expected to be released Tuesday, the Journal reported.

Rep. Elijah Cummings of Maryland, the top Democrat on the committee, alleged that Issa was cutting Democrats out of the investigation by releasing information without sharing it with the opposition party first.

"Republicans are intentionally bypassing the normal congressional vetting process designed to distinguish fact from fiction," he said.

The committee has been investigating reports that, starting in 2010, the IRS began placing conservative and tea party groups under extra scrutiny after they applied for tax-exempt status.

The IRS bid to impose a gift tax on major donors to tax-exempt organizations has concerned the GOP because conservatives have made widespread use of nonprofits, such as Crossroads GPS, to reach out to voters, the newspaper said.

Giving tax-exempt status to politically active nonprofit groups allows them to keep the identity of donors secret, and imposing a gift tax on the contributors would likely discourage them.

The top gift tax rate was 35 percent in 2011 and is now 40 percent, the Journal reported, while noting that such a gift tax would have "disproportionately hurt conservative activists."

Issa, who is concluding his time as chairman of the committee due to term limits, attacked the IRS in the 210-page report for what he said was its illegal use of power.

"Nearly five years after the IRS first began targeting conservative organizations for additional scrutiny due to their political beliefs, the agency has still not escaped the shadow of its misdeeds and abuse of power," the report said in conclusion.

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