"Reformers" Admit Using Fear of the IRS to Stifle Contributions to Nonprofits

We strongly support H. R. 1104, Rep. Peter Roskam's bill to prohibit the IRS from imposing gift tax on contributions to non-profit organizations.  As we explained in our letter of support to Rep. Roskam last month:

In 2011, donors to conservative groups were told that – despite decades of clear legal understanding and practice – they could be found liable for gift tax on their contributions.  While the IRS never did impose such a tax, simply sending the letters likely had a chilling effect on contributions to conservative groups.

Your legislation is needed to eliminate any risk that such targeting of donors could recur.

Last week the bill passed the House unanimously, boosted by liberal groups like the ACLU and Human Rights Campaign as well as a chorus of conservative groups.

Now, with strong Senate support making final passage likely, we see the first public statements of opposition.

In CQ (subscription required) Alan Ota quotes several self-styled campaign finance "reformers" openly touting fear of the IRS intimidating contributors to nonprofits and chilling their participation in the public policy process.

Meredith McGehee, policy director for the Campaign Legal Center, a speech-restricting advocacy group, said: "It strikes me as a wrong-headed move at the wrong moment," and Ota described her as "worried the measure would remove a potential deterrent — the fear of potential gift-tax liability — for mega-donors to 501(c)4 groups."

Ota also included an indirect quote from Craig Holman, a lobbyist for another speech-restricting group called Public Citizen, that "the fear of potential gift-tax liability served as a curb of sorts to some undisclosed donations."

These statements make clear that although the IRS never imposed taxes on contributions to non-profit groups, the mere threat of doing so was intended to sow fear and uncertainty and chill participation in the public policy process. As we warned in our letter to Rep. Roskam:

Taxing contributions to nonprofits would do nothing to advance the intended purpose of the gift tax — enforcing compliance with the federal estate tax — and would serve to dramatically diminish the ability of groups across the political spectrum to educate and mobilize citizens in the public policy process.

The Senate should act promptly to approve the unanimously-passed House bill, and the willingness of self-styled "reformers" to use the IRS as a tool of fear and intimidation to advance their goal of restricting political speech should not be forgotten.