Beginning in 2010, the Internal Revenue Service (IRS) systematically targeted taxpayers based on their political beliefs. Unaccountable, unelected bureaucrats at the IRS deliberately slowed and denied applications for tax-exempt status because the applicants did not share their politics. Although it’s deeply concerning that unelected, unaccountable bureaucrats at the IRS were using the tax code to restrict free speech, what’s more unfathomable is that Congress has done very little to date to protect individuals from future IRS targeting.
Congress should act to protect citizens of all political persuasions from similar politically-motivated targeting in the future. Thankfully the House Ways and Means Committee is currently working on legislation that would help. The bill prohibits the IRS from applying the federal gift tax to contributions to tax-exempt organizations.
The original intent of the federal gift tax was to stop taxpayers from sidestepping the federal death tax—i.e., transferring gifts of money while an aging taxpayer is still alive instead of paying a 40 percent tax on the entire estate after death. Congress did not enact the gift tax to apply to contributions made to tax-exempt organizations.
IRS guidance on gift taxes has been far more confusing than clarifying. In 1982, the IRS issued administrative guidance that said the gift tax could be applied to contributions to tax-exempt organizations. This directly conflicted with the original purpose of the gift tax that Congress established; it also defied a long history of court decisions that struck down applying gift taxes to contributions. Following this 1982 guidance, the IRS took no enforcement action for nearly 30 years – until 2011, when it began auditing taxpayers who had contributed to certain non-profit organizations.
Selectively applying the gift tax is an affront to First Amendment free speech protections. It violates one of the bedrock principles of our nation’s founding. People and organizations should not be silenced because of their political beliefs—certainly not by applying the U.S. tax code in an inconsistent way. Combined with this nebulous IRS guidance, unbridled discretion serves to limit political speech by silencing groups before they are able to form.
Congress has an obligation protect taxpayers from similar politically-motivated targeting in the future, and legislation to do just that is taking shape. Sponsored by Rep. Peter Roskam from Illinois, the Fair Treatment for All Donations Act (H.R. 1104) would clarify in statute that the IRS cannot apply the gift tax to contributions to non-profit organizations over $14,000.
Americans for Prosperity endorsed this important legislation earlier this month, and it’s heartening that it has begun moving quickly through Congress, thanks to the leadership of Roskam and House Ways and Means Chairman Paul Ryan. It’s important that Congress defend our fundamental right to free speech from unaccountable bureaucrats. H.R 1104 will do just that. It’s time to make sure nobody is unfairly targeted by the government because of their beliefs or contributions.