IRS could complicate anonymous donations

The Internal Revenue Service is paying more attention to enforcing gift taxes on nonprofits classified as 501(c)4's, Ben Smith reports for Politico. The move could potentially complicate the use of groups under this classification at a time when they've emerged as a major vehicle for raising anonymous campaign funds.

The category includes organizations self-defined as social welfare groups. Shadow 501(c)4 organizations, such as Crossroads GPS, choose to label themselves as nonprofits, which are permitted to raise unlimited anonymous donations, rather than as political fundraising groups, which have to disclose the names of donors.

But now it appears that since contributions to 501(c)4 organizations are classified as gifts, individuals could be subject to gift taxes.

That could be tall order for some past and future donors--among other things, it might end up reducing a 501(c)4 supporter's lifetime tax exemption.

Republicans found much fundraising success in 2010 through Karl Rove's Crossroads GPS group and other declared not-for-profits. Democrats recently announced they plan to fight back with the introduction of their own 501(c)4 in the coming cycle--Priorities USA.

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