A key House Republican will introduce a bill Thursday to ban the IRS from taxing gifts to nonprofits, trying to make sure the tax agency isn’t able to selectively target conservative organizations by singling them out for scrutiny.
Rep. Peter Roskam, Illinois Republican and chairman of the Ways and Means oversight subcommittee, said the bill will make sure that when someone gives large donations to nonprofit organizations, nobody will have to pay a gift tax on the transaction, ensuring that all of the money goes to the work of the organization.
The IRS several years ago, at the height of its targeting of tea party organizations for special scrutiny, sent letters to five high-dollar donors telling them their contributions could be taxed under an agency interpretation of the law that gifts above a certain dollar amount are subject to the tax.
The New York Times reported at the time that while the five donors weren’t named, it could have had an effect on the conservative Koch brothers or liberal backer George Soros, who each give tens of millions of dollars to their favored organizations.
After an outcry, the agency backed off and said it wouldn’t pursue the tax, but Mr. Roskam says the law should be changed to make sure the agency can’t reverse itself.
“Americans who donate to tax-exempt organizations should always be treated fairly and equally by the IRS — an agency with an infamous track record of targeting individuals for their religious and political beliefs,” the congressman said.
The 2011 letters came at a time when the IRS has admitted it was also giving improper scrutiny to conservative nonprofit organizations. The tax agency asked intrusive questions and held up dozens of applications, some of which waited years for final approval, for no apparent reason.
The agency has blamed overzealous inspectors in a regional office, but the groups blame political leaders in Washington.
Most of those groups were formed as social welfare organizations, also known as 501(c)(4) organizations because of the section of tax code that governs them. Those are the same groups whose donations the IRS said it would scrutinize, along with 501(c)(5) and 501(c)(6) groups.
Gifts above $14,000 are subject to taxes under the law, but Mr. Roskam said those taxes were never meant to be applied to gifts made to nonprofits.
In addition to the gift tax bill, Mr. Roskam on Wednesday announced two bills designed to codify a taxpayer’s bill of rights into law. The IRS last year announced it was imposing a similar set of rules on itself, but Mr. Roskam wants it to be written into law so the agency has no discretion.
One of the bills would prohibit the IRS from asking questions about taxpayers’ political or religious leanings. The agency probed question along those lines in its scrutiny of tea party groups.
Mr. Roskam also said reports such as the one released earlier this month showing the tax agency knowingly rehired tax cheats “erode public trust.”