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Defying the Odds

Defying the Odds
New book about the 2016 election.

Thursday, May 26, 2011

American Crossroads: Regulatory and Legal Developments

The Washington Post reports:

Part of the 2002 McCain-Feingold campaign finance law banned lawmakers from raising contributions that aren’t regulated by federal laws — part of the curb on corporate “soft money” that was a hallmark of the legislation.

Two Democratic interest groups have asked the Federal Election Commission to weigh in on the idea, saying that the law does not appear to allow elected officials to raise money for their groups. But, they said, they’d like to do so if the FEC doesn’t explicitly say that it is illegal.

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The article also mentions the IRS letter about gift taxes, but notes that it might not be as significant as it seems.

For one thing, gifts from corporations are not affected by the tax. That excludes much of the political spending that was prompted last year by Citizens United and related cases.

There’s also no evidence that the contributions under review at the IRS are political in nature. The agency says that it has begun five audits but that they’re not part of a broader effort. There are thousands of social welfare groups in the United States, and the number active in political campaigns is small by comparison.

Further, it’s not even clear that the IRS could apply the gift tax to a political contribution. The last court case on the matter found that a political contribution is not the same as a gift, said Paul Caron, a tax professor at the University of Cincinnati College of Law.

“You can make the argument that when a businessman gives money to an organization like Karl Rove’s American Crossroads, he’s not giving a gift to Karl Rove the same way a parent is giving a gift to a child,” Caron said. “There’s not the donative intent to the contribution; it’s just a business person hoping to further their business interest through these entities.”

Even if the gifts were subject to the tax, there’s a $5 million lifetime exemption, which means only the wealthiest contributors would be subject to it.

The biggest impact of the IRS investigation is likely to be on the willingness of donors to open their wallets, given their fear of an audit from the tax agency.