Political speech funneled through 501(c)(4) organizations and funded by anonymous contributions is not just legal: It’s rampant. Could applying the gift tax to 501(c)(4) contributions resolve a legal grey area while curbing this anonymous political speech? Legally, expanding the gift tax would appear to be a legitimate option. It would be consistent with prior tax expansions and it is not abnormal for tax incentives to influence taxpayer behavior. The problem is not whether Congress could expand the tax, but whether it should. Applying the gift tax to 501(c)(4) contributions may very well curtail anonymous spending by c4s, but it would also hurt legitimate c4s and would not be likely to reduce the scale of anonymous contributions. Instead of using the gift tax as a blunt instrument that is unlikely to fix the problem, Congress should instead focus on mandating disclosure for any organization that engages in political speech.
Tyler J. Kassner,
Bringing Dark Money Into the Light: 501(c)(4) Organizations, Gift Tax, and Disclosure,
10 Hastings Bus L.J. 471
Available at: https://repository.uchastings.edu/hastings_business_law_journal/vol10/iss2/5