IRS Suspends Gift Tax Examinations

WASHINGTON -- The Internal Revenue Service ( IRS ) said Thursday it will suspend its examinations of potential gift-tax violations while it reviews its policy.

The tax agency said in a statement that it would not pursue open examinations of large contributions made by donors to 501(c)(4) organizations, which are nonprofit "social welfare" groups, while it reviews the need for additional guidance or legislation on the politically charged topic.

The IRS had opened investigations into five donors who didn't pay the 35% gift tax when making their donations. Republicans have questioned whether the recent interest in gift taxes, which historically haven't been enforced, came as a result of political pressure.

In the last few years, 501(c)(4) groups appear to have benefited from a flood of large private donations, as rules surrounding them allow donors to remain anonymous. Democrats unsuccessfully attempted to change the rules last year.

Last month, Ways and Means Committee Chairman Dave Camp (R., Mich.) asked IRS Commissioner Douglas Shulman to provide detailed information as to why the agency opened its investigations. Six Republican members of the Senate Finance Committee, which oversees the tax agency, previously sent a letter to the IRS asking similar questions.

The IRS has said that the reviews weren't influenced by political pressure.

On Thursday, Camp said he was pleased by the suspension, but said he would continue his query.

"I remain troubled that the IRS has failed to explain what prompted these audits in the first place," Camp said in a statement. "Given the lack of transparency, I will continue my investigation until the complete story behind the actions of the IRS has been told.

The IRS did not rule out the possibility of enforcing the gift tax in the future, but said taxpayers would be notified of any decisions.

"As we consider this issue, it is possible that Congress may choose to clearly articulate through legislation the applicability of the gift tax to contributions to 501(c)(4) organizations," the agency said in its statement.

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