AP had an interesting story about dropping an investigation of whether donations to 501(c)(4) organizations were subject to gift taxes. You cannot read an AP story on line except by going through the Web site of a member newspaper, but search for "IRS drops probe of donors to nonprofit groups".
The unnamed 501(c)(4) organizations whose contributors were being probed were set up to make political expenditures in 2010 congressional races and did not disclose their contributors under McCain-Feingold and related legislation requiring disclosure from groups not subject to other campaign disclosure law. The undisclosed contributions in question were six and seven figures.
Is anyone familiar with IRS's theory? Are they possibly subject to gift tax because IRS has taken the position that political expenditures aren't the exempt function of a 501(c)(4) and that this isn't exempt function income? Or is it based on exceeding the gift tax threshold, regardless of what position IRS takes on the 501(c)(4) organization's exempt function?
I hope it's not the latter.