Schadenfraude Alert

It looks like a lot of big anonymous donors to political advcocy groups are facing a tough choice, pay a 35% gift tax, or contest the rules in open court, where your anonymous donations to Karl Rove will become a matter of public record:

The Internal Revenue Service appears to have begun to enforce a tax on gifts to the non-profit organizations that were a key vehicle for anonymous politics in the last five years and had promised to play a large role in the presidential cycle, a move which could reshape the place of money in politics in 2012.

"It appears that the IRS Estate and Gift Tax team has also started paying attention to 501(c)(4) organizations," a Los Angeles tax lawyer who has followed the issue closely, Ofer Lion, wrote in a memo to clients today.

Gifts to other political organizations are not taxable under federal law, and lawyers informally say many donors do not typically pay the gift tax -- which may run as high as 35%, mirroring income tax rates -- for contributions to 501(c)4s.

The IRS focus would only apply to quite large donors: the first $13,000 annually are exempt. The rest of the contributions, however, reduce a donor's lifetime tax exemption, which stands currently at $5 million but stands to drop to $1 million in 2013, a fact which would mean a donor's heirs lose substantially more to estate taxes, including potentially a "clawback" of money that's already been given away back into the taxable estate.

………

"[C]ontributors wishing to remain anonymous may feel the need to pay sizable gift tax assessments rather than challenge the tax in open court, and on the public record," Lion wrote.

My heart bleeds borscht for the Koch suckers who now face Morton's Fork.