March 20, 2018

March 19, 2018

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Gift Tax Certainty at Last? re: H.R. 1104

The U.S. House of Representatives this week passed a bill to provide gift tax certainty to individuals who make gifts to 501(c)(4) social welfare organizations, 501(c)(5) labor unions, and 501(c)(6) trade associations.  The bill, H.R. 1104 (the “Fair Treatment for All Gifts Act”), was approved with bipartisan support on a voice vote.  It now goes to the Senate for consideration.

H.R. 1104, if enacted by the U.S. Senate and not vetoed by the President, would amend the Internal Revenue Code to provide that gifts to social welfare organizations, labor unions, and trade associations would not be subject to the federal gift tax.  The bill effectively adopts, as law, the IRS’s long-standing practice (and formal position since 2011) that transfers to social welfare organizations are not subject to the federal gift tax.  The bill extends the same treatment to gifts to labor unions and trade associations.

In a related move, the House also passed a bill to repeal the federal estate tax (H.R. 1105, the “Death Tax Repeal Act”).  If enacted into law, the ability to make gift- and estate-tax free bequests to social welfare organizations, labor unions, and trade associations could open up new planning possibilities for donors.


© 2018 Covington & Burling LLP


About this Author

Kevin Shorthill, Attorney, Covington Law Firm

Kevin Shortill advises tax-exempt and not-for-profit organizations on a wide variety of tax and corporate matters, including grant-making, internet-related activities, public solicitation (including the use of raffles and auctions to raise funds), lobbying and legislative activities, the lobbying disallowance rules, utilizing for-profit subsidiaries, unrelated business income (UBIT), conducting activities abroad and sales and merchandising, in addition to corporate governance matters specific to tax-exempt entities, such as advice in connection with state laws seeking to “extend Sarbanes-...