Presenter Information

Jill SharpFollow

Presentation Type

Poster

Abstract

The Internal Revenue Service recognizes numerous types of section 501(c) organizations. These include section 501(c)(3) charitable organizations, section 527 political organizations, and section 501(c)(4) social welfare organizations. Donors to charitable organizations are not taxed on their contributions and they are able to deduct their contributions on their income taxes. Donors to political organizations are also not taxed on their contributions although they see no benefit in deductions on their income taxes. Donors to social welfare organizations, however, don’t have clear tax implications on their contributions due to the lack of federal gift tax regulation by the IRS. While the IRS has specifically exempted donations to political and charity organizations from federal gift tax, whether donations to social welfare organizations are exempt remains ambiguous. To determine the impact of federal gift tax on donations, I hypothesize that when donations to social welfare organizations are subject to the federal gift tax, donors are less likely to contribute.

To examine how donors’ contributions to social welfare organizations are impacted by the inclusion or exclusion of federal gift tax, over one hundred subjects acting as donors have been surveyed, half of which were told their contribution would be subject to the gift tax and half of which were told their contribution would be excluded from it. Each survey contained definitions and explanations of federal gift tax and social welfare organizations as well as examples of social welfare organizations located in Montana. This paper further examines any impact on donations due to a match or mismatch between donor’s views and the legislation or cause supported by social welfare organizations named in the survey. All data was collected numerically and analyzed with t-statistic and regression analysis. My final data analysis will determine the correlation between donors willingness to contribute and the tax treatment of the contribution.

Category

Social Sciences

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Apr 11th, 11:00 AM Apr 11th, 12:00 PM

Donors to Social Welfare Organizations: Are they avoiding gift tax?

The Internal Revenue Service recognizes numerous types of section 501(c) organizations. These include section 501(c)(3) charitable organizations, section 527 political organizations, and section 501(c)(4) social welfare organizations. Donors to charitable organizations are not taxed on their contributions and they are able to deduct their contributions on their income taxes. Donors to political organizations are also not taxed on their contributions although they see no benefit in deductions on their income taxes. Donors to social welfare organizations, however, don’t have clear tax implications on their contributions due to the lack of federal gift tax regulation by the IRS. While the IRS has specifically exempted donations to political and charity organizations from federal gift tax, whether donations to social welfare organizations are exempt remains ambiguous. To determine the impact of federal gift tax on donations, I hypothesize that when donations to social welfare organizations are subject to the federal gift tax, donors are less likely to contribute.

To examine how donors’ contributions to social welfare organizations are impacted by the inclusion or exclusion of federal gift tax, over one hundred subjects acting as donors have been surveyed, half of which were told their contribution would be subject to the gift tax and half of which were told their contribution would be excluded from it. Each survey contained definitions and explanations of federal gift tax and social welfare organizations as well as examples of social welfare organizations located in Montana. This paper further examines any impact on donations due to a match or mismatch between donor’s views and the legislation or cause supported by social welfare organizations named in the survey. All data was collected numerically and analyzed with t-statistic and regression analysis. My final data analysis will determine the correlation between donors willingness to contribute and the tax treatment of the contribution.