Rev. Rul. 72-355

Advice has been requested regarding the circumstances under which political organizations will be recognized as separate donees for purposes of the gift tax exclusion allowable under section 2503(b) of the Internal Revenue Code of 1954 which, in general, provides that the first $3,000 of gifts made to a donee by a donor during the calendar year shall be excluded in determining the total amount of gifts made by a donor during such year.

Since the enactment of the present gift tax in 1932, it has been the position of the Internal Revenue Service that contributions to a political campaign are taxable transfers for purposes of the gift tax imposed by section 2501 of the Code. See Technical Information Release 1125, dated December 17, 1971, and Revenue Ruling 59-57, C.B. 1959-1, 626, which provides that for Federal gift tax purposes any individual who makes a contribution or gift in excess of $3,000 in any one calendar year to a political candidate or party must file a Federal Gift Tax Return on Form 709. The position of the Service has been explained as follows:

In determining the total amount of gifts made during any year by the donor, section 2503 provides an annual exclusion of the first $3,000 given to any donee. This means that a contribution to any person or organization, including a political organization, may be made each year in the amount of $3,000 or less without any requirement that the amount be reported for gift tax purposes. In determining the amount permitted as an exclusion in the case of a contribution made to a political organization, only one $3,000 exclusion is permitted, even though the personal campaigns of several individuals may be benefited by the contribution made to such organization.

(Testimony of Assistant Commissioner Justin Winkle, before the Subcommittee on Privileges and Elections of the Senate Committee on Rules and Administration, 84th Cong., 2d Sess. (1956).)

In United States v. Edith R. Stern, 436 F. 2d 1327 (5th Cir. 1971), the court held that amounts expended by a taxpayer in attempting to secure the election of various candidates to political office were not taxable gifts. In TIR 1125 the Service announced that it would not follow the decision in the Stern case except in those cases arising in the Fifth Circuit which are identical to the Stern case.

Political committees and organizations typically receive funds to advance a purpose or influence a cause (usually an election) and not for the personal use or benefit of a candidate or any other designated beneficiary. Thus, for income tax purposes, contributions to a political campaign are not taxable to the political candidate by or for whom they are collected if they are used for expenses of a political campaign or some similar purpose. However, any amount diverted from the channel of campaign activity and used by the political candidate for any personal purpose is income taxable to such candidate for the year in which the funds are so diverted. See Rev. Proc. 68-19, C.B. 1968-1, 810, and Rev. Rul. 71-449, C.B. 1971-2, 77. For gift tax purposes, political organizations, rather than the candidates they support, are generally considered the donees of political contributions, regardless of whether the legal form of the organization is a trust, a corporation or some other entity under state law. See section 25.2511-1(h)(1) of the Gift Tax Regulations. Political organizations must, however, be distinguished from private trusts which are essentially for the personal benefit of designated individuals. The beneficiary of such a trust, rather than the trust itself, is considered to be the donee of transfers to the trust. See Helvering v. Mary M. Hutchings, 312 U.S. 393 (1941), Ct. D. 1493, C.B. 1941-1, 438.

In general, political organizations will be recognized as separate donees for purposes of the annual gift tax exclusion. Where, however, political organizations have essentially the same officers and supported candidates and no substantial independent purpose, the organizations will be treated as one and gifts to them by an individual will be aggregated for purposes of section 2503(b) of the Code. For purposes of this paragraph, the officers or supported candidates will not be deemed to be essentially the same if at least one-third of the officers or candidates are different in each of the committees.

The principles of this ruling are illustrated by the following examples. In each example assume that D is the senatorial candidate in State M of the Republicrat Party, that E is the Republicrat candidate for governor of State M, that F is the Republicrat candidate for President, and that A is an individual.

Example 1. A makes a contribution of $3,000 to each of the following political committees: Citizens for the Election of D, Lawyers for D, and Republicrats for D. Each committee is a separate organization and has different officers. Under these circumstances, the committees will be recognized as separate donees and the contributions made to them will not be aggregated for purposes of section 2503(b) of the Code. Accordingly, no gift tax return is required with respect to these contributions.

Example 2. A contributes $3,000 to each of the following committees: Republicrats for D, Republicrats for D and E, and Republicrats for D and F. Each committee is a separate organization and has different officers. Under these circumstances, the committees will be recognized as separate donees and the contributions made to them will not be aggregated for purposes of section 2503(b) of the Code. Accordingly, no gift tax return is required with respect to these contributions.

Example 3. The facts are the same as in Example 2, except that the committees have the same officers. Since the committees do not support essentially the same candidates, they will be recognized as separate donees and the contributions made to them will not be aggregated for purposes of section 2503(b) of the Code. Accordingly, no gift tax return is required with respect to these contributions.

Example 4. A contributes $3,000 to the Republicrats for D and $3,000 to the Republicrat Lawyers for D. Each committee has a Chairman and a Treasurer. J serves as Chairman of both committees; K is Treasurer of one committee; and L is Treasurer of the other committee. Since the committees do not have essentially the same officers, contributions to the committees will not be aggregated for purposes of section 2503(b) of the Code. Accordingly, no gift tax return is required with respect to these contributions.

Example 5. G is a candidate for election as a delegate to the Republicrat National Convention from State M and is also a candidate for election to the State House of Representatives. A makes a contribution of $3,000 to the Committee To Elect G Delegate to the Republicrat National Convention from State M and a contribution of $3,000 to the Committee To Elect G to the State House of Representatives. Since these committees have a substantial independent purpose, they will be recognized as separate donees and the contributions will not be aggregated for purposes of section 2503(b) of the Code. Accordingly, no gift tax return is required with respect to these contributions.

Example 6. A contributes $3,000 to each of the following committees: Committee for the Election of D, Citizens for the Election of D, and Republicrats for the Election of D. Each committee has the same officers and supported candidates, and the committees have no substantial independent purpose. The committees will not be recognized as separate donees and the contributions by A will be aggregated for purposes of section 2503(b) of the Code. Accordingly, a gift tax return is required with respect to these contributions.

¹ Also released as Technical Information Release 1179, dated June 21, 1972.