John Bullis: Political donations are not income tax deductions

With the election season and all that campaign spending, some folks are asking "are my political contributions or donations an income tax deduction?"

The basic answer is "no."

Congress has messed up this area quite a bit.

Dues paid to a nonprofit group such as a trade organization have special rules. The member dues paid to the U.S. Chamber of Commerce and the National Association of Realtors the American Medical Association, for example, are only partly deductible.

Those organizations file under Internal Revenue Code Section 501(c)(6). The individual dues are allocated between the ratio of money those organizations spend on political matters and the portion that supports their basic non profit activities.

Those groups are supposed to tell the members what portion of the dues are not an income tax deduction, as they usually do tell that some way or another.

For example, the U.S. Chamber of Commerce dues are only 45 percent deductible according to their website. The other 55 percent is not an income tax deduction because that is spent on political activities.

The "social welfare" nonprofits that promote social welfare are known as IRC 501(c)(4) organizations. Donations to these groups are generally not tax deductible. Some of those groups are really just for political purposes. They are allowed to lobby and participate in campaigns and elections, but they are not to contribute to candidates.

Examples of 501(c)(4) groups include Crossroads GPS and Priorities USA. They support either conservative or liberal causes.

There are some "experts" that think gifts of $5,000 or more to the 501(c)(4) organizations must be disclosed to IRS and may even be subject to gift tax. It is another part of the tax law that is not really settled. IRS is examining some of those organizations.

Donations to super Political Action Committees are not deductible for income tax purposes. You've heard of the U.S. Supreme Court decision that individuals, corporations and unions have no restrictions, they can donate as much as they want to super PACs. There is no income tax deduction for contributions to super PACs.

Donations to 501(c)(3) organizations like churches, schools, hospitals, etc. are almost always deductible for income tax if they send a letter confirming the gift and the amount.

Did you hear? "Life is an continuous process of getting used to things we had not expected."

• John Bullis is a certified public accountant, personal financial specialist and certified senior adviser serving Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs, LLC.


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