Hamill: The tax waltz in the White House ballroom

I have often made the point that just about everything has a tax angle to it. Even White House ballrooms.

Today we will learn some Latin, and about motives, ballrooms, charity, destruction and construction, and tax laws. What fun! Let’s proceed.

The east wing of the White House has been torn down to make way for a new ballroom.

As best we know, this ballroom will be almost double the size of the pre-demolition White House structure.

The President initially said that the cost of the ballroom, which has been said to be $200 million to $300 million, would be privately funded.

It was argued that since private funds would be used for the demolition and construction, no specific approval was needed.

This may or may not be true, and that issue really does not affect this column. I want to focus on the donors.

There was a list released of 37 donors. Generally, no specific sums were attached to each name, although Lockheed Martin was said to have given over $10 million.

Let’s now switch gears for a moment to discuss tax law and to define a few Latin words.

The tax law allows a deduction for gifts made to qualified charitable organizations. It is said that the private ballroom funding gifts are made to the Trust for the National Mall.

The Trust for the National Mall is a section 501(3) charity — a public charity. Prior IRS Form 990 filings show it often receives a little over $10 million in annual gifts.

Donations to a section 501(3) charity may allow for a tax deduction. This is so if the donation satisfies the requirements of a charitable gift.

The Tax Court has said that “the sine qua non of a charitable gift is a transfer of money or property without adequate consideration.”

And they say Latin is a dead language. Sine qua non means “without which nothing,” or an essential precondition. No gift if consideration was received.

The courts have consistently held that there is no deductible charitable gift if there is a quid pro quo involved.

Quid pro quo means something for something, or this for that. If a donor gets a quid pro quo, they fail the sine qua non for a deductible gift.

A company called Triumph Mixed Use Investments III LLC was building a master-planned community in Utah.

Project approval was conditioned on Triumph donating 747 acres of land and agreeing to limit the density of the project.

Triumph donated the land. The agreement with the city said the donation was voluntary and no consideration was received.

Triumph claimed a large tax deduction for the gift. The IRS challenged the deduction, claiming a quid pro quo.

Triumph said to look at its agreement with the city. It says that the gift was both voluntary and made without any consideration. There was a this but no that.

The Tax Court said we may have been born, but we were not born yesterday. It is clear that you made the gift to get valuable approval for your project.

That was not the end of the story. Even if the approval had value, a donation of a lesser amount might be justified if the approval value was less than the land value.

But the court said that was not so. No deduction was allowed. The sine qua non for a deduction was not met.

Back to the ballroom. What’s the deal with these donors? If they claim collective deductions of $300 million, the tax savings could be between $60 million and $100 million.

We do know their identities. Two tobacco companies. They could benefit from less regulation, including the regulation of e-cigarettes.

More than a few with large federal contracts. Amazon, Caterpillar, Google, Lockheed Martin, Meta, Microsoft and T-Mobile.

Union Pacific, awaiting regulatory approval for a merger with Norfolk Southern. Apple, looking for tariff relief for imports from India.

Some big cryptocurrency people — Coinbase, Tether, Ripple and the Winklevoss brothers.

These cryptocurrency people could be hurt by federal regulation. “Nice company you have, it’d be a shame should something happen to it.”

Motives are hard to decipher. Maybe there is a groundswell of support for a ballroom. A ballroom for a ballroom’s sake.

But could there be quids and quos and pros floating around? And if so, will the IRS actually challenge any claimed gifts?