Contributions to such funds are generally not tax deductible. In the case of DeLay, because of rules of the House of Representatives, there is a limitation on the amount that such a fund can take from any one individual and any contribution in excess of $250 has to be publicly disclosed in a report to the House. (Ol' Tom apparently screwed up on this one.)
Legal defense funds on behalf of a private citizen such as Libby are not subject to similar limitations. However, there would seem to be one tax aspect of these funds that is frequently overlooked, namely the gift tax implications of contributions.
To the extent that a contribution is less than $11,000 in 2005 or $12,000 in 2006, there are essentially no gift tax implicatons because gifts of this size need not be reported. Thus, assuming they time their contributions appropriately, wealthy contributors can give up to $23,000 to funds for each individual within the next 90 days. However, IRC § 2511(a) would seem clear that a contribution does constituted a gift:
Subject to the limitations contained in this chapter, the tax imposed by section 2501 shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, tangible or intangible; but in the case of a nonresident not a citizen of the United States, shall apply to a transfer only if the property is situated within the United States.(Emphasis added.)
I have found no authority that would provide an exemption from the gift tax for such contributions. I will publish an update if anyone could point me to any authority to the effect that such contributions are either exempt or not taxable gifts.