The IRS recently released Form 8976 “Notice of Intent to Operate Under Section 501(c)(4)” and accompanying regulations for social welfare organizations, following the enactment of the federal “Protecting Americans from Tax Hikes” (PATH) Act. The requirements apply to both existing and new Section 501(c)(4) tax-exempt organizations.
Section 501(c)(4) organizations typically engage in extensive lobbying and sometimes limited political campaign activity. They have historically been used as a catch-all tax-exemption category, without the benefit of qualifying for tax-deductible contributions. Until the PATH Act, no notification to the IRS was legally required to secure tax-exempt status. These organizations could simply self-declare their tax-exempt status, albeit with ongoing annual Form 990 filing obligations to maintain such status. Section 501(c)(4) organizations could also affirmatively apply to the IRS for recognition of tax-exempt status, via IRS Form 1024, to confirm that the organization’s programs constitute qualified 501(c)(4) activities and should not be classified instead as a political action committee (PAC) or even a non-exempt entity.
Under the new IRS regulations, all Section 501(c)(4) organizations must comply with IRS notification requirements in one of three ways. First, they may satisfy this requirement if they filed the IRS Form 1024 application for recognition of tax-exempt status before July 8, 2016. Second, they may satisfy this requirement if they filed an IRS Form 990-series filing1, again before July 8, 2016. Third, Section 501(c)(4) organizations may file the new IRS Form 8976 notice.
Section 501(c)(4) organizations that were formed before July 8, 2016, must complete this filing before September 6, 2016. New organizations must do so within 60 days of their formation. Failure to comply with this new IRS notice requirement may subject an organization to financial penalties of $20 per day, up to $5,000 total.
Form 8976 must be completed online, and it is available at www.irs.gov. This form requires that the organization provide its name, address, Employer Identification Number (EIN), date organized, state/country organized, the month its fiscal year ends, and a statement of the purpose of the organization. The user fee to file the Form 8976 notice is currently $50. The IRS is required to issue a written acknowledgment of receipt within 60 days of submission of the notice.
Note that the Form 8976 filing does not amount to IRS recognition of Section 501(c)(4) tax-exempt status. (Likewise, submitting an IRS Form 1024 exemption application after July 8, 2016, will not substitute for the new Form 8976 notice requirement.) Organizations wanting formal recognition of Section 501(c)(4) tax-exempt status should file both the Form 8976 notice and Form 1024 exemption application. In addition, organizations that file only the IRS Form 8976 notice should be prepared to include additional information in their future Form 990 filings demonstrating their Section 501(c)(4) tax-exempt qualification.
For additional background information, please see our previous blog. For more IRS information, please see the IRS Form 8796 guidance.
