The Protecting Americans From Tax Hikes Act of 2015 (PATH) added U.S. Code Section 506, establishing a new filing requirement for organizations wishing to operate under U.S. Code § 501(C)(4). Specifically, § 506(a) states organizations must notify the U.S. Secretary of the Treasury of their intent no later than 60 days after they’ve been established. On July 8, 2016, the IRS released temporary and final regulations, T.D. 9775 and Revenue Procedure 2016-41, which outline how organizations must fulfill this new requirement and the types of relief available for certain organizations.
Going forward, any newly formed organization wishing to operate as a tax-exempt organization under § 501(c)(4) will be required to file Form 8976, Notice of Intent to Operate Under Section 501(c)(4), which only may be submitted via the IRS online registration system. The IRS will not be accepting paper filed versions of Form 8976 and will deem any received paper filed applications as incomplete. The person responsible for submitting Form 8976 will create an account on the IRS online registration system, file the notice and pay the applicable user fee, which is $50 for 2016, but may change in the future. The IRS will send a notice acknowledgment to the user’s account within 60 days of receiving a completed Form 8976. It should be noted that filing Form 8976 isn’t considered a request for a determination letter from the IRS, and the acknowledgment received from the IRS doesn’t indicate tax-exempt status. Organizations will still need to file Form 1024, Application for Recognition of Exemption, to receive a determination of tax-exempt status.
Filing a Complete Form 8976
The IRS will deem an organization’s Form 8976 complete if it contains this information:
- Organization’s establishment date, name, address and Federal Employer Identification Number
- The state or other jurisdiction where organized
- Statement declaring whether the organization wishes to operate as a social welfare organization or local association of employees
- Month the organization’s accounting period ends
Penalties for Noncompliance
If an organization fails to file Form 8976, it will be subject to penalties, unless the organization can prove that it has reasonable cause for noncompliance. The penalty imposed on the organization is $20 per day and is not to exceed $5,000. In addition, the person or persons responsible for submitting Form 8976 also may be subject to penalties for the failure to timely file Form 8976. The penalties imposed on the responsible individual or individuals are $20 per day, not to exceed $5,000 for all individuals.
Relief for Certain Organizations
Revenue Procedure 2016-41 details relief available to organizations during this transitional period. Organizations that have either filed their applicable Form 990 series return or requested a determination letter from the IRS by filing Form 1024, on or before December 18, 2015, aren’t required to submit Form 8976. The temporary regulations laid out in T.D. 9775 extend this relief to organizations established after December 18, 2015, that have filed any one of the aforementioned forms on or before July 8, 2016. If an organization doesn’t qualify for relief, it has until September 6, 2016, to submit Form 8976.
Contact your BKD advisor for more information on filing requirements and relief available for your organization.