New IRS 501(c)(4) Determination Letter Process and Form Established
In Revenue Procedure 2018-10, which is effective January 16, 2018, the IRS modified Revenue Procedure 2018-05 by applying the procedures for Exempt Organization Determination letters to a new IRS form 1024-A, Application for Recognition of Exemption Under Section 501(c)(4) of the Internal Revenue Code.
This Revenue Procedure provides exempt organizations with information and procedures for obtaining determination letters using Form 1024-A.
Prior to enactment of the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), IRC Section 501(c)(4) organizations were not required to formally apply for tax-exempt status provided they met certain criteria necessary for that status. However, to be publicly recognized as exempt pursuant to IRC Section 501(c)(4), and receive certain benefits applicable to that status, many 501(c)(4) organizations nonetheless chose to formally apply to the IRS for tax-exempt status, by filing IRS Form 1024.
With the enactment of the PATH Act, IRC Section 506(f) was added, requiring organizations established after December 15, 2015 and who are seeking to qualify as an IRC Section 501(c)(4) to notify the IRS, within 60 days after the organization is established. The IRS created Form 8976 for organizations to provide this notification. Such Form be submitted online through IRS pay.gov, along with the required $50 fee, and is a one-time notification.
In addition, IRC Section 506(f) also provides that an organization desiring additional certainty regarding its tax-exempt status may also choose to separately file a request for a determination letter with the IRS, together with any applicable user fee. In response to this taxpayer option, pursuant to Revenue Procedure 2018-10, IRS procedures have also been changed to reflect the use of a new Form 1024-A, as well as implementing other minor changes.
The IRS now offers Form 1024-A (Application for Recognition of Exemption Under Section 501 (c)(4) of the Internal Revenue Code) for use by social welfare organizations that choose to be recognized as tax-exempt and that also wish to receive an IRS determination letter verifying their status.
What Does CohnReznick Think?
The filing of IRS Form 1024-A does not satisfy the new requirement to notify the IRS that an organization is operating pursuant to IRC Section 501(c)(4), as is required by IRC Section 506. That one-time notification requirement can only be met by filing IRS Form 8976.
To take advantage of certain state tax exemptions, receive non-profit postage privileges, and be publicly recognized as a tax-exempt organization, impacted organizations must file new Form 1024-A. Today, rules seem to be getting more complex. Organizations wishing to operate as an IRC Section 501(c)(4) entity should understand and comply with all IRS (and any required state) filings to ensure that all registration requirements are satisfied.
This has been prepared for informational purposes, is general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without first obtaining professional advice specific to, among other things, your individual facts, circumstances and jurisdiction. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.