Filed under: Tax Compliance & Planning
By Karen L. Dunn, JD, LLM
September 6th is the due date for filing the notification of intent to operate as a 501(c)(4) organization, if the organization existed on July 8, 2016 and is otherwise not excepted from this requirement. Newly created organizations must file the notification and pay a small user fee, no later than 60 days after the organization is established. Failure to file this notice may result in penalties assessed.
A new law requiring organizations exempt under 501(c)(4) to notify the IRS that they are operating as such was enacted in December of 2015. However, it took time for the IRS to develop a process for this notification. Now we have, hot off the press (more accurately, website), Form 8976, Notice of Intent to Operate Under Section 501(c)(4) and temporary regulations for guidance. The form can only be filed electronically and is a one-time notification. See the IRS website for c4 notification.
Why the notification? Well, let’s back up for a minute. Despite all the hullabaloo in Congress and the media about the IRS delaying the processing of 501(c)(4) exemption applications, until now, a 501(c)(4) organization did not have to file a Form 1024 or other notice to the IRS to be allowed to operate as a 501(c)(4) organization. As a result, many such organizations never formally applied for 501(c)(4) status, and instead have been operating as such, regardless. This new notification lets the IRS know that newly formed 501(c)(4) organizations exist and will comply with annual IRS filing requirements as applicable to the organization.
The Form 8976 notification is not a substitute for the Form 1024 and the Form 8976 filing acknowledgment received from the IRS is not a determination of qualification for exemption. The notification also does not affect any organization’s requirement to file some Form 990 (Form 990, Form 990-EZ, or Form 990-N). Further, having applied for recognition of exemption (Form 1024) does not relieve an organization from the required Form 8976 notification, unless the application was filed before July 9, 2016.
Organizations created on July 8, 2016, or earlier, do not have to file this notice if, by July 8, 2016, they either:
- Filed a Form 1024 for a determination from the IRS that they are recognized as exempt under Code Section 501(c)(4); or
- Filed at least one Form 990, 990-EZ, or 990-N.
For organizations in existence on July 8, 2016, that do not meet the exception above, the due date for filing Form 8876 is September 6, 2016.
The penalty for failure to file is $20 per day, with a maximum penalty of $5,000. If an organization receives a demand by the IRS for the filing and does not comply, management may be personally liable for a penalty of $20 per day from the date specified in the demand, not to exceed $5,000.
Organizations that have not filed some type of Form 990 for three consecutive years, will have their exemptions automatically revoked under the Pension Protection Act. The Form 8976 notification presumably will put organizations in the IRS database and thus may prompt revocations of exempt status for failure to file Forms 990 for the requisite three-year period. Such an organization should file the notification by September 6, regardless. If it receives a letter of revocation, it can then file a Form 1024 to reinstate its exempt status. The notification will not serve as an application for reinstatement.
Section 501(c)(4) organizations should read the information on the IRS website or contact their tax advisors as soon as possible to make sure that they comply with this new filing requirement.
© Clark Nuber PS, 2016. All Rights Reserved
