Since late December 2015 we have been on the lookout for implementing regulations regarding the new notice requirements on certain 501(c)(4) organizations. The IRS has now issued Revenue Procedure 2016-41 and the Treasury Department issued final and temporary regulations implementing the new requirement that organizations must notify the IRS within 60 days of their creation if they intend to operate as an organization described under Section 501(c)(4).
Section 506 was added to the Internal Revenue Code as a part of the Protecting Americans from Tax Hikes Act of 2015. Section 506 requires that certain Section 501(c)(4) organizations must provide notice to the IRS within 60 days of the organization’s creation if it intends to operate as a 501(c)(4).
Who it does and does not apply to:
- The new requirement does not apply to organizations that, on or before December 18, 2015, applied for a determination letter using Form 1024 or filed at least one 990-series return.
- It does apply to organizations in existence on or before July 8, 2016 that have not applied for a determination letter using Form 1024 or filed at least one 990-series return. Organizations not excluded for meeting either of the above requirements are subject to a transition rule that gives them until September 6, 2016 to file the required notice and not be subject to penalties.
- It does apply to new 501(c)(4) organizations formed after July 8, 2016.
Organizations subject to the Section 506 notice requirement must electronically file Form 8976. This filing is made at https://services.irs.gov/datamart/login.do.* The individual filing the notice should be able to receive confirmation of the filing or notice of non-acceptance. The filing must be accompanied by a $50 user fee, which will be made through www.pay.gov.
Organizations that fail to file the Form 8976 are subject to a $20/day late filing penalty, up to a maximum of $5,000. Certain responsible persons may also be jointly and severally liable for an additional penalty of $20/day up to a max of $5,000. Either penalty can be abated if reasonable cause can be shown.
The above requirements may vary depending on the specific facts associated with your organization. If you want help understanding how the new requirement applies to your organization, or you would like help with the new filing, please contact our office.
*blog post updated 7/19/16 to reflect change in URL for registration/filing