Final Regulations: 501(c)(4) Notification Requirement

In July 2016, we published a post on the New IRS Notification Requirement for 501(c)(4) Organizations – Form 8976. At the time, the IRS issued final and temporary regulations and published Revenue Procedure 2016-41 relating to the requirement that organizations notify the IRS of their intent to operate under section 501(c)(4) of the Internal Revenue Code (“IRC”) no later than 60 days after the date of formation. On July 23, 2019, final regulations were published.

Selected Background Provisions

“Although an organization may apply to the IRS for recognition that the organization qualifies for tax-exempt status under section 501(c)(4), there is no requirement to do so (except as provided in section 6033(j)(2), which requires organizations that lose tax-exempt status for failure to file required annual information returns or notices and want to regain tax-exempt status to apply to obtain reinstatement of such status). Accordingly, a section 501(c)(4) organization that files annual information returns or notices (Form 990, “Return of Organization Exempt From Income Tax,” or, if eligible, Form 990-EZ, “Short Form Return of Organization Exempt From Income Tax,” or Form 990-N (e-Postcard)), as required under section 6033, need not seek an IRS determination of its qualification for tax-exempt status in order to be described in and operate as a section 501(c)(4) organization.”

“Section 405(a) of the PATH Act added section 506 to the Code, requiring an organization to notify the IRS of its intent to operate as a section 501(c)(4) organization.”

“Section 506(a) requires a section 501(c)(4) organization, no later than 60 days after the organization is established, to notify the Secretary of the Department of the Treasury (Secretary) that it is operating as a section 501(c)(4) organization (the notification). Section 506(b) provides that the notification must include: (1) The name, address, and taxpayer identification number of the organization; (2) the date on which, and the state under the laws of which, the organization was organized; and (3) a statement of the purpose of the organization.”

“Notice 2016-09 also clarified that the filing of Form 1024 does not relieve an organization of the requirement to submit the notification.”

“The temporary regulations, in accordance with section 506(a), generally required a section 501(c)(4) organization to submit the notification to the IRS on Form 8976 [“Notice of Intent to Operate Under Section 501(c)(4)”] no later than 60 days after the date the organization is organized.”

“The temporary regulations also referred to section 6652(c)(4) through (6) for information on the applicable penalties for failure to submit the section 506 notification. The temporary regulations specifically referred to section 6652(c)(5), which provides a reasonable cause exception, and section 6652(c)(6), which provides other special rules that generally apply for purposes of section 6652(c) penalties.”

“The temporary regulations have applied since July 8, 2016, and this Treasury decision adopts the proposed regulations that cross-referenced the text of those temporary regulations without substantive change. Thus, for clarity and continuity in application, the final regulations apply on and after July 8, 2016.”