Snell & Wilmer
Legal Alert
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August 16, 2016
New IRS Notice Requirement for 501(c)(4) Organizations
** September 6 Filing Deadline Fast Approaching **
by Craig R. McPike, Carlene Lowry, Geoffrey L. Gunnerson and Soheila Shahidi

On July 8, 2016, the Internal Revenue Service (IRS) issued Revenue Procedure 2016-41 implementing a provision of the Protecting Americans from Tax Hikes Act of 2015 (the “PATH Act”). The provision, Section 405 of the PATH Act, added new Section 506 of the Internal Revenue Code of 1986, as amended (the “Code”). Code Section 506 requires a newly formed organization that intends to operate as a tax-exempt social welfare organization to notify the IRS of its intent to be recognized as a Code Section 501(c)(4) organization no later than 60 days after its formation date under state law. This 60-day notice requirement is not a substitute for filing an IRS Form 1024, Application for Recognition of Exemption Under Section 501(a), and is not a request for an IRS determination letter. In order to satisfy the 60-day notice requirement, an organization must electronically file a completed IRS Form 8976, Notice of Intent to Operate Under Section 501(c)(4).

Who Must File?

  • All Code Section 501(c)(4) organizations formed after July 8, 2016, must file an IRS Form 8976 within 60 days after their date of formation.
  • Except as noted below, all Code Section 501(c)(4) organizations formed on or before July 8, 2016, must file an IRS Form 8976 on or before September 6, 2016.

Exception to Notice Requirement Filing.

A Code Section 501(c)(4) organization is not required to file an IRS Form 8976 if (i) it was formed on or before July 8, 2016, and (ii) on or before July 8, 2016, it either:

  • Applied on IRS Form 1024 for recognition as a tax-exempt organization under Code Section 501(c)(4); or
  • Filed at least one IRS Form 990, or, if eligible, IRS Form 990-EZ or IRS Form 990-N.

How to File?

Penalty for Failure to File or Late Filing.

An organization that fails to submit an accurately completed IRS Form 8976 by the due date may subject the organization and its managers to penalties.

  • The penalty on the organization is $20 for each day during which the failure continues; the total penalty on the organization shall not exceed $5,000.
  • The penalty on the organization’s managers is $20 for each day during which the failure continues for each manager responsible for submitting the IRS From 8976; the total penalty on the organization’s managers shall not exceed $5,000.

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