501(c)(4) Notification Requirement Finalized, Clarified

The IRS has issued final regulations addressing the requirement that social welfare organizations notify the IRS of their intent to operate under Section 501(c)(4) no later than 60 days after their establishment. The final regulations adopt, without substantive changes, the proposed regulations issued by the IRS in 2016.

Legislation passed in 2015 first put the notification requirement in place, which changed the longstanding landscape for 501(c)(4)s—these organizations technically are not required to apply to the IRS for recognition of exempt status, though they may choose to do so using Form 1024-A. Prior to 2018, they used Form 1024.

Notification to the IRS must be on Form 8976, and is an online filing. It requires basic information including the organization’s name, address, date of formation, accounting year end, and a statement of purpose that the organization will operate as either a social welfare organization or local association of employees. There is a $50 filing fee, and organizations can face penalties for late filing. Organizations are not required to file the notification if they’ve filed a Form 1024 for recognition of exempt status or an appropriate form of the Form 990 on or before July 8, 2016.

While the final regulations have no substantive changes, the preamble clarifies several issues:

  • The exemption for organizations that have filed a Form 990 applies only to a completed form, not to a request for an extension to file.
  • Organizations that were terminated or dissolved before September 6, 2016, were required to file Form 8976 because such organizations may still be included in the IRS’s Exempt Organization Business Master File, and a filed Form 8976 would notify the IRS that the terminated or dissolved organization operated as a 501(c)(4).
  • Filing a Form 1024-A within the 60-day notification period is not a substitute for filing Form 8976 because, among other reasons, the notification requirement is separate from the application process, and the IRS does not have a process for using Form 1024-A as both a notification and an optional application for exempt status.
  • Subordinate organizations included in a group exemption letter are not exempt from the notification requirement unless they were included in a group 990 return or filed their own 990 return.
  • An organization that didn’t originally intend to operate as a 501(c)(4) must submit Form 8976 once it begins operating as a 501(c)(4). Such organizations should submit the notification form within 60 days of amending their organizational documents for qualify as a 501(c)(4), and this would meet the reasonable cause exception for filing within 60 days of formation.

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