By Virginia (Ginny) R. Belcher, CPA, Senior Tax Manager | Not-for-Profit Team
Until recently, a section 501(c )(4) organization was not required to apply for exemption with the IRS to operate as a 501( c)(4). The organization simply filed the appropriate tax return. The Form 1024, Application for Recognition of Exemption, was also available if the organization wanted to get an IRS determination letter confirming their exemption under Sect 501(a). However, under the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act), the IRS has added section 506 to the Internal Revenue Code which requires organizations, organized after December 18, 2015, to notify the IRS of its intent to operate as a section 501(c )(4) organization.
The IRS developed Form 8976, Notice of Intent to Operate Under Section 501( c)(4), for use in providing this notification. It is a one- time notification. There is no paper Form 8976. It can only be completed and submitted electronically through the Form 8976 Electronic Notice Registration System. While an organization need only file a notification once, it will still need to file annual information returns (e.g. Form 990, Form 990-EZ, or Form 9900N) depending on their total assets and gross receipts.
There are special rules for organizations that were organized on or before July 8, 2016. A section 501(c)(4) is not required to submit the Form 8976 if the organization either:
- applied on Form 1024 for a Determination Letter that recognizes the organization as a section 501(c)(4) organization or;
- filed at least one annual information return or notice such as a Form 990, or if eligible, Form 990EZ or Form 990-N.
The notification must be submitted within 60 days after the organization is established. A user fee of $50 must be submitted online at www.pay.gov to complete the organization’s notification. There is no special software needed to submit a notification but an organization will need an email address to activate the login and password. Failure to file within the 60 day period will result in a $20 per day penalty for each day the notification is late up to a maximum of $5,000.
An organization will need to submit the following information on the Form 8976:
- Business name
- Date organized
- State and County organized
- Filing year/month
- Organization’s purpose
The IRS is required to acknowledge that an organization’s Form 8976 has been submitted and will notify the organization if it was not properly completed. If a complete and accurate Form 8976 has been submitted, an organization can expect to receive an acknowledgement from the IRS within 60 days of submitting the Form 8976.
The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.