New IRS Notice Requirements for 501(c)(4) Social Welfare Organizations

irs_logo_generic1If your organization is a social welfare organization (or you plan to form one), you’re required to notify the IRS of your existence or you could face monetary penalties.

On July 8, 2016, the IRS issued final and temporary regulations and Revenue Procedure 2016-41, which detail new notice requirements for social welfare organizations imposed by the Protecting Americans from Tax Hikes Act of 2015 (the “PATH Act”). The PATH Act added Section 506 to the Internal Revenue Code and requires an organization to notify the IRS within 60 days of its formation that it intends to operate as a 501(c)(4) social welfare organization.

These new notice requirements apply to: (a) 501(c)(4) social welfare organizations formed after July 8, 2016; and (b) all social welfare organizations formed on or before July 8, 2016 except for those that either: (1) applied for and received an IRS 501(c)(4) determination letter; or (2) filed at least one Form 990 Annual Information Return. Organizations formed on or before July 8, 2016 not meeting either of these exceptions were required to provide notice to the IRS by September 6, 2016. 

To satisfy these new requirements, an organization must file IRS Form 8976, Notice of Intent to Operate Under Section 501(c)(4) along with a $50 user fee. For more information, visit the IRS Website.  Organizations that fail to timely file Form 8976 by the due date will subject to a daily penalty of $20 per day, up to $5,000.

It is important to note that neither the filing of the Form 8976 nor the IRS acknowledgement of its receipt is equivalent to an IRS determination letter of 501(c)(4) status. And, the filing of a Form 8976 does not relieve 501(c)(4) social welfare organizations of their requirement to file Forms 990.

Information provided by: Laura Solomon & Associates.