The IRS has issued a new form to be used by organizations applying for tax-exempt status under Code Sec. 501(c)(4): Form 1024-A, Application for Recognition of Exemption Under Section 501(c)(4) of the Internal Revenue Code.
Take away. Code Sec. 501(c)(4) describes certain civic leagues or organizations that operate exclusively to promote social welfare. Organizations may engage in public advocacy but are not supposed to endorse or oppose political candidates. The regs do not provide any guidance on the requirements for an organization to qualify as a tax-exempt social welfare organization. The IRS issued but then withdrew proposed regs for satisfying Code Sec. 501(c)(4).
Social welfare organizations and civic leagues are exempt from tax if they are not organized for profit and are devoted exclusively for promotion of social welfare. Net earnings may not inure to the benefit of any private individual or shareholder. An excise tax may apply as an intermediate sanction for excess benefit transactions.
To qualify as an exempt social welfare organization or civic league—two terms often used interchangeably—an organization must not be organized for profit and be operated exclusively for the promotion of social welfare. No part of an organization’s net earnings may inure to the benefit of a private individual or shareholder. A penalty excise tax may be imposed as
The promotion of social welfare is primarily the furtherance of the common good or general welfare of people in a community and bringing about of civic betterment or social improvements. A volunteer fire organization is a common example of an exempt social welfare organization.
The Protecting Americans from Take Hikes Act of 2015 (PATH Act) imposed a new requirement that a 501(c)(4) organization notify the IRS, within 60 days of its formation, of its existence and that it is operating as a Code Sec. 501(c)(4) organization. The notice requirement applies to organizations organized after December 18, 2015. It also applies to organizations in existence on that date unless the organization, before December 19, 2015, had either applied for an IRS determination letter as to its 501(c)(4) status (using Form 1024 for the application), or had filed at least one annual information return or notice (Form 990, 990-EZ, or 990-N). An organization that fails to satisfy the 60-day filing deadline will owe a penalty of $20 per day, up to a maximum of $5,000, unless the failure was due to reasonable cause.
IRS regulations generally require a Code Sec. 501(c)(4) organization to submit the notification to the agency on a new electronic form, Form 8976, Notice of Intent to Operate Under Section 501(c)(4). The notification must include: (1) the name, address, and taxpayer identification number of the organization; (2) the date on which, and the state or other jurisdiction under the laws of which, the organization was organized; and (3) a statement of the purpose of the organization. In addition, the notification must include any additional information as may be specified in published guidance in the Internal Revenue Bulletin or in other guidance, such as forms or instructions. To ensure that the statutorily required items of information in the notification are correlated accurately within existing IRS systems, Form 8976 requires organizations to provide their annual accounting period.
Rev. Proc. 2018-10
Form 1024 continues to be the form to be used by organizations seeking a determination of their exempt status under Code Secs. 501(c)(2), (c)(5), (c)(6), (c)(7), (c)(8), (c)(9), (c)(10), (c)(12), (c)(13), (c)(15), (c)(17), (c)(19), and (c)(25). Rev. Proc. 2018-10 modifies Rev. Proc. 2018-5, Section 4.02, to explain the requirement of applicants for 501(c)(4) exempt status to use Form 1024-A.
Providing the required 60-day notice to the IRS does not qualify as a determination request, nor will filing Form 1024-A qualify as providing the required notification under Code Sec. 506(a) to the IRS. Form 8718, User Fee for Exempt Organization Determination Letter Request, should be filed with Form 1024-A.