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IRS Issues Temporary Regulations Clarifying 501(c)(4) Notification Process

July 2016

By Robert D. Benton and Stephen J. Kenny

The IRS recently issued temporary and proposed regulations explaining how 501(c)(4) social welfare organizations must comply with new requirements to notify the Service of the organization’s formation. This requirement imposes minimal burdens on new 501(c)(4) organizations and requires only barebones information to comply. The new filing does not replace or remove any current filing requirements, including the need to file a Form 1024 for recognition of exemption.

In December 2015, Congress passed the Protecting Americans from Tax Hikes Act. This legislation included a new requirement that 501(c)(4) organizations notify the IRS within 60 days of formation. The regulations issued by the IRS provide a mechanism for organizations to do this. The organization must electronically submit a Form 8976, “Notice of Intent to Operate Under Section 501(c)(4)” as well as a $50 user fee. Form 8976 requires minimal information, including the name, address, and taxpayer identification number of the organization; the date and state of formation; and a statement of purpose of the organization. The IRS may impose a penalty of up to $20 on the organization for each day the notification is late (not to exceed $5,000). The IRS may also assess penalties on the managers of the organization responsible for failing to notify the IRS. 

Under the temporary regulations, organizations that sought a determination letter or filed a Form 990 on or before July 8, 2016 need not submit the notification to the IRS. An organization formed on or before July 8, 2016 that has not sought a determination letter or filed a Form 990 must notify the IRS of its formation by September 6, 2016.

The IRS has stated that comments and requests for a public hearing on the proposed regulations, including the procedures outlined above, must be received by October 11, 2016. Comments can also be submitted regarding the related Revenue Procedure 2016-41, which will be considered in making any future updates to the procedures.