Under recent legislation, newly-created and certain existing 501(c)(4) social welfare organizations must file a notice with the IRS.  In the past, social welfare organizations were not required to submit an application (Form 1024) to the IRS to be recognized as a tax-exempt organization but could “self-declare” exempt status, as long as the organization operated pursuant to the requirements applicable to such organizations.

The Protecting Americans from Tax Hikes Act (PATH Act), signed into law by President Obama on December 18, 2015, added a new provision to the Internal Revenue Code that requires 501(c)(4) organizations to file a notice of registration with the IRS within 60 days of the organization’s formation.

Existing organizations that have not filed a Form 1024 or annual information return (Form 990/990-EZ/990-N) on or before the date of enactment must provide the notice required within 180 days of enactment of the new law.

The IRS will have to issue the format of the notice early in 2016 so that new social welfare organizations are able to meet the deadlines.

A 501(c)(4) organization will have to provide the following to the IRS:

  • user fee
  • the name, address, and taxpayer identification number of the organization;
  • the date on which, and the state under the laws of which, the organization was organized; and
  • a statement of the purpose of the organization.

The IRS will have the authority to extend the 60-day deadline for reasonable cause.  Within 60 days after an application is submitted, the IRS must provide a letter of acknowledgement of the registration, which the organization can use to demonstrate its exempt status.  The notice and receipt are subject to the disclosure requirements, which are currently applicable to Forms 1024 and 990.

This format is similar to the Form 1023-EZ that small, charitable, 501(c)(3) organizations use to apply for recognition of tax-exempt status. Generally, the IRS makes a determination regarding a Form 1023-EZ within a month of submission.

While the filing of the notice is required of all new 501(c)(4) organizations, the option to file a more-detailed application remains for 501(c)(4) organizations that seek greater certainty regarding qualification; however, the application form used will no longer be Form 1024 but will be a new form to be issued by the IRS.

As reported in Inside Political Law on December 16, 2015, the PATH Act confirms that gift taxes do not apply to contributions to 501(c)(4), (c)(5), and (c)(6) organizations, which will provide greater certainty to donors to such organizations.

Tags: 501(c)(4), Form 1024, IRS, social welfare organizations
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Photo of Susan Leahy Susan Leahy

Susan Leahy has advised tax-exempt, nonprofit organizations on tax and corporate governance matters for over 25 years. She assists organizations in obtaining and maintaining tax-exempt status and advises boards and senior executives on a range of governance policies and procedures.

In her work…

Susan Leahy has advised tax-exempt, nonprofit organizations on tax and corporate governance matters for over 25 years. She assists organizations in obtaining and maintaining tax-exempt status and advises boards and senior executives on a range of governance policies and procedures.

In her work with tax-exempt organizations that operate in the United States, as well as internationally, Susan regularly:

  • Counsels clients on the tax implications involving:
  • Self-dealing, inurement, and impermissible private benefit to individuals and for-profit companies;
  • Lobbying, and political activities;
  • Unrelated business income tax;
  • Excess benefit transactions and compensation of executives;
  • Joint ventures and relationships with for-profit organizations;
  • Mergers of tax-exempt organizations and the acquisition or donation of assets; and
  • Corporate sponsorship.

Advises nonprofit boards of directors, board committees, and management with respect to:

  • Corporate formation and good governance principles;
  • Preparation for board and committee meetings; and
  • Conflicts of interests.
  • Provides guidance on state corporate and tax compliance for nonprofit organizations.

“Susan has been my ‘Go-To’ attorney for adept legal strategy and guidance for over 20 years. Susan skillfully led our organization’s volunteer leadership through a needed transition with compassion and sensitivity. Her legal assistance remains invaluable!” a nonprofit organization client noted.

“I highly value Susan’s expertise, responsiveness, and pragmatism,” said another client. “Her insight and advice have proven invaluable time and time again and remain integral to our ability to operate quickly and nimbly.”

Susan is the past chair of the Exempt Organizations Committee of the District of Columbia Bar and a member of the American Bar Association. Susan received her J.D. from Catholic University of America, Columbus School of Law and a B.B.A. from St. Bonaventure University.

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