Treasury IG’s Report Underscores Change in (c)(4) Filing Requirements

On January 6, the Treasury Inspector General for Tax Administration issued a report noting that 9,774 501(c)(4) organizations may have failed to notify the Internal Revenue Service (IRS) of their formation. Since July 2016, new 501(c)(4)s have been required to electronically file Form 8976  within 60 days of formation. This is a separate process from the application for recognition of 501(c)(4) status, and was implemented to ensure the IRS was aware of 501(c)(4) organizations formed and legally operating before they filed their Form 1024-A or their first Form 990 tax return.

The reason for the failure to file has several explanations, but the IG Report concludes in part that “[m]any of these organizations may not have understood or even been aware of the notification requirement because many of them filed other documents that informed the IRS of their existence.” The IG recommendations suggest that the IRS should improve its systems and procedures to better enforce penalties against 501(c)(4)s that fail to file Form 8976 in a timely manner.

This is a good opportunity to remind new 501(c)(4)s that they must file Form 8976 within 60 days of formation. Although the Treasury IG reports thousands of 501(c)(4)s have failed to file and have not been penalized, it’s unlikely that this forbearance on the new filing requirement will continue. For more information, see page 40 of The Connection: Strategies for Creating and Operating 501(c)(3)s, 501(c)(4)s and Political Organizations for a detailed step-by-step plan to form your 501(c)(4) the legal way.

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