IRS Issues Rules for Notification By 501(c)(4) Groups

The Internal Revenue Service has issued new procedures on how 501(c)(4) social welfare groups must comply with the recently enacted requirement to notify the IRS of their existence.  (Rev. Proc. 2016-41)   The requirement was included in the 2015 tax act (See Nonprofit Issues®, January, 2016) in the aftermath of the IRS “scandal” delaying recognition of potentially political 501(c)(4) organizations.  Because (c)(4) social welfare organizations, unlike 501(c)(3) charities, are not required to obtain a determination of exemption, many have failed to notify the IRS of their existence and have operated largely under the radar and unknown to the IRS.  The 2015 law added a new section 506 to the Tax Code that does not require (c)(4) organizations to obtain official recognition of their status, but requires them to tell the IRS that they exist.