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Category Archives: Formation & Tax Exempt Status

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California Franchise Tax Board and Secretary of State Publish First Batch of Delinquent Nonprofits to be Automatically Dissolved or Surrendered.

Posted in AG, IRS, FTB, & Property Tax Proceedings, Formation & Tax Exempt Status, FTB, Nonprofit Governance & Ethics

The California Franchise Tax Board (FTB), in conjunction with the California Secretary of State, published on March 1 the first batch of approximately 5,000 nonprofit corporations that will be administratively dissolved (for California nonprofit corporations) or administratively surrendered (for foreign nonprofit corporations registered in California) exactly 60 calendar days after March 1 (which falls on… Continue Reading

System Outages Cause Delays for Filing Form 8976; IRS Offers to Help Affected Organizations

Posted in AG, IRS, FTB, & Property Tax Proceedings, Formation & Tax Exempt Status, IRS, Nonprofit Governance & Ethics, Tax Treatment of Lobbying & Political Activities, Uncategorized

The initial deadline for new self-declared 501(c)(4) organizations to notify the IRS of their existence was September 6.  However, system outages on that day, and since, caused delays that may have prevented organizations from filing on time. The IRS released a statement today promising to “work with you to ensure that you are not subjected… Continue Reading

Section 501(c)(4) Notice Requirement: IRS Implements New Notice System for Organizations Claiming Exemption Under Section 501(c)(4), Announces Updated Compliance Deadlines

Posted in AG, IRS, FTB, & Property Tax Proceedings, Formation & Tax Exempt Status, IRS, Nonprofit Structures, Relationships & Transactions, Tax Treatment of Lobbying & Political Activities

The IRS has finally caught up with Congress with respect to the new notice requirement for new organizations claiming exemption under Section 501(c)(4).  Narrowly (?) missing its self-imposed July 1 deadline for implementing this requirement, the IRS last week released new temporary (and proposed) regulations, a Revenue Procedure (Rev. Proc. 2016-41) explaining the notification system,… Continue Reading

IRS to Roll Out New Section 501(c)(4) Notice System on July 1?

Posted in AG, IRS, FTB, & Property Tax Proceedings, Formation & Tax Exempt Status, IRS, Nonprofit Structures, Relationships & Transactions, Tax Treatment of Lobbying & Political Activities

A while back, we blogged about a new notification requirement for organizations claiming exemption under Section 501(c)(4) imposed by Congress’s adoption last December of the PATH Act of 2015.  The Path Act created a new section of the Internal Revenue Code, Section 506, which requires new and certain existing (see below) Section 501(c)(4) organizations to… Continue Reading

New IRS Notification Requirement for Section 501(c)(4) Social Welfare Organizations

Posted in Formation & Tax Exempt Status, IRS, IRS, FTB & Attorney General Controversies, Unions, Associations, Clubs & Other Tax-Exempt Organizations

UPDATE: In Notice 2016-09, the IRS indicated that the notification requirement will not go into effect until “at least 60 days from the date” it issues regulations implementing Section 506, and no penalties will be assessed against any Section 501(c)(4) organization that submits the required notice by the due date provided in those regulations.  … Continue Reading

New Law Eases Dissolution of Inactive California Nonprofit Corporations.

Posted in AG, IRS, FTB, & Property Tax Proceedings, Formation & Tax Exempt Status, IRS, FTB & Attorney General Controversies, Nonprofit Governance & Ethics

California’s nonprofit sector is vibrant and lively.  Nonprofit entrepreneurs form new entities in California every day, with great hopes for garnering support and tackling society’s pressing problems or serving constituencies with specialized needs. Nonetheless, despite good ideas and best intentions, sometimes things just don’t work out as planned.  When that happens, nonprofit founders are stuck… Continue Reading

New Domain Names Available for Nonprofits

Posted in Formation & Tax Exempt Status, International Charitable Transactions & Operations, Nonprofit Governance & Ethics, Nonprofit Structures, Relationships & Transactions, Private Foundations, Public Charities

As of May 7, 2015, nongovernmental organizations that meet certain eligibility requirements can purchase two new web domains – “.ngo” and “.ong.” Public Interest Registry, the nonprofit that manages the .org web domain, launched the new domains exclusively for nonprofits, unlike the .org domain which is available to both nonprofits and for-profits.  The new domains… Continue Reading

IRS FY 2014 Data Book Reveals Dramatic Increase in Exempt Organization Approvals

Posted in AG, IRS, FTB, & Property Tax Proceedings, Formation & Tax Exempt Status, Public Charities

Last week the Internal Revenue Service released its Fiscal Year 2014 Data Book, reporting on IRS operations, enforcement, revenue collection and related activities during the period of October 1, 2013, through September 30, 2014, (the IRS fiscal year).  The Data Book included a table on “Closures of Applications for Tax-Exempt Status, by Organization Type and… Continue Reading

Hundreds of Thousands of Nonprofits Affected by Security Breach Related to Electronic Filings

Posted in Formation & Tax Exempt Status, IRS, FTB & Attorney General Controversies, Public Charities

The Urban Institute’s National Center for Charitable Statistics (“NCCS”) reported this week that hackers tapped into its online filing system for Forms 990, 990-EZ, 990-N, and 8868 (Application for Extension), as well as state filings for Hawaii, Michigan, and New York.  According to the report, information including e-mail addresses, usernames, passwords, individual names, and IP… Continue Reading

IRS Debuts Streamlined Form 1023-EZ Application for Recognition of Exemption Under Section 501(c)(3)

Posted in Formation & Tax Exempt Status, Public Charities

In hopes of reducing the long backlog of exemption applications and ostensibly freeing up resources for more robust enforcement, the Internal Revenue Service released on Tuesday a new short-form tax exemption application, Form 1023-EZ, for certain small charities.  The release also includes instructions for completing the form. To be eligible to use the new form,… Continue Reading

Update — Expedited Handling for Determination Letters Still Available

Posted in AG, IRS, FTB, & Property Tax Proceedings, Formation & Tax Exempt Status, Private Foundations, Public Charities, Unions, Associations, Clubs & Other Tax-Exempt Organizations

For the past few weeks, there has been some confusion over Revenue Procedure 2014-4’s apparent elimination of an expedited option for exempt-organization determination letters as discussed previously, since the subsequent Revenue Procedure 2014-9 still included the explanation from previous years about the IRS’s standards for granting expedited treatment of exempt-organization determination letters. Earlier today, the… Continue Reading

IRS Removes Expedited Handling for Determination Letters

Posted in AG, IRS, FTB, & Property Tax Proceedings, Formation & Tax Exempt Status, Private Foundations, Public Charities, Unions, Associations, Clubs & Other Tax-Exempt Organizations

*** THIS POST HAS BEEN SUPERSEDED BY NEW INFORMATION FROM THE IRS.  PLEASE REFER TO http://www.nonprofitlawmatters.com/2014/01/29/update-expedited-handling-for-determination-letters-still-available/. *** In Section 9.03(3) of the new Revenue Procedure 2014-4, the IRS has clarified that the option to request expedited handling is no longer available for determination letters.  The Revenue Procedure defines a “determination letter” as “a written statement… Continue Reading

Waiting on the IRS? The Shutdown Isn’t Helping

Posted in AG, IRS, FTB, & Property Tax Proceedings, Formation & Tax Exempt Status, IRS, FTB & Attorney General Controversies

Like most parts of the federal government, the IRS is currently operating on a limited basis.  As of October 1, all live telephone lines have been closed, and any open or pending audits have been put on hold.  According to the IRS website, “people with appointments related to examinations (audits), collection, Appeals or Taxpayer Advocate… Continue Reading

IRS Recognizes Exemption for Nonprofit Community Newspaper

Posted in AG, IRS, FTB, & Property Tax Proceedings, Formation & Tax Exempt Status, Public Charities, Revenue Generating Activities

In recent years, the dramatic expansion of digital news content, and the redirection of advertising dollars away from print, has caused an equally dramatic decline in the viability of print journalism.  At the same time, the IRS has demonstrated increased skepticism about whether journalism is charitable, given the historically commercial aspect of news publication. One… Continue Reading

IRS Response to 501(c)(4) Scandal: Initial Assessment and Plan of Action

Posted in Formation & Tax Exempt Status, Tax Treatment of Lobbying & Political Activities, Unions, Associations, Clubs & Other Tax-Exempt Organizations

On June 24, 2013, Acting Commissioner of the IRS Daniel Werfel released a report titled “Charting a Path Forward at the IRS:  Initial Assessment and Plan of Action,” or, for the sake of brevity, the “Werfel Report.”  The Report responds to the Secretary of the Treasury’s request for a 30-day update on the IRS’s progress… Continue Reading

User-Friendly or User-Fraught? California Secretary of State’s New Form Articles for Nonprofit Corporations

Posted in AG, IRS, FTB, & Property Tax Proceedings, Formation & Tax Exempt Status

If you deal with the California Secretary of State’s office with any frequency, you’re probably already familiar with the new requirements for nonprofit articles of incorporation that kicked in at the start of this year. While it’s simple to provide the new information requested (i.e., the corporation’s initial street and mailing addresses), there’s another new development… Continue Reading

Let’s Improve 501(c)(4)s, Not Eradicate Them: Rosemary Fei on Bloomberg News

Posted in Formation & Tax Exempt Status, Tax Treatment of Lobbying & Political Activities, Unions, Associations, Clubs & Other Tax-Exempt Organizations

Earlier this week, Gregory Colvin and Rosemary Fei reported on the current scandal at the IRS concerning the Service’s improper review of certain tax-exemption applications, particularly those applications from conservative and Tea Party groups seeking recognition as 501(c)(4) social welfare organizations.  Since the news came out, some commentators have proposed eliminating the 501(c)(4) social welfare category… Continue Reading

A Bad Week for the IRS: Improper Scrutiny of Organizations Applying for Tax-Exempt Recognition

Posted in Formation & Tax Exempt Status, Tax Treatment of Lobbying & Political Activities, Unions, Associations, Clubs & Other Tax-Exempt Organizations

Five of our attorneys, Rob Wexler, Ingrid Mittermaier, Susan Dawson, and the two of us, were in the audience at the American Bar Association Exempt Organizations Committee meeting in Washington, D.C., on May 10. We heard the remarks from Lois Lerner, head of Exempt Organizations at the IRS, apologizing for how the exemption applications of… Continue Reading

IRS Sends Compliance Check Questionnaire to More Than 1,300 “Self-declared” 501(c)(4), (c)(5), and (c)(6) Organizations

Posted in Formation & Tax Exempt Status, Tax Treatment of Lobbying & Political Activities, Unions, Associations, Clubs & Other Tax-Exempt Organizations

As part of a compliance check initiative, this week the IRS sent out letters to more than 1,300 section 501(c)(4), (c)(5), and (c)(6) “self-declared” exempt organizations, requesting the completion of a nine-page online questionnaire (Form 14449) regarding their activities, revenue, and expenditures.  Unlike section 501(c)(3) charitable organizations, which are required to obtain an IRS determination of… Continue Reading

New Payout Requirements for Non-functionally Integrated Type III Supporting Organizations: Comment Period for Proposed Regulations Closes March 28, 2013

Posted in Formation & Tax Exempt Status, Nonprofit Structures, Relationships & Transactions, Public Charities

On December 28, 2012, the Treasury Department issued final, temporary, and proposed regulations regarding Type III supporting organizations (“Type III SOs”), effective that day.  The final and temporary regulations, including the substantial preamble, are here.  The temporary and proposed portions of the new regulations, available here, address the calculation of the annual payout requirement for… Continue Reading

Two New California Laws Benefiting Nonprofits

Posted in Formation & Tax Exempt Status, IRS, FTB & Attorney General Controversies, Nonprofit Governance & Ethics

Over 800 new California laws went into effect this January.  Two of them — SB 1341 and AB 2641 — directly affect nonprofit organizations, and are intended primarily to aid organizations in maintaining compliance with state regulations. SB 1341 provides an opportunity for nonprofit organizations that have neglected to file required reports with the Attorney General… Continue Reading