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Applications for tax-exempt status; new social welfare organizations form

Tax-exempt status; social welfare organizations form

The IRS, over the past few weeks, has released revisions to forms and instructions used by section 501(c)(3) organizations and most other organizations exempt under section 501(a) to apply for recognition of tax-exempt status.

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In addition, the IRS released a new form for section 501(c)(4) organizations that choose to apply for recognition of their tax-exempt status. Significant changes in each of these forms are summarized below.

Form 1023

Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, and instructions have been updated to:

  • Include the new public charity status for section 170(b)(1)(A)(ix) agricultural organizations 
  • Reflect the process for applying for retroactive reinstatement of tax-exempt status (for organizations that had their tax-exempt status automatically revoked for failure to file a required information return or notice for three consecutive years) 
  • Reflect changes to the public support test (i.e., years of financial data required) and the elimination of the advance ruling process 
  • Include clarifications that the sample conflict of interest policy contained in the instructions does not impose any specific requirements
  • Remove the ability of organizations not filing within 27 months of formation to request recognition of section 501(c)(4) status from the date of formation

Form 1023-EZ

Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, now includes a line instructing applicants to describe their mission and most significant activities, actual or planned, in 255 characters or less. 

Form 1024

Form 1024, Application for Recognition of Exemption Under Section 501(a), and its instructions were revised to clarify that section 501(c)(4) organizations, to the extent such organizations decide to apply for recognition of tax-exempt status, should use Form 1024-A, not Form 1024.

Form 1024-A

Form 1024-A, Application for Recognition of Exemption Under Section 501(c)(4) of the Internal Revenue Code, is to be used by organizations described in section 501(c)(4) that wish to apply for recognition of exemption. The instructions to the form make clear that such organizations are not required to file Form 1024-A, but may do so if they wish to receive an IRS determination letter of section 501(c)(4) status. The IRS released a draft version of the form on September 29, 2017.

Form 1024-A simplifies the application process for section 501(c)(4) organizations by removing those portions of Form 1024 not relevant to organizations seeking recognition under section 501(c)(4) while still collecting the information necessary for the IRS to make a determination of section 501(c)(4) status. While Form 1024-A requires much of the same information that was previously required by Form 1024, certain additional information not included in Form 1024 (e.g., information regarding grants to foreign organizations and family or business relationships between certain executives and employees and the organization) is now required as well.

 

For more information, contact a tax professional with KPMG’s Washington National Tax practice:

Alexandra Mitchell | +1 202 533 6078 | aomitchell@kpmg.com

Preston Quesenberry | +1 202 533 3985 | pquesenberry@kpmg.com 

Randall Thomas | +1 202 533 3786 | randallthomas@kpmg.com

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