If you are hoping to organize a new nonprofit this year, new legislation passed at the end of 2015 may have an impact on your organization. As part of the Protecting Americans from Tax Hikes (“PATH”) Act of 2015, a new section of the Internal Revenue Code was created by Congress. This new section, IRC Section 506, includes a new requirement that mandates that all organizations intending to operate as a Section 501(c)(4) must notify the IRS of its intent. This is done by electronically filing Form 8976, Notice of Intent to Operate Under Section 501(c)(4), a simple but important step to organizing your nonprofit that can have large consequences if ignored.

Form 8976 must be filed within 60 days of the nonprofit’s organization, and a small fee of $50 must be submitted to Pay.gov to complete your organization’s notification. The form itself consists of the following basic information:

1. Business name

2. Address

3. EIN

4. Date organized

5. State and country organized

6. Filing year/month

7. Statement of purpose of the organization

The vast majority of this information should be readily available to anyone intending to organize a Section 501. However, just because the form is quick and simple to fill out doesn’t mean it can be ignored. If an organization misses the 60-day deadline, the penalties can begin to really add up: for every day the failure to file Form 8976 continues, the IRS will add a penalty of $20 per day, up to a maximum of $5,000.

Failing to file Form 8976 can create a huge headache for newly formed nonprofit organizations. In general, with the ever-changing nature of the tax code, it is important to stay current on the most recent regulations put forth by Congress and the IRS. If you have any questions about how new regulations may affect your nonprofit organization, be sure to reach out to your GBQ nonprofit associate for any help you may need.

Article written by:
Justin Knight
Tax Senior

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