Updated: February 12, 2022
December 19, 2021
Candace J. Dixon
Here are IRS news and updates for Exempt Organizations in December 2021.
IRS Revising Form 1024 to Allow for Electronic Submission
As part of an ongoing effort to improve service, the IRS is revising Form 1024, Application for Recognition of Exemption Under Section 501(a), and its instructions to allow electronic filing for the first time. The IRS expects electronic filing to be available early in 2022, at which point applications for recognition of exemption on Form 1024 must be submitted electronically online at www.pay.gov. There will be a grace period when paper versions of Form 1024 will still be accepted.
Organizations requesting determinations under sections 501(c)(11), (14), (16), (18), (21), (22), (23), (26), (27), (28), (29) and Section 501(d) that currently submit letter applications will use electronic Form 1024.
Organizations requesting determination under Section 521 will also be able to use electronic Form 1024 instead of Form 1028, Application for Recognition of Exemption Under Section 521.
Form 1024 will be revised accordingly.
New Technical Guides Published
Exempt Organizations and Government Entities published eight comprehensive Technical Guides that combine and update the Audit Technique Guides (ATG) with other technical content to replace corresponding ATGs as they are completed.
These are the newest Technical Guides:
TG 45 Suspension of Tax-Exempt Status of Terrorist Orgs under IRC 501(p)
TG 59 Taxes on Foundation Failure to Distribute Income IRC 4942
TG 61 Taxes on Investments which Jeopardize Charitable Purposes IRC 4944
LLCs Applying for Tax-exempt Status Under Section 501(c)(3) Must Submit the Information Requested in Notice 2021-56
Notice 2021-56 has requirements that must be met for a limited liability company (LLC) to receive a determination letter recognizing it as tax-exempt under Section 501(c)(3).
LLCs applying for recognition of exemption on Form 1023 must submit this information as part of their application. Otherwise, LLCs continue to complete Form 1023 following the form's Instructions.
1. Submit both the LLC’s state-approved articles of organization and its adopted operating agreement. Both the articles of organization and the operating agreement must contain the following:
Provisions requiring each member be either an organization under Section 501(c)(3) and exempt from tax under Section 501(a) or
(ii) a governmental unit under Section 170(c)(1) (or a wholly owned instrumentality of one).
A contingency plan in the event one or more members cease to be Section 501(c)(3) organizations or governmental units (or wholly owned instrumentalities), such as suspension of its membership rights until a member regains recognition of Section 501(c)(3) status) .
The charitable purposes and charitable dissolution clauses in Form 1023 Part III, lines 1 and 2.
The express Chapter 42 compliance provisions in Section 508(e)(1) if the LLC is a private foundation. See Instructions for Form 1023, Part VII, line 1a for more information.
Both the articles of organization and operating agreement must contain provisions requiring each member be either an organization in Section 501(c)(3) and exempt from tax under Section 501(a), or
a governmental unit in Section 170(c)(1), (or a wholly owned instrumentality of the governmental unit).
A contingency plan for if a member ceases to have Section 501(c)(3) organization status, or governmental units or wholly owned instrumentalities. such as the suspension of membership rights until the member regains its status.
The charitable purposes and charitable dissolution clauses in Form 1023, Part III, lines 1 and 2.
The express Chapter 42 compliance provisions in Section 508(e)(1) if the LLC is a private foundation. See Form 1023, Part VII, line 1a of the Instructions has more information.
NOTE: If you are formed under a state LLC law that prohibits the addition of provisions to articles of organization other than certain specific provisions required by the state LLC law, you may include the provisions above only in your operating agreement. Include an explanation if you necessary.
2. Submit this statement, signed and dated by an officer, director, trustee or governing body member - (not an authorized representative): “We represent that all provisions in our articles of organization and operating agreement are consistent with applicable state LLC law and are legally enforceable.”
New Form 4506-B and Revised Form 4506-A
Exempt Organizations (EO) released a new Form 4506-B, Request for a Copy of Exempt Organization IRS Application or Letter for use requesting copies of exempt organization's exemption application or determination letter. You can submit it by mail, fax or e-mail. Tax Exempt Organization Search (TEOS) can be used to access copies of determination letters issued in 2014 or later.
EO also revised Form 4506-A, Request for a Copy of Exempt or Political Organization IRS Form for requesting copies of exempt or political organization's returns, reports or notices. You can mail or fax it.
Use TEOS to get copies of Form 990‑N and direct access to 990-series returns received by the IRS in 2017 or later. Check it before submitting Form 4506-A to see if the return you want is there.Review the Instructions for the forms before submitting; incomplete or incorrect information or mailing, fax or email addresses will cause delays.
Online Taxable Unrelated Business Income Course
An organization may generate taxable income even though it is tax exempt. The Unrelated Business Income Course shows how to determine if you have taxable income, and how to report it.
IRS News Releases
IRS unveils new online identity verification process for accessing self-help tools
Tax Exempt Organization Search (TEOS) to Be Sole Source of EO Data
Starting December 31, 2021, the public data on electronically filed Form 990 will be available only on the TEOS page of the IRS website and will no longer be updated on AWS to make access to tax-exempt organization public data be in one location. See this IRS news release for more details.
Public Announcement of Revocations to Be Published in Internal Revenue Bulletin
In December 2021 - January 2022, EO Examinations will publish announcements in the Internal Revenue Bulletin about the revocation of exempt status for 77 organizations to resolve a backlog of IRB announcements referenced in Rev. Proc. 2018-32, 2018-23 I.R.B. 739. The IRS routinely makes announcements, some in the IRB, that organizations no longer qualify for tax-deductible charitable contributions. The 77 organizations have been removed from the Tax Exempt Organization Search listings and the Exempt Organizations Business Master File (EO BMF) Extract of organizations eligible for tax-deductible contributions.
Online Training: Understanding Disaster Relief Tax Law
There is online training for charitable organizations to assist with disaster relief. Disaster Relief - Part I and Disaster Relief - Part II discuss how charities may provide disaster relief; the applicable special tax rules; rules for employer-sponsored disaster relief organization; the deductibility of contributions to disaster relief organizations; and tax treatment of relief recipients.
Management and volunteers should do the Tax-Exempt Organization Workshop for information on benefits, limitations and expectations.
IRS News Releases
IRS unveils new online identity verification process for accessing self-help tools
Sources & Resources:
IRS EO Update: e-News for Charities & Nonprofits, December 20, 2021; December 15, 2021; December 3, 2021