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Guidance for Nonprofits Collecting Money and Relief Supplies for Hurricane Disaster Victims

Question: Our nonprofit organization (public charity or private foundation) is collecting relief aid to help people in Texas, Florida or Puerto Rico who were seriously affected by the hurricanes. Disaster relief is not our normal charitable activity. If we collect money and supplies, can we tell our donors that their donations are tax deductible?

Answer: In most cases, yes. Largely because of the terrorist attacks on 9-11 and the subsequent formation of many hundreds of charities across the U.S., the IRS has issued special guidance for charities providing disaster relief.

The IRS states on its web site that a charitable organization may engage in charitable activities that were not described in its Form 1023 Application for Tax-Exempt Status as long as those activities do qualify as charitable and as long as the activities are described on the tax return it files.
In Disaster Relief Publication 3833, page 3, the IRS specifically states that charities may engage in disaster relief activities even though it was not specifically organized to provide disaster relief, as long as the activities are disclosed on the tax return. The IRS also indicates that it may be a good idea to report the activities to Determinations.

Here are some of the IRS’s primary concerns regarding the provision of disaster relief by a charity:

1. Earmarking: A donation cannot be solicited which is earmarked for a particular individual or family if it is to be treated as tax-deductible. So, you could not say that you are asking for donations for the Rodriguez family whose house was destroyed. That would not be a deductible donation. You should simply say that you are collecting relief aid for Houston (or Florida, or Puerto Rico). You could specifically mention that it is for people in a certain city or district if you wish and you could mention the types of assistance you are providing to the people.
2. Impermissible Benefits: Expenditures would be problematic if they were made to benefit family members or employees of a person who is an officer/director/ of the foundation.
3. Documentation: A charity should document who receives the money and goods (and how much–FMV) and what they do with it. I recommend reading IRS publication 3833 regarding documentation, pages 8-13 for specific guidance on the documentation requirements for long-term vs short-term disaster relief aid.

Deducting Contributions

In order for a donor to take a tax deduction for their donation, if the donation has a value of $250 or more, the foundation will need to provide a “contemporaneous acknowledgement” of the donation to the donor: A thank-you letter. Please see IRS Publication 1771, pages 2 and 3:  The thank you letter must say that “no goods or services were provided to you by the foundation in exchange for your donation” if that is the case, which it most likely should be.
Regarding a statement of deductibility: “We are a charitable private foundation (or a public charity, as appropriate) exempt under Section 501(c)(3) of the Internal Revenue Code. Donations are deductible to the extent allowed by law. Consult your tax adviser to determine the amount of any charitable deduction you may take.”
While donations would be tax deductible, they are subject to the 30% of AGI limitation for private foundations, and the 50% AGI limitation for donations to public charities. Other deductibility rules and limitations may apply to donations of non-cash items or inventory donated by businesses. A charity should generally not provide tax advice. Refer the donor to his or her tax adviser to determine if their donation will result in a benefit on their tax return. It is important to advise the donor whether the charity is a public charity or a private foundation, since that MAY impact the amount of the donation.

Registering to Solicit Charitable Donations

Another issue is the state charitable solicitation registration requirements. A charitable organization is usually required to register with the state to solicit contributions in that state. Most public charities have already registered, but some private foundations may not have been required to register previously since they often do not solicit contributions.
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IRS Makes Approved Form 1023-EZ Data Available Online

The IRS is making it easier to investigate charities and other tax-exempt organizations that applied for tax-exempt status using Form 1023-EZ.  Only data from approved applications will be available.  The Form 1023-EZ discloses limited information and currently does not contain copies of  Articles of Incorporation or detailed descriptions of purposes and activities.  Form 1023-EZ does not result in a determination by the IRS that the organization qualifies for tax-exempt status, rather, it is a “self-declaration” to be used by small organizations that qualify to file the 1023-EZ rather than the full Form 1023 Application for Tax-Exempt Status.

The following announcement was published by the IRS:

IR-2017-41, Feb. 22, 2017
WASHINGTON — The Internal Revenue Service announced today that publicly available information from approved applications for tax exemption using Form 1023-EZ, Streamlined Application for Recognition of Exemption, is now available electronically for the first time.

Here is the link to the page on the IRS website to access approved Form 1023-EZ data.

The data on is available in spreadsheet format and includes information for approved applications beginning in mid-2014, when the 1023-EZ form was introduced, through 2016. The information will be updated quarterly, starting with the first quarter of calendar year 2017. The IRS’s Tax Exempt and Government Entities division approved more than 105,000 applications for exemption submitted on the Form 1023-EZ from 2014 through 2016.

Previously, Form 1023-EZ data was only available through a lengthier process that included completing and submitting Form 4506-A to the IRS.
“The new online availability of Form 1023-EZ data is an important step forward and will allow taxpayers to more easily research information on tax-exempt organizations,” said IRS Commissioner John Koskinen. The IRS is committed to ongoing improvements in taxpayer service across the agency and we continue to look for innovative ways like this to provide taxpayers the information they need, when they need it.”

Information in the Form 1023-EZ includes basic identifying information such as the name of the organization, Employer Identification Number and the names of officers, directors and trustees. The Form also contains information regarding items such as the organizing documents, state of incorporation, purpose and activities of the organization.

Form 1023-EZ must be filed electronically. The IRS reminds filers that they should not include Social Security numbers on their submissions.
This is part of continuing effort to provide information about the tax-exempt community. In June 2016, the IRS announced that it was making publicly available data on electronically filed Forms 990 in machine-readable format through Amazon Web Services.

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New 501(c)(4) IRS Notice Requirements

Certain 501 (c)(4) organizations now have a requirement to notify the IRS that they are claiming tax-exempt status under IRC section 501c4. In the video above I explain the basics of the new rules and how to comply.

Understanding the New 501(c)(4) Rules

There are many types of tax-exempt nonprofit organizations. Two of the most common are the 501(c)(3) public charity, and the 501(c)(4) social welfare organization. There are three main differences between these organizations:

  1. A 501(c)(3) public charity is eligible to receive donations that are deductible as a charitable contribution on the donor’s tax return. A 501(c)(4) organization can receive donations tax-free, but they are not deductible as charitable contributions on the donor’s tax return.
  2. A 501(c)(3) public charity is subject to strict limits as to the amount of money it can expend on lobbying to influence legislation. A 501(c)(4) organization can engage in lobbying as its primary activity.
  3. A 501(c)(3) public charity is absolutely prohibited from engaging in any political speech undertaken to influence an election. A 501(c)(4) organization is not prohibited from attempting to influence elections by political speech, but influencing elections cannot be the primary purpose of a 501(c)(4). Note that all election-related activities are not limited. For instance, voter registration and non-partisan voter education activities are not considered activities that influence an election and can be engaged in by a 501(c)(4) organization in an unlimited amount.

Both types of organizations are prohibited–at least in theory–from disseminating propaganda.

Since Congress and the IRS create the rules under which tax-exempt organizations operate, those official bodies have an interest in monitoring the activities of organizations claiming to be tax-exempt under the laws and regulations. Section 508 requires most 501(c)(3) organizations to let the IRS know of their existence and that they are operating under section 501(c)(3). Churches are exempt from this notice requirement.

Until now, there has been no requirement that 501(c)(4) organizations notify the IRS of their existence beyond the filing of Form 990.

Why is filing Form 990 not enough to satisfy Congress and the IRS? It has to do with time. Because 501(c)(4) organizations have the ability to influence an election, and because electioneering cannot be the primary activity of a 501(c)(4), the IRS must somehow be able to monitor the extent of the electioneering activities of c4’s in a timely fashion, and must be able to do so without violating the rights of the organizations.

Since 501(c)(4) organizations have not had a requirement to notify the IRS up front, there is no way for the IRS and Congress to monitor the political activities of these organizations. The filing of Form 990 does serve as notice to the IRS, but a tax-exempt organization can delay the filing of a tax return for quite some time. As a typical example, assume that a 501(c)(4) organization is incorporated on January 1, 2016. The following is a typical timeline for filing a Form 990:

  • The organization operates for a full 12 months after formation. (Elapsed time: 12 months)
  • The organization’s first return is due  four and one-half months after its year end. (Elapsed time: 16 1/2 months)
  • The organization is allowed extensions of the Form 990 filing deadline of up to six months. (Elapsed time: 22 1/2 months).

As you can see, a new organization may not have to submit its first filing for 22 1/2 months, which is more than enough time to exert political influence.

As part of the Protecting Americans From Tax Hikes Act of 2015, Congress added section 506 to the Internal Revenue Code. This created the new notice requirement for 501(c)(4) organizations.

Essentially, the requirement is that all new organizations claiming to be tax-exempt under section 501(c)(4) are required to notify the IRS of their existence and their intent by electronically submitting the newly created Form 8976 within 60 days of formation. That’s not much time.

I won’t go into the entire history of the implementation of this new law. Suffice it to say that when Congress passed the law, the IRS was not ready to implement it. As a result there were some extensions of time to comply and some transition rules put into place. These can be confusing. All you really need to know to meet the filing deadlines (and avoid penalties) is this:

  • If the organization was formed after July 8, 2016, it has 60 days to notify the IRS by electronically submitting Form 8976.
  • If the organization was formed on or before July 8, 2016, it has until September 6, 2016 to notify the IRS by electronically submitting Form 8976.
  • If the organization was formed on or before July 8, 2016 and by that date has filed either Form 990 or Form 1024, it does not have to submit Form 8976.

Penalties for submitting the Form 8976 after the due date are $20 per day up to a maximum of $5,000. Penalties can be abated if the organization can show that it had reasonable cause for submitting Form 8976 after the due date.

Early reports are that the IRS website for submitting Form 8976 has some bugs that may prevent some organizations from properly completing the form. I expect that these bugs will eventually be worked out. However, if problems with the IRS website prevent an organization from filing Form 8976 by the due date, this should constitute reasonable cause for filing late.

That’s it.


File IRS Form 8976

PATH Act of 2015 (scroll to section 405)


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