Guidelines for the Streamlined Process of Applying for Recognition of Section 501(c)(3) Status, 29730-29733 [2017-13866]

Download as PDF mstockstill on DSK30JT082PROD with RULES 29730 Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Rules and Regulations (d) * * * (4) * * * (i) * * * (C) * * * (2) If the U.S. branch of an FFI is not treated as a U.S. person and applies the rules described in § 1.1471– 4(d)(2)(iii)(C) and provides the withholding agent with a withholding certificate that transmits information regarding its reporting pools referenced in paragraph (d)(4)(i)(B) of this section or information regarding each recipient that is an account holder or payee of the U.S. branch, the withholding agent must complete a separate Form 1042–S issued to the U.S. branch for each such pool to the extent required on the form and its accompanying instructions or must complete a separate Form 1042–S issued to each recipient whose documentation is associated with the U.S. branch’s withholding certificate as described in paragraph (d)(4)(ii)(A) of this section and report the U.S. branch as an entity not treated as a recipient; or (3) If the U.S. branch of an FFI is not treated as a U.S. person and applies the rules described in § 1.1471– 4(d)(2)(iii)(C) to the extent it fails to provide sufficient information regarding its account holders or payees, the withholding agent shall report the recipient of the payment as an unknown recipient to the extent recipient information is not provided and report the U.S. branch as provided in paragraph (d)(4)(ii)(A) of this section for an entity not treated as a recipient. * * * * * (ii) * * * (C) Disregarded entities. If a U.S. withholding agent makes a payment to a disregarded entity and receives a valid withholding certificate or other documentary evidence from the person that is the single owner of such disregarded entity, the withholding agent must file a Form 1042–S treating the single owner as the recipient in accordance with the instructions to the Form 1042–S. (iii) Reporting by participating FFIs and deemed-compliant FFIs (including QIs, WPs, and WTs) and U.S. branches of FFIs not treated as U.S. persons—(A) In general. Except as otherwise provided in paragraph (d)(4)(iii)(B) (relating to NQIs, NWPs, NWTs, and FFIs electing under section 1471(b)(3)) and § 1.1471–4(d)(2)(ii)(F) (relating to transitional payee-specific reporting for payments to nonparticipating FFIs), a participating FFI or deemed-compliant FFI (including a QI, WP, or WT), and a U.S. branch of an FFI that is not treated as a U.S. person that applies the rules described in § 1.1471–4(d)(2)(iii)(C) that VerDate Sep<11>2014 17:26 Jun 29, 2017 Jkt 241001 makes a payment that is a chapter 4 reportable amount to a recalcitrant account holder or nonparticipating FFI must complete a Form 1042–S to report such payments. A participating FFI or registered deemed-compliant FFI (including a QI, WP, or WT), and a U.S. branch of an FFI that is not treated as a U.S. person that applies the rules described in § 1.1471–4(d)(2)(iii)(C) may report in pools consisting of its recalcitrant account holders and payees that are nonparticipating FFIs. With respect to recalcitrant account holders, the FFI may report in pools consisting of recalcitrant account holders within a particular status described in § 1.1471– 4(d)(6) and within a particular income code. Except as otherwise provided in § 1.1471–4(d)(2)(ii)(F), with respect to payees that are nonparticipating FFIs, the FFI may report in pools consisting of one or more nonparticipating FFIs that fall within a particular income code and within a particular status code described in the instructions to Form 1042–S. Alternatively, a participating FFI or registered deemed-compliant FFI (including a QI, WP, or WT) and a U.S. branch of an FFI that is not treated as a U.S. person that applies the rules described in § 1.1471–4(d)(2)(iii)(C) may (and a certified deemed-compliant FFI is required to) perform payee-specific reporting to report a chapter 4 reportable amount paid to a recalcitrant account holder or a nonparticipating FFI when withholding was applied (or should have applied) to the payment. (B) Special reporting requirements of participating FFIs, deemed-compliant FFIs, FFIs that make an election under section 1471(b)(3), and U.S. branches of FFIs not treated as U.S. persons. Except as otherwise provided in § 1.1471– 4(d)(2)(ii)(F), a participating FFI or deemed-compliant FFI that is an NQI, NWP, or NWT, and a U.S. branch of an FFI that is not treated as a U.S. person that applies the rules described in § 1.1471–4(d)(2)(iii)(C) or an FFI that has made an election under section 1471(b)(3) and has provided sufficient information to its withholding agent to withhold and report the payment is not required to report the payment on Form 1042–S as described in paragraph (d)(4)(iii)(A) of this section if the payment is made to a nonparticipating FFI or recalcitrant account holder and its withholding agent has withheld the correct amount of tax on such payment and correctly reported the payment on a Form 1042–S. Such FFI or branch is required to report a payment, however, when the FFI knows, or has reason to know, that less than the required amount has been withheld by the PO 00000 Frm 00032 Fmt 4700 Sfmt 4700 withholding agent on the payment or the withholding agent has not correctly reported the payment on Form 1042–S. In such case, the FFI or branch must report on Form 1042–S to the extent required under paragraph (d)(4)(iii)(A) of this section. See, however, § 1.1471– 4(d)(6) for the requirement to report certain aggregate information regarding accounts held by recalcitrant account holders on Form 8966, ‘‘FATCA Report,’’ regardless of whether withholdable payments are made to such accounts. * * * * * Martin V. Franks, Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration). [FR Doc. 2017–13632 Filed 6–29–17; 8:45 am] BILLING CODE 4830–01–P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [TD 9819] RIN 1545–BM06 Guidelines for the Streamlined Process of Applying for Recognition of Section 501(c)(3) Status Internal Revenue Service (IRS), Treasury. ACTION: Final regulations and removal of temporary regulations. AGENCY: This document contains final regulations that allow the Commissioner of Internal Revenue to adopt a streamlined application process that eligible organizations may use to apply for recognition of tax-exempt status under section 501(c)(3) of the Internal Revenue Code (Code). The final regulations affect organizations seeking recognition of tax-exempt status under section 501(c)(3). DATES: Effective Date: These regulations are effective on June 30, 2017. Applicability Dates: For dates of applicability, see §§ 1.501(a)–1(f), 1.501(c)(3)–1(h), and 1.508–1(c). FOR FURTHER INFORMATION CONTACT: Peter A. Holiat at (202) 317–5800 (not a toll-free number). SUPPLEMENTARY INFORMATION: SUMMARY: Background Since 1969, section 508 of the Code has required an organization seeking tax-exempt status under section 501(c)(3), as a condition of its E:\FR\FM\30JNR1.SGM 30JNR1 mstockstill on DSK30JT082PROD with RULES Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Rules and Regulations exemption, to notify the Secretary of the Treasury (or his delegate) that it is applying for recognition of exempt status in the manner prescribed in regulations, unless it is specifically excepted from the requirement. Longstanding regulations under §§ 1.501(a)–1, 1.501(c)(3)–1, and 1.508– 1 had required all organizations applying for recognition of section 501(c)(3) exempt status to submit a properly completed and executed Form 1023, ‘‘Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code,’’ (see § 1.508–1(a)(2) as contained in 26 CFR part 1, revised April 1, 2014) and to submit with, and as part of, the application, a detailed statement of its proposed activities (see §§ 1.501(a)– 1(b)(1)(iii) and 1.501(c)(3)–1(b)(1)(v) as contained in 26 CFR part 1, revised April 1, 2014). Detailed procedures for applying for recognition of exemption are included in annual revenue procedures and in the instructions for Form 1023. See § 601.601(d)(2)(i)(b). On July 2, 2014, final and temporary regulations (TD 9674) authorizing the Commissioner to adopt a streamlined application process that eligible organizations may use to apply for recognition of tax-exempt status under section 501(c)(3) were published in the Federal Register (79 FR 37630). The final and temporary regulations were effective and applicable on July 1, 2014. The 2014 final regulations removed and reserved certain paragraphs of the longstanding final regulations addressed by corresponding paragraphs of the new temporary regulations. Under the temporary regulations, the IRS instituted the streamlined application process on Form 1023–EZ, ‘‘Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code,’’ the detailed procedures for which have been provided in annual revenue procedures, most recently in Rev. Proc. 2017–5, 2017–1 IRB 230, and in the instructions for Form 1023–EZ. Also on July 2, 2014, a notice of proposed rulemaking (REG–110948–14) cross-referencing the temporary regulations and soliciting public comments and requests for a hearing was published in the Federal Register (79 FR 37697). No comments responding to the notice of proposed rulemaking were received, and no public hearing was requested or held. The IRS continues to consider improvements to Form 1023–EZ based on its own experience and informal comments received from the public and other stakeholders on the form, including whether to require applicants VerDate Sep<11>2014 17:26 Jun 29, 2017 Jkt 241001 to submit a brief statement of actual or proposed activities. Because the proposed regulations contemplate that guidance published in the Internal Revenue Bulletin may prescribe the information required of Form 1023–EZ filers, including regarding their proposed activities, the Department of the Treasury (Treasury Department) and the IRS have concluded that the proposed regulations are sufficiently flexible to allow such a revision to the Form 1023–EZ at a future date, as resources permit. Accordingly, this Treasury decision adopts as final regulations, without substantive change, the proposed regulations set forth in the 2014 notice of proposed rulemaking and removes the corresponding temporary regulations. Explanation of Provisions The Treasury Department and the IRS have considered how the process of meeting the notice requirement of section 508 in seeking recognition of tax-exempt status may be made more efficient for certain smaller organizations. The IRS developed Form 1023–EZ to provide a simplified application form that relies more heavily on attestations by the organization that it meets the section 501(c)(3) organizational and operational requirements, which are explained in the accompanying form instructions. The new form was made available for use by eligible small organizations in July 2014, following the issuance of the temporary regulations and a revenue procedure describing the streamlined application process. The streamlined application process generally allows eligible small organizations to receive IRS determinations of tax-exempt status more quickly and allows the IRS to focus resources on more complex exemption applications and on compliance programs. This Treasury decision adopts the 2014 proposed regulations by amending §§ 1.501(a)–1, 1.501(c)(3)–1, and 1.508–1 to authorize the continued use of the IRS’ streamlined process by eligible organizations to meet the notice requirements of section 508. Specifically, this Treasury decision amends §§ 1.501(a)–1 and 1.501(c)(3)–1, as in effect before July 2, 2014, to authorize the Treasury Department and the IRS to modify, by applicable regulations or other guidance published in the Internal Revenue Bulletin, the requirement that an organization applying for section 501(c)(3) taxexempt status provide a detailed statement of its proposed activities. This document also amends the § 1.501(a)–1 provisions relating to the PO 00000 Frm 00033 Fmt 4700 Sfmt 4700 29731 Commissioner’s ability to revoke a determination because of a change in the law or regulations, or for other good cause, to reference the Commissioner’s authority to retroactively revoke a determination under section 7805(b). No substantive change is intended by this amendment. This Treasury decision also amends the requirement in § 1.501(a)– 1(b)(3) that an organization claiming to be exempted from filing annual returns file a statement supporting its claim with and as a part of its application. As amended, § 1.501(a)–1(b)(3) allows an organization to file the statement either in its application, or in a manner prescribed in guidance published in the Internal Revenue Bulletin. See Rev. Proc. 2017–5 for rules for filing this statement on Form 8940, ‘‘Request for Miscellaneous Determinations.’’ In addition, this document amends § 1.508–1 to provide that eligible organizations may use Form 1023–EZ to notify the Commissioner of their applications for tax-exempt status under section 501(c)(3). This Treasury decision also amends §§ 1.501(a)–1 and 1.508–1 to state that the office to which applications should be submitted will be published in the Internal Revenue Bulletin or instructions to the Form 1023 or Form 1023–EZ. Finally, this Treasury decision incorporates minor revisions within the portions of §§ 1.501(a)–1, 1.501(c)(3)–1, and 1.508–1 that are otherwise being amended. In § 1.501(a)–1(a)(2), the reference to ‘‘internal revenue district’’ is removed because such reference has been made obsolete by the enactment of the Internal Revenue Service Restructuring and Reform Act of 1998, Public Law 105–206, 112 Stat. 685. References to a district director in §§ 1.501(a)–1, 1.501(c)(3)–1, and 1.508– 1 are also modified as appropriate, as those positions no longer exist within the IRS. Similarly, references to obsolete due dates for filing notices described in section 508 and related transition relief provisions that are no longer relevant have been removed from §§ 1.508– 1(a)(2)(i) and (b)(2)(iv). In addition, § 1.508–1(b)(2)(v) has been revised to remove a reference to the instructions for Form 4653, which is no longer in use. Effective/Applicability Dates The temporary regulations have applied since July 1, 2014, and this Treasury decision adopts the proposed regulations that cross-referenced the text of those temporary regulations without substantive change. Thus, the final regulations apply on and after July 1, 2014. E:\FR\FM\30JNR1.SGM 30JNR1 29732 Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Rules and Regulations Statement of Availability of IRS Documents Rev. Proc. 2017–5 is published in the Internal Revenue Bulletin and is available from the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402, or by visiting the IRS Web site at http:// www.irs.gov. Special Analyses Certain IRS regulations, including these, are exempt from the requirements of Executive Order 12866, as supplemented and reaffirmed by Executive Order 13563. Therefore, a regulatory impact assessment is not required. It is hereby certified that this rule will not have a significant economic impact on a substantial number of small entities. Although this rule may affect a substantial number of eligible small entities that choose to use Form 1023–EZ to apply for recognition of tax-exempt status under section 501(c)(3), the Form 1023–EZ streamlines the application process, thereby reducing the economic impact on these entities. This rule merely permits use of the streamlined form of application available to satisfy the notice requirements under section 508(a). Therefore, a Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. Pursuant to section 7805(f), the temporary and proposed regulations preceding these final regulations were submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business and no comments were received. Drafting Information The principal author of these regulations is Peter A. Holiat of the Office of Associate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the Treasury Department and the IRS participated in their development. List of Subjects in 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. mstockstill on DSK30JT082PROD with RULES Adoption of Amendments to the Regulations Accordingly, 26 CFR part 1 is amended as follows: PART 1—INCOME TAXES Paragraph 1. The authority citation for part 1 continues to read in part as follows: ■ Authority: 26 U.S.C. 7805 * * * VerDate Sep<11>2014 17:26 Jun 29, 2017 Jkt 241001 Par. 2. Section 1.501(a)–1 is amended by revising paragraphs (a)(2), (b)(1), (b)(3), and (f) to read as follows: ■ § 1.501(a)–1 Exemption from taxation. (a) * * * (2) An organization, other than an employees’ trust described in section 401(a), is not exempt from tax merely because it is not organized and operated for profit. In order to establish its exemption, it is necessary that every such organization claiming exemption file an application form as set forth below with the appropriate office as designated by the Commissioner in guidance published in the Internal Revenue Bulletin, forms, or instructions to the applicable forms. Subject only to the Commissioner’s inherent power to revoke rulings, including with retroactive effect as permitted under section 7805(b), because of a change in the law or regulations or for other good cause, an organization that has been determined by the Commissioner (or previously by a district director) to be exempt under section 501(a) or the corresponding provision of prior law may rely upon such determination so long as there are no substantial changes in the organization’s character, purposes, or methods of operation. An organization that has been determined to be exempt under the provisions of the Internal Revenue Code of 1939 or prior law is not required to secure a new determination of exemption merely because of the enactment of the Internal Revenue Code of 1954 unless affected by substantive changes in law made by such Code. * * * * * (b) Additional proof by particular classes of organizations—(1) Unless otherwise prescribed by applicable regulations or other guidance published in the Internal Revenue Bulletin, organizations mentioned below shall submit with and as a part of their applications the following information: (i) Mutual insurance companies shall submit copies of the policies or certificates of membership issued by them. (ii) In the case of title holding companies described in section 501(c)(2), if the organization for which title is held has not been specifically notified in writing by the Internal Revenue Service that it is held to be exempt under section 501(a), the title holding company shall submit the information indicated herein as necessary for a determination of the status of the organization for which title is held. (iii) An organization described in section 501(c)(3) shall submit with, and PO 00000 Frm 00034 Fmt 4700 Sfmt 4700 as a part of, an application filed after July 26, 1959, a detailed statement of its proposed activities. * * * * * (3) An organization claiming to be specifically exempted by section 6033(a) from filing annual returns shall submit with and as a part of its application (or in such other manner as is prescribed in guidance published in the Internal Revenue Bulletin) a statement of all the facts on which it bases its claim. * * * * * (f) Effective/applicability date. Paragraphs (a)(2), (b)(1), and (b)(3) of this section apply on and after July 1, 2014. Section 1.501(a)–1T [Removed]. Par. 3. Section 1.501(a)–1T is removed. ■ Par. 4. Section 1.501(c)(3)–1 is amended by revising paragraphs (b)(1)(v), (b)(6), and (h) to read as follows: ■ § 1.501(c)(3)–1 Organizations organized and operated for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or for the prevention of cruelty to children or animals. * * * * * (b) * * * (1) * * * (v) Unless otherwise prescribed by applicable regulations or other guidance published in the Internal Revenue Bulletin, an organization must, in order to establish its exemption, submit a detailed statement of its proposed activities with and as a part of its application for exemption (see § 1.501(a)–1(b)). * * * * * (6) Applicability of the organizational test. A determination by the Commissioner that an organization is described in section 501(c)(3) and exempt under section 501(a) will not be granted after July 26, 1959, regardless of when the application is filed, unless such organization meets the organizational test prescribed by this paragraph (b). If, before July 27, 1959, an organization has been determined by the Commissioner or district director to be exempt as an organization described in section 501(c)(3) or in a corresponding provision of prior law and such determination has not been revoked before such date, the fact that such organization does not meet the organizational test prescribed by this paragraph (b) shall not be a basis for revoking such determination. Accordingly, an organization that has been determined to be exempt before July 27, 1959, and which does not seek E:\FR\FM\30JNR1.SGM 30JNR1 Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Rules and Regulations a new determination of exemption is not required to amend its articles of organization to conform to the rules of this paragraph (b), but any organization that seeks a determination of exemption after July 26, 1959, must have articles of organization that meet the rules of this paragraph (b). For the rules relating to whether an organization determined to be exempt before July 27, 1959, is organized exclusively for one or more exempt purposes, see 26 CFR (1939) 39.101(6)–1 (Regulations 118) as made applicable to the Code by Treasury Decision 6091, approved August 16, 1954 (19 FR 5167; 1954–2 CB 47). * * * * * (h) Effective/applicability date. Paragraphs (b)(1)(v) and (b)(6) of this section apply on and after July 1, 2014. Section 1.501(c)(3)–1T [Removed]. Par. 5. Section 1.501(c)(3)–1T is removed. ■ Par. 6. Section 1.508–1 is amended by revising paragraphs (a)(2)(i), (a)(2)(ii), (b)(2)(iv), (b)(2)(v), and (c) to read as follows: ■ mstockstill on DSK30JT082PROD with RULES § 1.508–1 Notices. (a) * * * (2) Filing of notice—(i) For purposes of paragraph (a)(1) of this section, except as provided in paragraph (a)(3) of this section, an organization seeking exemption under section 501(c)(3) must file the notice described in section 508(a) within 15 months from the end of the month in which the organization was organized. Such notice is filed by submitting a properly completed and executed Form 1023 (or, if applicable, Form 1023–EZ) exemption application. Notice should be filed with the appropriate office as designated by the Commissioner in guidance published in the Internal Revenue Bulletin, forms, or instructions to the applicable forms. A request for extension of time for the filing of such notice should be submitted to such appropriate office. Such request may be granted if it demonstrates that additional time is required. (ii) Although the information required by either Form 1023 or Form 1023–EZ must be submitted to satisfy the notice required by this section, the failure to supply, within the required time, all of the information required to complete such form is not alone sufficient to deny exemption from the date of organization to the date such complete information for such form is submitted by the organization. If the information that is submitted within the required time is incomplete, and the organization supplies the necessary additional VerDate Sep<11>2014 17:26 Jun 29, 2017 Jkt 241001 29733 information requested by the Commissioner within the additional time period allowed, the original notice will be considered timely. * * * * * (b) * * * (2) * * * (iv) Any organization filing notice under this paragraph (b)(2)(iv) shall file its notice by submitting a properly completed and executed Form 1023 (or, if applicable, Form 1023–EZ) and providing information that it is not a private foundation. The organization shall also submit all information required by the regulations under section 170 or 509 (whichever is applicable) necessary to establish recognition of its classification as an organization described in section 509(a)(1), (2), (3), or (4). The notice required by this paragraph (b)(2)(iv) should be filed with the appropriate office as designated by the Commissioner in guidance published in the Internal Revenue Bulletin, forms, or instructions to the applicable forms. (v) An extension of time for the filing of a notice under this paragraph (b)(2) may be granted by the office with which the notice is filed upon timely request by the organization, if the organization demonstrates that additional time is required. * * * * * (c) Effective/applicability date. Paragraphs (a)(2)(i), (a)(2)(ii), (b)(2)(iv), and (b)(2)(v) of this section apply on and after July 1, 2014. DEPARTMENT OF THE TREASURY Section 1.508–1T Background [Removed]. Par. 7. Section 1.508–1T is removed. Kirsten B. Wielobob, Deputy Commissioner for Services and Enforcement. Approved: June 9, 2017. Thomas West, Tax Legislative Counsel. [FR Doc. 2017–13866 Filed 6–29–17; 8:45 am] BILLING CODE 4830–01–P PO 00000 Internal Revenue Service 26 CFR Parts 1 and 301 [TD 9809] RIN 1545–BL72 RIN 1545–BN79 Regulations Relating to Information Reporting by Foreign Financial Institutions and Withholding on Certain Payments to Foreign Financial Institutions and Other Foreign Entities; Correction Internal Revenue Service (IRS), Treasury. ACTION: Final and temporary regulations; correction. AGENCY: This document contains a correction to final and temporary regulations (TD 9809) that were published in the Federal Register on Friday, January 6, 2017 (82 FR 2124). The final and temporary regulations under chapter 4 of Subtitle A (sections 1471 through 1474) of the Internal Revenue Code of 1986 (Code) relate to information reporting by foreign financial institutions (FFIs) with respect to U.S. accounts and withholding on certain payments to FFIs and other foreign entities. DATES: This correction is effective June 30, 2017 and is applicable beginning January 6, 2017. FOR FURTHER INFORMATION CONTACT: Kamela Nelan at (202) 317–6942 (not a toll-free number). SUPPLEMENTARY INFORMATION: SUMMARY: The final and temporary regulations (TD 9809) that are subject of this correction are under sections 1471 through 1474 of the Internal Revenue Code. Need for Correction As published, the final and temporary regulations (TD 9809) contain an error that proves to be misleading and is in need of clarification. Correction of Publication Accordingly, the final and temporary regulations (TD 9809) that are the subject of FR Doc. 2016–31601 are corrected as follows: ■ On page 2192, column 1, under the title heading PART 301—PROCEDURE AND ADMINISTRATION, the first line, the language ‘‘Par. 23. Need Authority’’ is corrected to read ‘‘Par. 23. The authority citation for part 301 continues to read in part as follows: Frm 00035 Fmt 4700 Sfmt 4700 E:\FR\FM\30JNR1.SGM 30JNR1

Agencies

[Federal Register Volume 82, Number 125 (Friday, June 30, 2017)]
[Rules and Regulations]
[Pages 29730-29733]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-13866]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9819]
RIN 1545-BM06


Guidelines for the Streamlined Process of Applying for 
Recognition of Section 501(c)(3) Status

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations and removal of temporary regulations.

-----------------------------------------------------------------------

SUMMARY: This document contains final regulations that allow the 
Commissioner of Internal Revenue to adopt a streamlined application 
process that eligible organizations may use to apply for recognition of 
tax-exempt status under section 501(c)(3) of the Internal Revenue Code 
(Code). The final regulations affect organizations seeking recognition 
of tax-exempt status under section 501(c)(3).

DATES: 
    Effective Date: These regulations are effective on June 30, 2017.
    Applicability Dates: For dates of applicability, see Sec. Sec.  
1.501(a)-1(f), 1.501(c)(3)-1(h), and 1.508-1(c).

FOR FURTHER INFORMATION CONTACT: Peter A. Holiat at (202) 317-5800 (not 
a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    Since 1969, section 508 of the Code has required an organization 
seeking tax-exempt status under section 501(c)(3), as a condition of 
its

[[Page 29731]]

exemption, to notify the Secretary of the Treasury (or his delegate) 
that it is applying for recognition of exempt status in the manner 
prescribed in regulations, unless it is specifically excepted from the 
requirement. Longstanding regulations under Sec. Sec.  1.501(a)-1, 
1.501(c)(3)-1, and 1.508-1 had required all organizations applying for 
recognition of section 501(c)(3) exempt status to submit a properly 
completed and executed Form 1023, ``Application for Recognition of 
Exemption Under Section 501(c)(3) of the Internal Revenue Code,'' (see 
Sec.  1.508-1(a)(2) as contained in 26 CFR part 1, revised April 1, 
2014) and to submit with, and as part of, the application, a detailed 
statement of its proposed activities (see Sec. Sec.  1.501(a)-
1(b)(1)(iii) and 1.501(c)(3)-1(b)(1)(v) as contained in 26 CFR part 1, 
revised April 1, 2014). Detailed procedures for applying for 
recognition of exemption are included in annual revenue procedures and 
in the instructions for Form 1023. See Sec.  601.601(d)(2)(i)(b).
    On July 2, 2014, final and temporary regulations (TD 9674) 
authorizing the Commissioner to adopt a streamlined application process 
that eligible organizations may use to apply for recognition of tax-
exempt status under section 501(c)(3) were published in the Federal 
Register (79 FR 37630). The final and temporary regulations were 
effective and applicable on July 1, 2014. The 2014 final regulations 
removed and reserved certain paragraphs of the longstanding final 
regulations addressed by corresponding paragraphs of the new temporary 
regulations. Under the temporary regulations, the IRS instituted the 
streamlined application process on Form 1023-EZ, ``Streamlined 
Application for Recognition of Exemption Under Section 501(c)(3) of the 
Internal Revenue Code,'' the detailed procedures for which have been 
provided in annual revenue procedures, most recently in Rev. Proc. 
2017-5, 2017-1 IRB 230, and in the instructions for Form 1023-EZ.
    Also on July 2, 2014, a notice of proposed rulemaking (REG-110948-
14) cross-referencing the temporary regulations and soliciting public 
comments and requests for a hearing was published in the Federal 
Register (79 FR 37697). No comments responding to the notice of 
proposed rulemaking were received, and no public hearing was requested 
or held. The IRS continues to consider improvements to Form 1023-EZ 
based on its own experience and informal comments received from the 
public and other stakeholders on the form, including whether to require 
applicants to submit a brief statement of actual or proposed 
activities. Because the proposed regulations contemplate that guidance 
published in the Internal Revenue Bulletin may prescribe the 
information required of Form 1023-EZ filers, including regarding their 
proposed activities, the Department of the Treasury (Treasury 
Department) and the IRS have concluded that the proposed regulations 
are sufficiently flexible to allow such a revision to the Form 1023-EZ 
at a future date, as resources permit. Accordingly, this Treasury 
decision adopts as final regulations, without substantive change, the 
proposed regulations set forth in the 2014 notice of proposed 
rulemaking and removes the corresponding temporary regulations.

Explanation of Provisions

    The Treasury Department and the IRS have considered how the process 
of meeting the notice requirement of section 508 in seeking recognition 
of tax-exempt status may be made more efficient for certain smaller 
organizations. The IRS developed Form 1023-EZ to provide a simplified 
application form that relies more heavily on attestations by the 
organization that it meets the section 501(c)(3) organizational and 
operational requirements, which are explained in the accompanying form 
instructions. The new form was made available for use by eligible small 
organizations in July 2014, following the issuance of the temporary 
regulations and a revenue procedure describing the streamlined 
application process. The streamlined application process generally 
allows eligible small organizations to receive IRS determinations of 
tax-exempt status more quickly and allows the IRS to focus resources on 
more complex exemption applications and on compliance programs. This 
Treasury decision adopts the 2014 proposed regulations by amending 
Sec. Sec.  1.501(a)-1, 1.501(c)(3)-1, and 1.508-1 to authorize the 
continued use of the IRS' streamlined process by eligible organizations 
to meet the notice requirements of section 508.
    Specifically, this Treasury decision amends Sec. Sec.  1.501(a)-1 
and 1.501(c)(3)-1, as in effect before July 2, 2014, to authorize the 
Treasury Department and the IRS to modify, by applicable regulations or 
other guidance published in the Internal Revenue Bulletin, the 
requirement that an organization applying for section 501(c)(3) tax-
exempt status provide a detailed statement of its proposed activities. 
This document also amends the Sec.  1.501(a)-1 provisions relating to 
the Commissioner's ability to revoke a determination because of a 
change in the law or regulations, or for other good cause, to reference 
the Commissioner's authority to retroactively revoke a determination 
under section 7805(b). No substantive change is intended by this 
amendment. This Treasury decision also amends the requirement in Sec.  
1.501(a)-1(b)(3) that an organization claiming to be exempted from 
filing annual returns file a statement supporting its claim with and as 
a part of its application. As amended, Sec.  1.501(a)-1(b)(3) allows an 
organization to file the statement either in its application, or in a 
manner prescribed in guidance published in the Internal Revenue 
Bulletin. See Rev. Proc. 2017-5 for rules for filing this statement on 
Form 8940, ``Request for Miscellaneous Determinations.''
    In addition, this document amends Sec.  1.508-1 to provide that 
eligible organizations may use Form 1023-EZ to notify the Commissioner 
of their applications for tax-exempt status under section 501(c)(3). 
This Treasury decision also amends Sec. Sec.  1.501(a)-1 and 1.508-1 to 
state that the office to which applications should be submitted will be 
published in the Internal Revenue Bulletin or instructions to the Form 
1023 or Form 1023-EZ.
    Finally, this Treasury decision incorporates minor revisions within 
the portions of Sec. Sec.  1.501(a)-1, 1.501(c)(3)-1, and 1.508-1 that 
are otherwise being amended. In Sec.  1.501(a)-1(a)(2), the reference 
to ``internal revenue district'' is removed because such reference has 
been made obsolete by the enactment of the Internal Revenue Service 
Restructuring and Reform Act of 1998, Public Law 105-206, 112 Stat. 
685. References to a district director in Sec. Sec.  1.501(a)-1, 
1.501(c)(3)-1, and 1.508-1 are also modified as appropriate, as those 
positions no longer exist within the IRS. Similarly, references to 
obsolete due dates for filing notices described in section 508 and 
related transition relief provisions that are no longer relevant have 
been removed from Sec. Sec.  1.508-1(a)(2)(i) and (b)(2)(iv). In 
addition, Sec.  1.508-1(b)(2)(v) has been revised to remove a reference 
to the instructions for Form 4653, which is no longer in use.

Effective/Applicability Dates

    The temporary regulations have applied since July 1, 2014, and this 
Treasury decision adopts the proposed regulations that cross-referenced 
the text of those temporary regulations without substantive change. 
Thus, the final regulations apply on and after July 1, 2014.

[[Page 29732]]

Statement of Availability of IRS Documents

    Rev. Proc. 2017-5 is published in the Internal Revenue Bulletin and 
is available from the Superintendent of Documents, U.S. Government 
Printing Office, Washington, DC 20402, or by visiting the IRS Web site 
at http://www.irs.gov.

Special Analyses

    Certain IRS regulations, including these, are exempt from the 
requirements of Executive Order 12866, as supplemented and reaffirmed 
by Executive Order 13563. Therefore, a regulatory impact assessment is 
not required. It is hereby certified that this rule will not have a 
significant economic impact on a substantial number of small entities. 
Although this rule may affect a substantial number of eligible small 
entities that choose to use Form 1023-EZ to apply for recognition of 
tax-exempt status under section 501(c)(3), the Form 1023-EZ streamlines 
the application process, thereby reducing the economic impact on these 
entities. This rule merely permits use of the streamlined form of 
application available to satisfy the notice requirements under section 
508(a). Therefore, a Regulatory Flexibility Analysis under the 
Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. 
Pursuant to section 7805(f), the temporary and proposed regulations 
preceding these final regulations were submitted to the Chief Counsel 
for Advocacy of the Small Business Administration for comment on their 
impact on small business and no comments were received.

Drafting Information

    The principal author of these regulations is Peter A. Holiat of the 
Office of Associate Chief Counsel (Tax Exempt and Government Entities). 
However, other personnel from the Treasury Department and the IRS 
participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 1 is amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805 * * *


0
Par. 2. Section 1.501(a)-1 is amended by revising paragraphs (a)(2), 
(b)(1), (b)(3), and (f) to read as follows:


Sec.  1.501(a)-1   Exemption from taxation.

    (a) * * *
    (2) An organization, other than an employees' trust described in 
section 401(a), is not exempt from tax merely because it is not 
organized and operated for profit. In order to establish its exemption, 
it is necessary that every such organization claiming exemption file an 
application form as set forth below with the appropriate office as 
designated by the Commissioner in guidance published in the Internal 
Revenue Bulletin, forms, or instructions to the applicable forms. 
Subject only to the Commissioner's inherent power to revoke rulings, 
including with retroactive effect as permitted under section 7805(b), 
because of a change in the law or regulations or for other good cause, 
an organization that has been determined by the Commissioner (or 
previously by a district director) to be exempt under section 501(a) or 
the corresponding provision of prior law may rely upon such 
determination so long as there are no substantial changes in the 
organization's character, purposes, or methods of operation. An 
organization that has been determined to be exempt under the provisions 
of the Internal Revenue Code of 1939 or prior law is not required to 
secure a new determination of exemption merely because of the enactment 
of the Internal Revenue Code of 1954 unless affected by substantive 
changes in law made by such Code.
* * * * *
    (b) Additional proof by particular classes of organizations--(1) 
Unless otherwise prescribed by applicable regulations or other guidance 
published in the Internal Revenue Bulletin, organizations mentioned 
below shall submit with and as a part of their applications the 
following information:
    (i) Mutual insurance companies shall submit copies of the policies 
or certificates of membership issued by them.
    (ii) In the case of title holding companies described in section 
501(c)(2), if the organization for which title is held has not been 
specifically notified in writing by the Internal Revenue Service that 
it is held to be exempt under section 501(a), the title holding company 
shall submit the information indicated herein as necessary for a 
determination of the status of the organization for which title is 
held.
    (iii) An organization described in section 501(c)(3) shall submit 
with, and as a part of, an application filed after July 26, 1959, a 
detailed statement of its proposed activities.
* * * * *
    (3) An organization claiming to be specifically exempted by section 
6033(a) from filing annual returns shall submit with and as a part of 
its application (or in such other manner as is prescribed in guidance 
published in the Internal Revenue Bulletin) a statement of all the 
facts on which it bases its claim.
* * * * *
    (f) Effective/applicability date. Paragraphs (a)(2), (b)(1), and 
(b)(3) of this section apply on and after July 1, 2014.


Section 1.501(a)-1T  [Removed].

0
Par. 3. Section 1.501(a)-1T is removed.

0
Par. 4. Section 1.501(c)(3)-1 is amended by revising paragraphs 
(b)(1)(v), (b)(6), and (h) to read as follows:


Sec.  1.501(c)(3)-1  Organizations organized and operated for 
religious, charitable, scientific, testing for public safety, literary, 
or educational purposes, or for the prevention of cruelty to children 
or animals.

* * * * *
    (b) * * *
    (1) * * *
    (v) Unless otherwise prescribed by applicable regulations or other 
guidance published in the Internal Revenue Bulletin, an organization 
must, in order to establish its exemption, submit a detailed statement 
of its proposed activities with and as a part of its application for 
exemption (see Sec.  1.501(a)-1(b)).
* * * * *
    (6) Applicability of the organizational test. A determination by 
the Commissioner that an organization is described in section 501(c)(3) 
and exempt under section 501(a) will not be granted after July 26, 
1959, regardless of when the application is filed, unless such 
organization meets the organizational test prescribed by this paragraph 
(b). If, before July 27, 1959, an organization has been determined by 
the Commissioner or district director to be exempt as an organization 
described in section 501(c)(3) or in a corresponding provision of prior 
law and such determination has not been revoked before such date, the 
fact that such organization does not meet the organizational test 
prescribed by this paragraph (b) shall not be a basis for revoking such 
determination. Accordingly, an organization that has been determined to 
be exempt before July 27, 1959, and which does not seek

[[Page 29733]]

a new determination of exemption is not required to amend its articles 
of organization to conform to the rules of this paragraph (b), but any 
organization that seeks a determination of exemption after July 26, 
1959, must have articles of organization that meet the rules of this 
paragraph (b). For the rules relating to whether an organization 
determined to be exempt before July 27, 1959, is organized exclusively 
for one or more exempt purposes, see 26 CFR (1939) 39.101(6)-1 
(Regulations 118) as made applicable to the Code by Treasury Decision 
6091, approved August 16, 1954 (19 FR 5167; 1954-2 CB 47).
* * * * *
    (h) Effective/applicability date. Paragraphs (b)(1)(v) and (b)(6) 
of this section apply on and after July 1, 2014.


Section 1.501(c)(3)-1T   [Removed].

0
Par. 5. Section 1.501(c)(3)-1T is removed.

0
Par. 6. Section 1.508-1 is amended by revising paragraphs (a)(2)(i), 
(a)(2)(ii), (b)(2)(iv), (b)(2)(v), and (c) to read as follows:


Sec.  1.508-1   Notices.

    (a) * * *
    (2) Filing of notice--(i) For purposes of paragraph (a)(1) of this 
section, except as provided in paragraph (a)(3) of this section, an 
organization seeking exemption under section 501(c)(3) must file the 
notice described in section 508(a) within 15 months from the end of the 
month in which the organization was organized. Such notice is filed by 
submitting a properly completed and executed Form 1023 (or, if 
applicable, Form 1023-EZ) exemption application. Notice should be filed 
with the appropriate office as designated by the Commissioner in 
guidance published in the Internal Revenue Bulletin, forms, or 
instructions to the applicable forms. A request for extension of time 
for the filing of such notice should be submitted to such appropriate 
office. Such request may be granted if it demonstrates that additional 
time is required.
    (ii) Although the information required by either Form 1023 or Form 
1023-EZ must be submitted to satisfy the notice required by this 
section, the failure to supply, within the required time, all of the 
information required to complete such form is not alone sufficient to 
deny exemption from the date of organization to the date such complete 
information for such form is submitted by the organization. If the 
information that is submitted within the required time is incomplete, 
and the organization supplies the necessary additional information 
requested by the Commissioner within the additional time period 
allowed, the original notice will be considered timely.
* * * * *
    (b) * * *
    (2) * * *
    (iv) Any organization filing notice under this paragraph (b)(2)(iv) 
shall file its notice by submitting a properly completed and executed 
Form 1023 (or, if applicable, Form 1023-EZ) and providing information 
that it is not a private foundation. The organization shall also submit 
all information required by the regulations under section 170 or 509 
(whichever is applicable) necessary to establish recognition of its 
classification as an organization described in section 509(a)(1), (2), 
(3), or (4). The notice required by this paragraph (b)(2)(iv) should be 
filed with the appropriate office as designated by the Commissioner in 
guidance published in the Internal Revenue Bulletin, forms, or 
instructions to the applicable forms.
    (v) An extension of time for the filing of a notice under this 
paragraph (b)(2) may be granted by the office with which the notice is 
filed upon timely request by the organization, if the organization 
demonstrates that additional time is required.
* * * * *
    (c) Effective/applicability date. Paragraphs (a)(2)(i), (a)(2)(ii), 
(b)(2)(iv), and (b)(2)(v) of this section apply on and after July 1, 
2014.


Section 1.508-1T   [Removed].

    Par. 7. Section 1.508-1T is removed.

Kirsten B. Wielobob,
Deputy Commissioner for Services and Enforcement.
    Approved: June 9, 2017.
Thomas West,
Tax Legislative Counsel.
[FR Doc. 2017-13866 Filed 6-29-17; 8:45 am]
 BILLING CODE 4830-01-P