[Federal Register Volume 79, Number 127 (Wednesday, July 2, 2014)]
[Rules and Regulations]
[Pages 37630-37632]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-15623]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9674]
RIN 1545-BM07


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

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations.

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

SUMMARY: This document contains final and temporary regulations that 
provide guidance to eligible organizations seeking recognition of tax-
exempt status under section 501(c)(3) of the Internal Revenue Code 
(Code). The final and temporary regulations amend current regulations 
to 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). The text of 
the temporary regulations also serves as the text of the proposed 
regulations (REG-110948-14) set forth in the notice of proposed 
rulemaking on this subject in the Proposed Rules section in this issue 
of the Federal Register.

DATES: Effective date: These regulations are effective on July 1, 2014.
    Applicability date: For dates of applicability, see Sec. Sec.  
1.501(a)-1T(f)(1), 1.501(c)(3)-1T(h)(1), 1.508-1T(c)(1).

FOR FURTHER INFORMATION CONTACT: James R. Martin or Robin Ehrenberg at 
(202) 317-5800 (not a toll-free number).

SUPPLEMENTARY INFORMATION: 

Background

    Section 508 requires an organization seeking tax-exempt status 
under section 501(c)(3), as a condition of its 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 the Treasury 
Regulations, unless it is specifically excepted from the requirement. 
Section 1.508-1(a) describes the process for giving notice, and 
requires that an organization ``submit[ ] a properly completed and 
executed Form 1023, exemption application.'' Section 1.501(c)(3)-
1(b)(1)(v) states that an organization must, to establish its 
exemption, submit a detailed statement of its proposed activities with 
and as a part of its application for exemption. Similarly, Sec.  
1.501(a)-1(b)(1)(iii) provides that an organization described in 
section 501(c)(3) shall submit with, and as part of, an application, a 
detailed statement of its proposed activities. Section 1.501(a)-1(b)(2) 
states that the Commissioner may require any additional information 
deemed necessary for a proper determination of whether a particular 
organization is exempt, and when deemed advisable in the interest of an 
efficient administration of the internal revenue laws, the Commissioner 
may, in the cases of particular types of organizations, prescribe the 
form in which the proof of exemption shall be furnished.
    Detailed procedures for applying for recognition of exemption are 
set out in Rev. Proc. 2014-9, 2014-2 IRB 281, and in the instructions 
to Form 1023, ``Application for Recognition of Exemption Under Section 
501(c)(3) of the Internal Revenue Code.'' See Sec.  
601.601(d)(2)(ii)(b) of this chapter.

Explanation of Provisions

    The Treasury Department and the IRS have considered how the process 
of meeting the notice requirement of section 508 can be made more 
efficient for certain smaller organizations. The IRS is developing a 
streamlined form and process for these organizations. Accordingly, this 
Treasury decision amends Sec. Sec.  1.501(a)-1, 1.501(c)(3)-1, and 
1.508-1 to permit eligible organizations to use a streamlined process, 
described in guidance published in the Internal Revenue Bulletin, 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 to authorize the Treasury Department and the IRS to 
prescribe, in applicable regulations or other guidance published in the 
Internal Revenue Bulletin, an exception to the requirement that an 
organization applying for 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. 
This amendment would provide flexibility for the Treasury Department 
and the IRS to prescribe in published guidance other methods of 
notifying the IRS that the organization is claiming an annual filing 
exemption.
    In addition, this document amends Sec.  1.508-1 to provide that 
eligible organizations may use Form 1023-EZ, ``Streamlined Application 
for Recognition of Exemption Under Section 501(c)(3) of the Internal 
Revenue Code,'' 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 makes certain technical revisions 
to the regulations. In Sec.  1.501(a)-1, 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 those positions no longer exist within 
the IRS. Proposed regulations in the Rules and Regulations section of 
this issue of the Federal Register use the text of these temporary 
regulations as the text of the proposed regulations. Treasury and the 
IRS seek comments on all aspects of the proposed rules, including 
whether additional technical revisions are necessary. Simultaneously 
with the publication of this Treasury decision, the Treasury Department 
and the IRS will release for publication a Revenue Procedure that 
provides procedures for applying for recognition of exemption using 
Form 1023-EZ.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866, as 
supplemented by Executive Order 13563. Therefore, a regulatory 
assessment is not required. It also has been determined that section 
553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does 
not apply to these regulations. For the applicability of the

[[Page 37631]]

Regulatory Flexibility Act (5 U.S.C. chapter 6), refer to the Special 
Analyses section of the preamble to the cross-reference notice of 
proposed rulemaking published in the Proposed Rules section in this 
issue of the Federal Register. Pursuant to section 7805(f), these 
regulations have been submitted to the Chief Counsel for Advocacy of 
the Small Business Administration for comment on their impact on small 
business.

Drafting Information

    The principal authors of these regulations are James R. Martin and 
Robin Ehrenberg of the Office of Associate Chief Counsel (Tax Exempt 
and Government Entities). However, other personnel from the IRS and the 
Treasury Department participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Nonprofit organizations, Foundations, 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:
0
1. Revising paragraphs (a)(2), (b)(1), and (b)(3).
0
2. Adding paragraph (f).
    The revisions and addition read as follows:


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

    (a) * * *
    (2) [Reserved]. For further guidance, see Sec.  1.501(a)-1T(a)(2).
* * * * *
    (b)(1) [Reserved]. For further guidance, see Sec.  1.501(a)-
1T(b)(1).
* * * * *
    (3) [Reserved]. For further guidance, see Sec.  1.501(a)-1T(b)(3).
* * * * *
    (f) [Reserved]. For further guidance, see Sec.  1.501(a)-1T(f).

0
Par. 3. Section 1.501(a)-1T is added to read as follows:


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

    (a)(1) [Reserved]. For further guidance see Sec.  1.501(a)-1(a)(1).
    (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.
    (3) [Reserved]. For further guidance, see Sec.  1.501(a)-1(a)(3).
    (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.
    (2) [Reserved]. For further guidance, see Sec.  1.501(a)-1(b)(2).
    (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.
    (c) through (e) [Reserved]. For further guidance, see Sec.  
1.501(a)-1(c) through (e).
    (f) Effective/applicability date. (1) Paragraphs (a)(2), (b)(1), 
and (b)(3) of this section apply on and after July 1, 2014.
    (2) Expiration date. Paragraphs (a)(2), (b)(1), and (b)(3) of this 
section expire on or before July 1, 2017.

0
Par. 4. Section 1.501(c)(3)-1 is amended by:
0
1. Revising paragraphs (b)(1)(v) and (b)(6).
0
2. Adding paragraph (h).
    The revisions and addition 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) [Reserved]. For further guidance see Sec.  1.501(c)(3)-
1T(b)(1)(v).
* * * * *
    (6) [Reserved]. For further guidance see Sec.  1.501(c)(3)-
1T(b)(6).
* * * * *
    (h) [Reserved]. For further guidance see Sec.  1.501(c)(3)-1T(h).

0
Par. 5. Section 1.501(c)(3)-1T is added to read as follows:


Sec.  1.501(c)(3)  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 (temporary).

    (a) through (b)(1)(iv) [Reserved]. For further guidance see Sec.  
1.501(c)(3)-1(a) through (b)(1)(iv).
    (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 paragraph (b) of Sec.  1.501(a)-1).
    (b)(2) through (b)(5) [Reserved]. For further guidance see Sec.  
1.501(c)(3)-1(b)(2) through (b)(5).
    (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

[[Page 37632]]

granted after July 26, 1959, regardless of when the application is 
filed, unless such organization meets the organizational test 
prescribed by this paragraph (b)(6). 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)(6) 
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 a new determination of exemption is not 
required to amend its articles of organization to conform to the rules 
of this paragraph (b)(6), 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)(6). 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; CB 1954-2, 47).
    (c) through (g) [Reserved]. For further guidance, see Sec.  
1.501(c)(3)-1(c) through (g).
    (h) Effective/applicability date. (1) Paragraphs (b)(1)(v) and 
(b)(6) of this section apply on and after July 1, 2014.
    (2) Expiration date. Paragraphs (b)(1)(v) and (b)(6) of this 
section expire on or before July 1, 2017.

0
Par. 6. Section 1.508-1 is amended by:
0
1. Revising paragraphs (a)(2)(i) and (ii).
0
2. Revising paragraphs (b)(2)(iv) and (v).
0
3. Adding paragraph (c).
    The revisions and addition read as follows:


Sec.  1.508-1  Notices.

    (a) * * *
    (2)(i) [Reserved]. For further guidance, see Sec.  1.508-
1T(a)(2)(i).
    (ii) [Reserved]. For further guidance, see Sec.  1.508-
1T(a)(2)(ii).
* * * * *
    (b) * * *
    (2) * * *
    (iv) [Reserved]. For further guidance, see Sec.  1.508-
1T(b)(2)(iv).
    (v) [Reserved]. For further guidance, see Sec.  1.508-1T(b)(2)(v).
* * * * *
    (c) [Reserved]. For further guidance, see Sec.  1.508-1T(c).

0
Par. 7. Section 1.508-1T is revised to read as follows:


Sec.  1.508-1T  Notices (temporary).

    (a)(1) [Reserved]. For further guidance, see Sec.  1.508-1(a)(1).
    (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, or before March 22, 
1973, whichever comes later. 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 at 
the request of the Commissioner within the additional time period 
allowed by him, the original notice will be considered timely.
    (iii) through (b)(2)(iii) [Reserved]. For further guidance, see 
Sec.  1.508-1(a)(2)(iii) through (b)(2)(iii).
    (iv) Any organization filing notice under this paragraph (b)(2)(iv) 
that has not received a ruling or determination letter from the 
Internal Revenue Service dated on or before July 13, 1970, recognizing 
its exemption from taxation under section 501(c)(3) (or the 
corresponding provisions of prior law), 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). A 
Form 1023 submitted prior to July 14, 1970, will satisfy this 
requirement if the organization submits an additional statement that it 
is not a private foundation together with all pertinent additional 
information required. Any statement filed under this paragraph 
(b)(2)(iv) shall be accompanied by a written declaration by the 
principal officer, manager or authorized trustee that there is a 
reasonable basis in law and in fact for the statement that the 
organization so filing is not a private foundation, and that to the 
best of the knowledge and belief of such officer, manager or trustee, 
the information submitted is complete and correct.
    (v) The notice filed under paragraph (b)(2)(ii) of this section 
should be filed in accordance with the instructions applicable to Form 
4653. The notice required by paragraph (b)(2)(iv) of this section 
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. An extension of time 
for the filing of such notice may be granted by such office upon timely 
request by the organization, if the organization demonstrates that 
additional time is required.
    (b)(3) through (8) [Reserved]. For further guidance, see Sec.  
1.508-1(b)(3) through (8).
    (c) Effective/applicability date. (1) Paragraphs (a)(2)(i), 
(a)(2)(ii), (b)(2)(iv), and (b)(2)(v) of this section apply on and 
after July 1, 2014.
    (2) Expiration date. Paragraphs (a)(2)(i), (a)(2)(ii), (b)(2)(iv), 
and (b)(2)(v) of this section expire on or before July 3, 2017.

John Dalrymple,
Deputy Commissioner for Services and Enforcement.

    Approved: June 27, 2014.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2014-15623 Filed 7-1-14; 8:45 am]
BILLING CODE 4830-01-P