IRS Investigating Self-Declared Exempt Organizations

The Internal Revenue Service, announced that they were investigating organizations that self-declare rather than apply to the IRS for recognition of tax-exempt status. To ensure that self-declared tax-exempt organizations are in compliance with IRS rules, the IRS's Exempt Organizations division has sent letters to more than 1,300 self-declaring social welfare organizations, labor unions, and trade associations, and has issued Form 14449, Self-Declarers Questionnaire to be completed and returned to the IRS.

Under the federal tax law, Section 501(c)(4) social welfare organizations; Section 501(c)(5) labor, agricultural, and horticultural groups; and Section 501(c)(6) business leagues, among others, are able to declare themselves tax-exempt without an official determination from the IRS.  Though not a formal audit, the Form 14449 focuses on various aspects of the self-declaring organizations' operations.

About Form 14449 - Areas of Inquiry

• General information about the self-declaring organization and asks the organization to describe the reason(s) for not applying for recognition of exemption.
• Information about certain activities of the self-declaring organization and its related organizations. The organization must list each of its activities and indicate the percentage of revenue, expenses, and time devoted to each. The organization must also report the portion of the income from each activity that is unrelated business income.
• Information about the organization's revenues and expenses.
• Information regarding the compensation of the organization's officers, directors, trustees, and key employees.

The questions are directed at the organization's tax-exempt status.  Form 14449 can also serve as a compliance planning resource for organizations that are not required to complete it.  Click here for a copy of Form 14449.

Contact me or visit my website if you have any questions about this IRS investigation or the Form 14449.