IRS and Treasury Likely to Issue Revised Guidelines for Tax Exempt Organizations

The United States Department of Treasury along with the IRS is likely to announce an official release having qualification requirements for organizations filing under the tax exempt category, as a social welfare organization. According to the proposed guidelines, there would be certain amendments to the present regulations and provide insights on the total proportion these organizations should promote social welfare activities. However, the U.S Department of Treasury and the IRS would consider and reflect on the comments before releasing the final proposal. Danny Werfel, IRS Acting Commissioner added that, “This is part of ongoing efforts within the IRS that are improving our work in the tax-exempt area,”

According to the Treasury and the IRS, organizations can continue report under the tax-exempt category but, only if they promote social welfare activities too. In the present scenario, the Internal Revenue conducts a “facts and circumstances” test to determine whether an organization is only involved in political activities and does not promote any social welfare activities. Replacing the test with definitive guidelines can make the inquiry process simpler and faster.

Mark J. Mazur, Treasury Assistant Secretary for Tax Policy said, “This proposed guidance is a first critical step toward creating clear-cut definitions of political activity by tax-exempt social welfare organizations,” He also added that finalizing the guidelines also depends on the public feedback and ensure providing clear guidelines under the tax exempt category in IRS form 990. The pointers discussed below provide insight into the candidate-related political activities included under the proposed guidelines.

1. Communication for Promotion Purposes

Communicating or advocating a known candidate or candidates involved with political activities or associated with a political party.

  • Any promotions made during the general elections (60 days) or primary election (30 days).
  • Reporting the communication expenses to the Federal Election Commission.

2. Grants and Contributions

  • Contributions considered as ‘reportable contribution’ by the campaign finance law.
  • Grants to organizations (both tax-exempt & tax exempt) under section 527 conducting candidate-related political activities but not involved with the election or defeat of a political party or candidate. However, it is important to keep in mind that a grantor can rely on a written certification form a grantee stating that the grants would not be used for ‘candidate-related political activity’.

3. Activities Concerning with Elections or Candidates

  • “Voter registration drives” and “get-out-the-vote” drives.
  • Handing out materials prepared by the candidate or related to the section 527 organization.
  • Preparing and handing out voter manuals to candidates or political parties.
  • Organizing any event during general (60 days) or primary elections (30 days) in which a candidate is a part of the program.

These proposed rules reduce the need to conduct fact-intensive inquiries, including inquiries into whether activities or communications are neutral and unbiased. The guidelines proposed by the treasury and the IRS can reduce additional efforts such as conducting ‘fact-intensive inquiries’ to know if the activities handled are neutral. Besides, the two government bodies have plans to address other issues concerning tax exemption standards too. However, the IRS and Treasury need public comments and opinions before announcing the final proposal.

Social welfare organizations report to the IRS through form 990 and have the option to file for an extension through IRS form 8868 to get an automatic 3 months extension. To save time, these organizations can file for an extension online at and get extra time to report.