49–006 

114TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 114–71 

IRS BUREAUCRACY REDUCTION AND JUDICIAL REVIEW 

ACT 

APRIL 13, 2015.—Committed to the Committee of the Whole House on the State of 

the Union and ordered to be printed 

Mr. RYAN of Wisconsin, from the Committee on Ways and Means, 

submitted the following 

R E P O R T 

together with 

ADDITIONAL VIEWS 

[To accompany H.R. 1295] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Ways and Means, to whom was referred the 

bill (H.R. 1295) to amend the Internal Revenue Code of 1986 to improve the process for making determinations with respect to whether organizations are exempt from taxation under section 501(c)(4) 

of such Code, having considered the same, report favorably thereon 

with an amendment and recommend that the bill as amended do 

pass. 

CONTENTS 

Page 

I. SUMMARY AND BACKGROUND ............................................................... 3 

A. Purpose and Summary ..................................................................... 3 

B. Background and Need for Legislation ............................................. 4 

C. Legislative History ............................................................................ 4 

II. EXPLANATION OF THE BILL ................................................................... 5 

A. Require Section 501(c)(4) Organizations to Provide Notice of 

Formation (sec. 2 of the bill, secs. 6033 and 6652 of the Code, 

and new sec. 506 of the Code) ....................................................... 5 

B. Declaratory Judgments for Section 501(c)(4) Organizations (sec. 

3 of the bill and sec. 7428 of the Code) ......................................... 10 

III. VOTES OF THE COMMITTEE .................................................................... 11 

IV. BUDGET EFFECTS OF THE BILL ............................................................ 12 

A. Committee Estimate of Budgetary Effects ...................................... 12 


SSpencer on DSK4SPTVN1PROD with REPORTS
2 

B. Statement Regarding New Budget Authority and Tax Expenditures Budget Authority .................................................................. 13 

C. Cost Estimate Prepared by the Congressional Budget Office ....... 13 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF 

THE HOUSE .............................................................................................. 15 

A. Committee Oversight Findings and Recommendations ................. 15 

B. Statement of General Performance Goals and Objectives ............. 15 

C. Information Relating to Unfunded Mandates ................................ 15 

D. Applicability of House Rule XXI 5(b) .............................................. 15 

E. Tax Complexity Analysis .................................................................. 15 

F. Congressional Earmarks, Limited Tax Benefits, and Limited 

Tariff Benefits ................................................................................. 16 

G. Duplication of Federal Programs ..................................................... 16 

H. Disclosure of Directed Rule Makings .............................................. 16 

VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED 16 

A. Text of Existing Law Amended or Repealed by the Bill, as 

Reported .......................................................................................... 16 

B. Changes in Existing Law Proposed by the Bill, as Reported ........ 33 

VII. ADDITIONAL VIEWS ................................................................................... 52 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘IRS Bureaucracy Reduction and Judicial Review 

Act’’. 

SEC. 2. ORGANIZATIONS REQUIRED TO NOTIFY SECRETARY OF INTENT TO OPERATE AS 

501(c)(4). 

(a) IN GENERAL.—Part I of subchapter F of chapter 1 of the Internal Revenue 

Code of 1986 is amended by adding at the end the following new section: 

‘‘SEC. 506. ORGANIZATIONS REQUIRED TO NOTIFY SECRETARY OF INTENT TO OPERATE AS 

501(c)(4). 

‘‘(a) IN GENERAL.—An organization described in section 501(c)(4) shall, not later 

than 60 days after the organization is established, notify the Secretary (in such 

manner as the Secretary shall by regulation prescribe) that it is operating as such. 

‘‘(b) CONTENTS OF NOTICE.—The notice required under subsection (a) shall include 

the following information: 

‘‘(1) The name, address, and taxpayer identification number of the organization. 

‘‘(2) The date on which, and the State under the laws of which, the organization was organized. 

‘‘(3) A statement of the purpose of the organization. 

‘‘(c) ACKNOWLEDGMENT OF RECEIPT.—Not later than 60 days after receipt of such 

a notice, the Secretary shall send to the organization an acknowledgment of such 

receipt. 

‘‘(d) EXTENSION FOR REASONABLE CAUSE.—The Secretary may, for reasonable 

cause, extend the 60-day period described in subsection (a). 

‘‘(e) USER FEE.—The Secretary shall impose a reasonable user fee for submission 

of the notice under subsection (a). 

‘‘(f) REQUEST FOR DETERMINATION.—Upon request by an organization to be treated 

as an organization described in section 501(c)(4), the Secretary may issue a determination with respect to such treatment. Such request shall be treated for purposes 

of section 6104 as an application for exemption from taxation under section 501(a).’’. 

(b) SUPPORTING INFORMATION WITH FIRST RETURN.—Section 6033(f) of such Code 

is amended— 

(1) by striking the period at the end and inserting ‘‘, and’’, 

(2) by striking ‘‘include on the return required under subsection (a) the information’’ and inserting the following: ‘‘include on the return required under subsection (a)— 

‘‘(1) the information’’, and 

(3) by adding at the end the following new paragraph: 

‘‘(2) in the case of the first such return filed by such an organization after 

submitting a notice to the Secretary under section 506(a), such information as 

the Secretary shall by regulation require in support of the organization’s treatment as an organization described in section 501(c)(4).’’. 

(c) FAILURE TO FILE INITIAL NOTIFICATION.—Section 6652(c) of such Code is 

amended by redesignating paragraphs (4), (5), and (6) as paragraphs (5), (6), and 

(7), respectively, and by inserting after paragraph (3) the following new paragraph: 


SSpencer on DSK4SPTVN1PROD with REPORTS
3 

‘‘(4) NOTICES UNDER SECTION 506.— 

‘‘(A) PENALTY ON ORGANIZATION.—In the case of a failure to submit a notice required under section 506(a) (relating to organizations required to notify Secretary of intent to operate as 501(c)(4)) on the date and in the manner prescribed therefor, there shall be paid by the organization failing to 

so submit $20 for each day during which such failure continues, but the 

total amount imposed under this subparagraph on any organization for failure to submit any one notice shall not exceed $5,000. 

‘‘(B) MANAGERS.—The Secretary may make written demand on an organization subject to penalty under subparagraph (A) specifying in such demand a reasonable future date by which the notice shall be submitted for 

purposes of this subparagraph. If such notice is not submitted on or before 

such date, there shall be paid by the person failing to so submit $20 for 

each day after the expiration of the time specified in the written demand 

during which such failure continues, but the total amount imposed under 

this subparagraph on all persons for failure to submit any one notice shall 

not exceed $5,000.’’. 

(d) CLERICAL AMENDMENT.—The table of sections for part I of subchapter F of 

chapter 1 of such Code is amended by adding at the end the following new item: 

‘‘Sec. 506. Organizations required to notify Secretary of intent to operate as 501(c)(4).’’. 

(e) LIMITATION.—Notwithstanding any other provision of law, any fees collected 

pursuant to section 506(e) of the Internal Revenue Code of 1986, as added by subsection (a), shall not be expended by the Secretary of the Treasury or the Secretary’s 

delegate unless provided by an appropriations Act. 

(f) EFFECTIVE DATE.— (1) IN GENERAL.—The amendments made by this section shall apply to organizations which are described in section 501(c)(4) of the Internal Revenue Code 

of 1986 and organized after the date of the enactment of this Act. 

(2) CERTAIN EXISTING ORGANIZATIONS.—In the case of any other organization 

described in section 501(c)(4) of such Code, the amendments made by this section shall apply to such organization only if, on or before the date of the enactment of this Act— 

(A) such organization has not applied for a written determination of recognition as an organization described in section 501(c)(4) of such Code, and 

(B) such organization has not filed at least one annual return or notice 

required under subsection (a)(1) or (i) (as the case may be) of section 6033 

of such Code. 

In the case of any organization to which the amendments made by this section 

apply by reason of the preceding sentence, such organization shall submit the 

notice required by section 506(a) of such Code, as added by this Act, not later 

than 180 days after the date of the enactment of this Act. 

SEC. 3. DECLARATORY JUDGMENTS FOR 501(c)(4) ORGANIZATIONS. 

(a) IN GENERAL.—Section 7428(a)(1) of the Internal Revenue Code of 1986 is 

amended by striking ‘‘or’’ at the end of subparagraph (C) and by inserting after subparagraph (D) the following new subparagraph: 

‘‘(E) with respect to the initial classification or continuing classification 

of an organization described in section 501(c)(4) which is exempt from tax 

under section 501(a), or’’. 

(b) EFFECTIVE DATE.—The amendments made by this section shall apply to pleadings filed after the date of the enactment of this Act. 

I. SUMMARY AND BACKGROUND 

A. PURPOSE AND SUMMARY

H.R. 1295, reported by the Committee on Ways and Means, provides for a streamlined recognition process for organizations claiming tax exemption under section 501(c)(4) of the Internal Revenue 

Code (the ‘‘Code’’). The new process would require an organization 

to notify the Internal Revenue Service (‘‘IRS’’) within 60 days of 

formation that it has begun operations as a tax-exempt organization under section 501(c)(4). The IRS would be required to provide 

an acknowledgement to the new organization within 60 days of receiving the notification. New exempt organizations would be expected to provide information supporting the exemption with their 


SSpencer on DSK4SPTVN1PROD with REPORTS
4 

first annual information return (Form 990). An organization that 

nonetheless wished to have an affirmative determination of its exempt status may request such a ruling, subject to an appropriate 

fee. The new recognition process generally would be effective for organizations seeking exemption under section 501(c)(4) after the 

date of enactment. The bill also permits organizations claiming exemption under section 501(c)(4) to seek Federal judicial review in 

cases in which the IRS challenges the organization’s initial or continuing exemption. 

B. BACKGROUND AND NEED FOR LEGISLATION

Organizations seeking exemption under section 501(c)(3)—typically public charities and private foundations—generally are required to seek formal recognition of their tax-exempt status by submitting an application to the IRS. Organizations seeking exemption 

under other Code sections (e.g., social welfare organizations claiming exemption under section 501(c)(4)) may submit a formal application for exemption, but are not required to do so. Through its investigation of the IRS targeting of certain social welfare organizations, the Committee learned that the IRS spends approximately 

10,000 hours a year processing entirely voluntary section 501(c)(4) 

applications. This is the same process that allowed the IRS to subject applicants to extraordinary delays and inappropriate questions, 

including demands for donor lists. The bill streamlines the recognition process for section 501(c)(4) organizations, while preserving 

the option for an organization to seek a formal determination. In 

addition, under current law and practice, if the IRS determines at 

any time—during the application process or later under exam— 

that an organization does not qualify under section 501(c)(4), the 

organization has limited recourse. The bill provides the opportunity 

for judicial review of adverse IRS determinations, which has long 

been available to section 501(c)(3) organizations. 

C. LEGISLATIVE HISTORY

Background 

H.R. 1295 was introduced on March 4, 2015, and was referred to 

the Committee on Ways and Means. 

Committee action 

The Committee on Ways and Means marked up H.R. 1295, the 

‘‘IRS Bureaucracy Reduction and Judicial Review Act,’’ on March 

25, 2015, and ordered the bill, as amended, favorably reported 

(with a quorum being present). 

Committee hearings 

The need for reform of the recognition process for organizations 

seeking exemption under section 501(c)(4) was discussed during 

multiple Committee hearings during the 113th Congress: 

• Full Committee Hearing on IRS Targeting Conservative 

Groups (May 17, 2013). 

• Full Committee Hearing Organizations Targeted by Internal 

Revenue Service for Their Personal Beliefs (June 4, 2013). 

• Full Committee Hearing on the Status of Internal Revenue 

Service’s Review of Taxpayer Targeting Practices (June 27, 2013). 


SSpencer on DSK4SPTVN1PROD with REPORTS
5 

1Treas. Reg. sec. 1.501(c)(4)–1(a)(2). 

2See sec. 508(a). Unless otherwise stated all section references are to the Internal Revenue 

Service Code of 1986, as amended (the ‘‘Code’’). 

• Oversight Subcommittee Hearing on the IRS Exempt Organizations Division Post-U.S. Treasury Inspector General for Tax Administration Audit Report (September 18, 2013). • Oversight Subcommittee Hearing with IRS Commissioner 

Koskinen (February 5, 2014). • Oversight Subcommittee Hearing on the IRS Operations and 

the 2014 Tax Return Filing Season (May 7, 2014). • Full Committee Hearing with IRS Commissioner Koskinen 

(June 20, 2014). 

II. EXPLANATION OF THE BILL 

A. REQUIRE SECTION 501(c)(4) ORGANIZATIONS TO PROVIDE NOTICE

OF FORMATION (SEC. 2 OF THE BILL, SECS. 6033 AND 6652 OF THE

CODE, AND NEW SEC. 506 OF THE CODE) 

PRESENT LAW

Section 501(c)(4) organizations 

Section 501(c)(4) provides tax exemption for civic leagues or organizations not organized for profit but operated exclusively for the 

promotion of social welfare, or certain local associations of employees, provided that no part of the net earnings of the entity inures 

to the benefit of any private shareholder or individual. An organization is operated exclusively for the promotion of social welfare if 

it is engaged primarily in promoting in some way the common good 

and general welfare of the people of a community.1 The promotion 

of social welfare does not include direct or indirect participation or 

intervention in political campaigns on behalf of or in opposition to 

any candidate for public office; however, social welfare organizations are permitted to engage in political activity so long as the organization remains engaged primarily in activities that promote social welfare. The lobbying activities of a social welfare organization 

generally are not limited. An organization is not operated primarily 

for the promotion of social welfare if its primary activity is operating a social club for the benefit, pleasure, or recreation of its 

members, or is carrying on a business with the general public in 

a manner similar to organizations that are operated for profit. 

Application for tax exemption 

Section 501(c)(3) organizations 

Section 501(c)(3) organizations (with certain exceptions) are required to seek formal recognition of tax-exempt status by filing an 

application with the IRS (Form 1023).2 In response to the application, the IRS issues a determination letter or ruling either recognizing the applicant as tax-exempt or not. Certain organizations 

are not required to apply for recognition of tax-exempt status in 

order to qualify as tax-exempt under section 501(c)(3) but may do 

so. These organizations include churches, certain church-related organizations, organizations (other than private foundations) the 

gross receipts of which in each taxable year are normally not more 

than $5,000, and organizations (other than private foundations) 


SSpencer on DSK4SPTVN1PROD with REPORTS
6 

3Pursuant to Treas. Reg. sec. 301.9100–2(a)(2)(iv), organizations are allowed an automatic 12- 

month extension as long as the application for recognition of tax exemption is filed within the 

extended, i.e., 27-month, period. The IRS also may grant an extension beyond the 27-month period if the organization is able to establish that it acted reasonably and in good faith and that 

granting relief will not prejudice the interests of the government. Treas. Reg. secs. 301.9100– 

1 and 301.9100–3. 4Treas. Reg. sec. 1.508–1(a)(1). 

5Sec. 508(d)(2)(B). Contributions made prior to receipt of a favorable determination letter may 

be deductible prior to the organization’s receipt of such favorable determination letter if the organization has timely filed its application to be recognized as tax-exempt. Treas. Reg. secs. 

1.508–1(a) and 1.508–2(b)(1)(i)(b). 

subordinate to another tax-exempt organization that are covered by 

a group exemption letter. 

A favorable determination by the IRS on an application for recognition of tax-exempt status will be retroactive to the date that 

the section 501(c)(3) organization was created if it files a completed 

Form 1023 within 15 months of the end of the month in which it 

was formed.3 If the organization does not file Form 1023 or files 

a late application, it will not be treated as tax-exempt under section 501(c)(3) for any period prior to the filing of an application for 

recognition of tax exemption.4 Contributions to section 501(c)(3) organizations that are subject to the requirement that the organization apply for recognition of tax-exempt status generally are not deductible from income, gift, or estate tax until the organization receives a determination letter from the IRS.5

Information required on Form 1023 includes, but is not limited 

to: (1) a detailed statement of actual and proposed activities; (2) 

compensation and financial information regarding officers, directors, trustees, employees, and independent contractors; (3) a statement of revenues and expenses for the current year and the three 

preceding years (or for the years of the organization’s existence, if 

less than four years); (4) a balance sheet for the current year; (5) 

a description of anticipated receipts and contemplated expenditures; (6) a copy of the articles of incorporation, trust document, or 

other organizational or enabling document; (7) organization bylaws 

(if any); and (8) information about previously filed Federal income 

tax and exempt organization returns, if applicable. 

A favorable determination letter issued by the IRS will state that 

the application for recognition of tax exemption and supporting documents establish that the organization submitting the application 

meets the requirements of section 501(c)(3) and will classify (as either an adverse or definitive ruling) the organization as either a 

public charity or a private foundation. 

Organizations that are classified as public charities (or as private 

operating foundations) and not as private nonoperating foundations 

may cease to satisfy the conditions that entitled the organization 

to such status. The IRS makes an initial determination of public 

charity or private foundation status (either a definitive ruling, or 

an advance ruling generally effective for five years and then reviewed again by the IRS) that is subsequently monitored by the 

IRS through annual return filings. The IRS periodically announces 

in the Internal Revenue Bulletin a list of organizations that have 

failed to establish, or have been unable to maintain, their status 

as public charities or as private operating foundations, and that become private nonoperating foundations. 

If the IRS denies an organization’s application for recognition of 

exemption under section 501(c)(3), the organization may seek a deVerDate Sep 11 2014 01:44 Apr 17, 2015 Jkt 049006 PO 00000 Frm 00006 Fmt 6659 Sfmt 6602 E:\HR\OC\HR071.XXX HR071

SSpencer on DSK4SPTVN1PROD with REPORTS
7 

6Sec. 7428. 

7 Rev. Proc. 2013–9, 2013–2 I.R.B. 255. Prior to the issuance of Revenue Procedure 2013–9 

in early 2013, an organization that filed an application for exemption on Form 2014 generally 

could obtain a determination that it was exempt as of its date of formation, regardless of when 

it filed Form 1024. 8Treas. Reg. sec. 1.501(a)–1(a)(2). 

9 Rev. Proc. 2013–9, 2013–2 I.R.B. 255. 

claratory judgment regarding its tax status.6 Prior to utilizing the 

declaratory judgment procedure, the organization must have exhausted all administrative remedies available to it within the IRS. 

Other section 501(c) organizations 

Most section 501(c) organizations—including organizations described within sections 501(c)(4) (social welfare organizations, etc.), 

501(c)(5) (labor organizations, etc.), or 501(c)(6) (business leagues, 

etc.)—are not required to provide notice to the Secretary that they 

are requesting recognition of exempt status. Rather, organizations 

are exempt under these provisions if they satisfy the requirements 

applicable to such organizations. However, in order to obtain certain benefits such as public recognition of tax-exempt status, exemption from certain State taxes, and nonprofit mailing privileges, 

such organizations voluntarily may request a formal recognition of 

exempt status by filing a Form 1024. 

If such an organization voluntarily requests a determination letter by filing Form 1024 within 27 months of the end of the month 

in which it was formed, its determination of exempt status, once 

provided, generally will be effective as of the organization’s date of 

formation.7 If, however, the organization files Form 1024 after the 

27-month deadline has passed, its exempt status will be formally 

recognized only as of the date the organization filed Form 1024. 

The declaratory judgment process available to organizations 

seeking exemption under section 501(c)(3) is not available to organizations seeking exemption under other subsections of the Code, 

including sections 501(c)(4), 501(c)(5), and 501(c)(6). 

Revocation (and suspension) of exempt status 

An organization that has received a favorable tax-exemption determination from the IRS generally may continue to rely on the determination as long as ‘‘there are no substantial changes in the organization’s character, purposes, or methods of operation.’’ 8 A ruling or determination letter concluding that an organization is exempt from tax may, however, be revoked or modified: (1) by notice 

from the IRS to the organization to which the ruling or determination letter was originally issued; (2) by enactment of legislation or 

ratification of a tax treaty; (3) by a decision of the United States 

Supreme Court; (4) by issuance of temporary or final Regulations 

by the Treasury Department; (5) by issuance of a revenue ruling, 

a revenue procedure, or other statement in the Internal Revenue 

Bulletin; or (6) automatically, in the event the organization fails to 

file a required annual return or notice for three consecutive years.9

A revocation or modification of a determination letter or ruling may 

be retroactive if, for example, there has been a change in the applicable law, the organization omitted or misstated a material fact, or 


SSpencer on DSK4SPTVN1PROD with REPORTS
8 

10 Ibid. 11Sec. 501(p) (enacted by Pub. L. No. 108–121, sec. 108(a), effective for designations made before, on, or after November 11, 2003). 12See Treasury Inspector General for Tax Administration, ‘‘Inappropriate Criteria Were Used 

to Identify Tax-Exempt Applications for Review’’ (May 14, 2013), Reference Number: 2013–10– 

053. 

the organization has operated in a manner materially different 

from that originally represented.10

The IRS generally issues a letter revoking recognition of an organization’s tax-exempt status only after: (1) conducting an examination of the organization; (2) issuing a letter to the organization proposing revocation; and (3) allowing the organization to exhaust the 

administrative appeal rights that follow the issuance of the proposed revocation letter. In the case of a section 501(c)(3) organization, the revocation letter immediately is subject to judicial review 

under the declaratory judgment procedures of section 7428. To sustain a revocation of tax-exempt status under section 7428, the IRS 

must demonstrate that the organization no longer is entitled to exemption. 

Upon revocation of tax-exemption or change in the classification 

of an organization (e.g., from public charity to private foundation 

status), the IRS publishes an announcement of such revocation or 

change in the Internal Revenue Bulletin. Contributions made to organizations by donors who are unaware of the revocation or change 

in status ordinarily will be deductible if made on or before the date 

of publication of the announcement. 

The IRS may suspend the tax-exempt status of an organization 

for any period during which an organization is designated or identified by U.S. authorities as a terrorist organization or supporter of 

terrorism.11 Such an organization also is ineligible to apply for tax 

exemption. The period of suspension runs from the date the organization is first designated or identified to the date when all designations or identifications with respect to the organization have been 

rescinded pursuant to the law or Executive Order under which the 

designation or identification was made. During the period of suspension, no deduction is allowed for any contribution to a terrorist 

organization. 

REASONS FOR CHANGE

In recent years, section 501(c)(4) organizations that file an application for recognition of exempt status have faced considerable 

delays in obtaining a determination from the IRS.12 The Committee found that the IRS was spending thousands of hours each 

year developing such 501(c)(4) applications, which are voluntarily 

filed, while thousands of section 501(c)(3) applications, for which a 

determination is required, were not being expeditiously processed. 

The Committee further found that still other groups simply organized under section 501(c)(4) without providing notice to the IRS, 

a practice that is currently permitted under the Code. The Committee therefore believes it is desirable to eliminate the need for a 

section 501(c)(4) that desires written IRS acknowledgment of its exempt status to apply for a formal IRS determination by requiring 

all organizations organizing under the section to provide the IRS 

with notice of existence and requiring the IRS to provide timely acknowledgment of that notice. 


SSpencer on DSK4SPTVN1PROD with REPORTS
9 

EXPLANATION OF PROVISION

Under the provision, an organization described in section 

501(c)(4) must provide to the Secretary notice of its formation and 

intent to operate as such an organization, in such manner as the 

Secretary may prescribe. The notice, together with a reasonable 

user fee in an amount to be established by the Secretary, must be 

provided no later than 60 days following the organization’s establishment and must include the following information: (1) the name, 

address, and taxpayer identification number of the organization; (2) 

the date on which, and the State under the laws of which, the organization was organized; and (3) a statement of the purpose of the 

organization. The Secretary may extend the 60-day deadline for 

reasonable cause. Any such fees collected may not be expended by 

the Secretary unless provided by an appropriations Act. Within 60 

days of receipt of a notice of an organization’s formation and intent 

to operate as an organization described in section 501(c)(4), the 

Secretary shall issue to the organization an acknowledgment of the 

notice. The notice and receipt are subject to the disclosure requirements of section 6104. 

The provision amends section 6652(c) (which provides for penalties in the event of certain failures to file an exempt organization 

return or disclosure) to impose penalties for failure to file the notice required under the proposal. An organization that fails to file 

a notice within 60 days of its formation (or, if an extension is 

granted for reasonable cause, by the deadline established by the 

Secretary) is subject to a penalty equal to $20 for each day during 

which the failure occurs, up to a maximum of $5,000. In the event 

such a penalty is imposed, the Secretary may make a written demand on the organization specifying a date by which the notice 

must be provided. If any person fails to comply with such a demand on or before the date specified in the demand, a penalty of 

$20 is imposed for each day the failure continues, up to a maximum of $5,000. 

With its first annual information return (Form 990, Form 990– 

EZ, or Form 990–N) filed after providing the notice described 

above, a section 501(c)(4) organization must provide such information as the Secretary may require, and in the form prescribed by 

the Secretary, to support its qualification as an organization described in section 501(c)(4). The Secretary is not required to issue 

a determination letter following the organization’s filing of the expanded first annual information return. 

A section 501(c)(4) organization that desires additional certainty 

regarding its qualification as an organization described in section 

501(c)(4) may file a request for a determination, together with the 

required user fee, with the Secretary. Such a request is in addition 

to, not in lieu of, filing the required notice described above. It is 

intended that such a request for a determination be submitted on 

a new form (separate from Form 1024, which may continue to be 

used by certain other organizations) that clearly states that filing 

such a request is optional. The request for a determination is treated as an application subject to public inspection and disclosure 

under sections 6104(a) and (d). 


SSpencer on DSK4SPTVN1PROD with REPORTS
10 

13Sec. 508(a). 14Sec. 7428. 15Sec. 7428(a)(1). 16Sec. 7428(a)(2). 17Sec. 7428(b)(2). 

EFFECTIVE DATE

The provision generally is effective for organizations organized 

after the date of enactment. 

Organizations organized on or before the date of enactment, that 

have not filed an application for exemption (Form 1024) or annual 

information return on or before the date of enactment must provide 

the notice required under the provision within 180 days of the date 

of enactment. 

B. DECLARATORY JUDGMENTS FOR SECTION 501(c)(4) 

ORGANIZATIONS (SEC. 3 OF THE BILL AND SEC. 7428 OF THE CODE) 

PRESENT LAW

In order for an organization to be granted tax exemption as a 

charitable entity described in section 501(c)(3), it must file an application for recognition of exemption with the IRS and receive a 

favorable determination of its status.13 For most section 501(c)(3) 

organizations, eligibility to receive tax-deductible contributions 

similarly is dependent upon its receipt of a favorable determination 

from the IRS. In general, a section 501(c)(3) organization can rely 

on a determination letter or ruling from the IRS regarding its taxexempt status, unless there is a material change in its character, 

purposes, or methods of operation. In cases where an organization 

violates one or more of the requirements for tax exemption under 

section 501(c)(3), the IRS generally may revoke an organization’s 

tax exemption, notwithstanding an earlier favorable determination. 

Present law authorizes an organization to seek a declaratory 

judgment regarding its tax-exempt status as a remedy if the IRS 

denies its application for recognition of exemption under section 

501(c)(3), fails to act on such an application, or informs a section 

501(c)(3) organization that it is considering revoking or adversely 

modifying its tax-exempt status.14 The right to seek a declaratory 

judgment arises in the case of a dispute involving a determination 

by the IRS with respect to: (1) the initial qualification or continuing 

qualification of an organization as a charitable organization for tax 

exemption purposes or for charitable contribution deduction purposes; (2) the initial classification or continuing classification of an 

organization as a private foundation; (3) the initial classification or 

continuing classification of an organization as a private operating 

foundation; or (4) the failure of the IRS to make a determination 

with respect to (1), (2), or (3).15 A ‘‘determination’’ in this context 

generally means a final decision by the IRS affecting the tax qualification of a charitable organization. Section 7428 vests jurisdiction 

over controversies involving such a determination in the U.S. District Court for the District of Columbia, the U.S. Court of Federal 

Claims, and the U.S. Tax Court.16

Prior to utilizing the declaratory judgment procedure, an organization must have exhausted all administrative remedies available 

to it within the IRS.17 For the first 270 days after a request for 

a determination is made and before the IRS informs the organizaVerDate Sep 11 2014 04:28 Apr 17, 2015 Jkt 049006 PO 00000 Frm 00010 Fmt 6659 Sfmt 6602 E:\HR\OC\HR071.XXX HR071

SSpencer on DSK4SPTVN1PROD with REPORTS
11 

tion of its decision, an organization is deemed not to have exhausted its administrative remedies. If no determination is made 

during the 270-day period, the organization may initiate an action 

for declaratory judgment after the period has elapsed. If, however, 

the IRS makes an adverse determination during the 270-day period, an organization may immediately seek declaratory relief. The 

270-day period does not begin with respect to applications for recognition of tax-exempt status until the date a substantially completed application is submitted. 

Under present law, a non-charity (i.e., an organization not described in section 501(c)(3)) may not seek a declaratory judgment 

with respect to an IRS determination regarding its tax-exempt status. In general, such an organization must petition the U.S. Tax 

Court for relief following the issuance of a notice of deficiency or 

pay any tax owed and file a refund action in Federal district court 

or the U.S. Court of Federal Claims. 

REASONS FOR CHANGE

The Committee found that section 501(c)(4) organizations that 

receive an adverse determination or upon examination have their 

exempt status revoked have limited recourse. The Committee 

therefore believes it is desirable to allow a section 501(c)(4) organization to seek a declaratory judgment regarding its tax-exempt status from a court of law in the event it has exhausted its administrative remedies, using the same procedures that are already available to section 501(c)(3) charitable organizations. 

EXPLANATION OF PROVISION

The provision extends the section 7428 declaratory judgment procedure to the initial determination or continuing classification of an 

organization as tax-exempt under section 501(a) as an organization 

described in section 501(c)(4) (i.e., social welfare and certain other 

organizations). 

EFFECTIVE DATE

The provision is effective for pleadings filed after the date of enactment. 

III. VOTES OF THE COMMITTEE 

In compliance with clause 3(b) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the vote of the Committee on Ways and Means in its consideration of H.R. 1295, the ‘‘IRS Bureaucracy Reduction and Judicial Review Act,’’ on March 25, 2015. 

The Chairman’s amendment in the nature of a substitute was 

adopted by a voice vote (with a quorum being present). 

An amendment by Mr. Holding to the amendment in the nature 

of a substitute, requiring any fees collected pursuant to the bill be 

subject to appropriations, was adopted by a voice vote (with a 

quorum being present). 

An amendment by Mr. McDermott to the amendment in the nature of a substitute, requiring 501(c)(4) organizations to indicate 

whether they plan to engage in certain political activity, was not 


SSpencer on DSK4SPTVN1PROD with REPORTS
12 

agreed to by a roll-call vote of 20 nays to 11 yeas (with a quorum 

being present). 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Ryan ................................. ........... X ........... Mr. Levin ................................ ........... ........... ...........

Mr. Johnson ............................. ........... X ........... Mr. Rangel ............................. ........... ........... ...........

Mr. Brady ................................ ........... X ........... Mr. McDermott ....................... X ........... ...........

Mr. Nunes ............................... ........... ........... ........... Mr. Lewis ................................ X ........... ...........

Mr. Tiberi ................................ ........... X ........... Mr. Neal ................................. X ........... ...........

Mr. Reichert ............................ ........... X ........... Mr. Becerra ............................ X ........... ...........

Mr. Boustany ........................... ........... X ........... Mr. Doggett ............................ X ........... ...........

Mr. Roskam ............................. ........... X ........... Mr. Thompson ........................ X ........... ...........

Mr. Price ................................. ........... ........... ........... Mr. Larson .............................. X ........... ...........

Mr. Buchanan ......................... ........... X ........... Mr. Blumenauer ..................... ........... ........... ...........

Mr. Smith (NE) ........................ ........... X ........... Mr. Kind ................................. X ........... ...........

Ms. Jenkins ............................. ........... X ........... Mr. Pascrell ............................ X ........... ...........

Mr. Paulsen ............................. ........... X ........... Mr. Crowley ............................ ........... ........... ...........

Mr. Marchant .......................... ........... X ........... Mr. Davis ................................ X ........... ...........

Ms. Black ................................ ........... ........... ........... Ms. Sanchez ........................... X ........... ...........

Mr. Reed ................................. ........... X ...........

Mr. Young ............................... ........... X ...........

Mr. Kelly .................................. ........... X ...........

Mr. Renacci ............................. ........... X ...........

Mr. Meehan ............................. ........... X ...........

Ms. Noem ................................ ........... X ...........

Mr. Holding ............................. ........... X ...........

Mr. Smith (MO) ....................... ........... X ...........

The bill, H.R. 1295, as amended, was ordered favorably reported 

to the House of Representatives by a voice vote (with a quorum 

being present). 

IV. BUDGET EFFECTS OF THE BILL 

A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

In compliance with clause 3(d) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the effects on the budget of the bill, H.R. 1295, as reported. 

The bill, as reported, is estimated to have the following effect on 

Federal budget receipts for fiscal years 2015–2025: 

FISCAL YEARS 

[Millions of dollars] 1

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2015–20 2015–25 

(2) 1 1 1 1 1 2 2 2 2 2 5 16 

1 Estimate includes an increase in user fees of $15 million over the budget window, as provided by the Congressional Budget Office. 2 Increase of less than $500,000. 

Pursuant to clause 8 of rule XIII of the Rules of the House of 

Representatives, the following statement is made by the Joint Committee on Taxation with respect to the provisions of the bill amending the Internal Revenue Code of 1986: the gross budgetary effect 

(before incorporating macroeconomic effects) in any fiscal year is 

less than 0.25 percent of the current projected gross domestic product of the United States for that fiscal year; therefore, the bill is 

not ‘‘major legislation’’ for purposes of requiring that the estimate 

include the budgetary effects of changes in economic output, employment, capital stock and other macroeconomic variables. 


SSpencer on DSK4SPTVN1PROD with REPORTS
13 

B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX

EXPENDITURES BUDGET AUTHORITY

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee states that the bill involves no new or increased budget authority. The Committee further states that there are no new or increased tax expenditures. 

C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET

OFFICE

In compliance with clause 3(c)(3) of rule XIII of the Rules of the 

House of Representatives, requiring a cost estimate prepared by 

the CBO, the following statement by CBO is provided. 

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, April 3, 2015. 

Hon. PAUL RYAN, 

Chairman, Committee on Ways and Means, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 1295, the IRS Bureaucracy Reduction and Judicial Review Act. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Matthew Pickford. 

Sincerely, 

KEITH HALL, 

Director. 

Enclosure. 

H.R. 1295—IRS Bureaucracy Reduction and Judicial Review Act 

Summary: H.R. 1295 would amend federal law concerning certain nonprofit and tax exempt civic leagues or organizations operated for the promotion of social welfare—known as 501(c)(4) organizations. Specifically, the bill would: 

• Require each such organization to notify the Department 

of the Treasury of its formation and to pay a fee; 

• Require the Treasury to acknowledge receipt of such notifications within 60 days; and 

• Establish new monetary penalties for organizations that 

do not provide timely notification to the Treasury. 

CBO and the staff of the Joint Committee on Taxation (JCT) estimate that enacting H.R. 1295 would increase fee and penalty collections (which are recorded in the budget as revenues) by $16 million over the 2016–2025 period. Because enacting the bill would affect revenues, pay-as-you-go procedures apply. Enacting the bill 

would not affect direct spending. In addition, CBO estimates that 

implementing H.R. 1295 would cost $5 million over the 2016–2020, 

assuming appropriation of the necessary amounts. 

CBO and JCT have determined that H.R. 1295 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA) and would not increase the 

budgets of state, local, or tribal governments. 

Estimated cost to the Federal Government: The estimated budgetary effects of H.R. 1295 are shown in the following table. The efVerDate Sep 11 2014 04:28 Apr 17, 2015 Jkt 049006 PO 00000 Frm 00013 Fmt 6659 Sfmt 6602 E:\HR\OC\HR071.XXX HR071

SSpencer on DSK4SPTVN1PROD with REPORTS
14 

fects of this legislation fall within budget function 800 (general government). 

By fiscal year, in millions of dollars— 

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2016– 

2020 

2016– 

2025 

CHANGES IN REVENUES 

Estimated Revenues .............. 1 1 1 1 1 2 2 2 2 2 5 16 

CHANGES IN SPENDING SUBJECT TO APPROPRIATION 

Estimated Authorization Level 1 1 1 1 1 2 2 2 2 2 5 15 

Estimated Outlays ................. 1 1 1 1 1 2 2 2 2 2 5 15 

Sources: CBO and the staff of the Joint Committee on Taxation. 

Note: Components may not sum to totals because of rounding. 

Basis of estimate: For this estimate, CBO assumes that the legislation will be enacted before the end of fiscal year 2015. 

Revenues 

H.R. 1295 would require each entity that forms as a 501(c)(4) organization after the bill’s enactment to provide notice to the Treasury of its formation and to pay a fee. Based on information from 

the Internal Revenue Service (IRS) regarding the number of 

501(c)(4) formed in recent years (about 3,000 per year), CBO estimates that this provision would increase revenue collections by $15 

million over the 2016–2025 period. In addition, JCT estimates that 

the bill would increase revenues by $1 million over the 2016–2025 

period from penalties imposed for violations of the provisions in 

H.R. 1295. 

Spending subject to appropriation 

H.R. 1295 would authorize IRS to spend amounts collected from 

entities applying to become 501(c)(4) organizations. CBO estimates 

that implementing this provision would cost $15 million over the 

2016–2025 period, assuming appropriation of the necessary 

amounts. 

Pay-As-You-Go considerations: The Statutory Pay-As-You-Go Act 

of 2010 establishes budget-reporting and enforcement procedures 

for legislation affecting direct spending or revenues. The changes 

in revenues that are subject to those pay-as-you-go procedures are 

shown in the following table. 

CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 1295, AS ORDERED REPORTED BY THE 

HOUSE COMMITTEE ON WAYS AND MEANS ON MARCH 25, 2015 

By fiscal year, in millions of dollars— 

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2015– 

2020 

2015– 

2025 

NET DECREASE IN THE DEFICIT 

Statutory PayAs-You-Go 

Impact ........ 0 ¥1 ¥1 ¥1 ¥1 ¥1 ¥2 ¥2 ¥2 ¥2 ¥2 ¥5 ¥16 

Intergovernmental and private-sector impact: CBO and JCT have 

determined that H.R. 1295 contains no intergovernmental or private-sector mandates as defined in UMRA and would not affect the 

budgets of state, local, or tribal governments. 


SSpencer on DSK4SPTVN1PROD with REPORTS
15 

Estimate prepared by: Federal spending: Matthew Pickford; Federal revenues: Staff of the Joint Committee on Taxation; Intergovernmental and private-sector mandates: Staff of the Joint Committee on Taxation, Jon Sperl, and Paige Piper/Bach. 

Estimate approved by: Theresa Gullo, Assistant Director for 

Budget Analysis. 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE 

RULES OF THE HOUSE 

A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

With respect to clause 3(c)(1) of rule XIII of the Rules of the 

House of Representatives (relating to oversight findings), the Committee advises that it was as a result of the Committee’s review of 

the provisions of H.R. 1295 that the Committee concluded that it 

is appropriate to report the bill, as amended, favorably to the 

House of Representatives with the recommendation that the bill do 

pass. 

B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

With respect to clause 3(c)(4) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the bill contains no measure that authorizes funding, so no statement of general performance goals and objectives for which any measure authorizes funding is required. 

C. INFORMATION RELATING TO UNFUNDED MANDATES

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104–4). 

The Committee has determined that the bill does not contain Federal mandates on the private sector. The Committee has determined that the bill does not impose a Federal intergovernmental 

mandate on State, local, or tribal governments. 

D. APPLICABILITY OF HOUSE RULE XXI 5(b) 

Rule XXI 5(b) of the Rules of the House of Representatives provides, in part, that ‘‘A bill or joint resolution, amendment, or conference report carrying a Federal income tax rate increase may not 

be considered as passed or agreed to unless so determined by a 

vote of not less than three-fifths of the Members voting, a quorum 

being present.’’ The Committee has carefully reviewed the bill, and 

states that the bill does not involve any Federal income tax rate 

increases within the meaning of the rule. 

E. TAX COMPLEXITY ANALYSIS

The following statement is made pursuant to clause 3(h)(1) of 

rule XIII of the Rules of the House of Representatives. Section 

4022(b) of the Internal Revenue Service Restructuring and Reform 

Act of 1998 requires the staff of the Joint Committee on Taxation 

(in consultation with the Internal Revenue Service and the Treasury Department) to provide a tax complexity analysis. The complexity analysis is required for all legislation reported by the Senate Committee on Finance, the House Committee on Ways and 


SSpencer on DSK4SPTVN1PROD with REPORTS
16 

Means, or any committee of conference if the legislation includes a 

provision that directly or indirectly amends the Internal Revenue 

Code and has widespread applicability to individuals or small businesses. 

Pursuant to clause 3(h)(1) of rule XIII of the Rules of the House 

of Representatives, the staff of the Joint Committee on Taxation 

has determined that a complexity analysis is not required under 

section 4022(b) of the IRS Reform Act because the bill contains no 

provisions that amend the Internal Revenue Code and that have 

‘‘widespread applicability’’ to individuals or small businesses, within the meaning of the rule. 

F. CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND

LIMITED TARIFF BENEFITS

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the bill, and states that the provisions of the bill do not 

contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

G. DUPLICATION OF FEDERAL PROGRAMS

In compliance with Sec. 3(g)(2) of H. Res. 5 (114th Congress), the 

Committee states that no provision of the bill establishes or reauthorizes: (1) a program of the Federal Government known to be duplicative of another Federal program, (2) a program included in any 

report from the Government Accountability Office to Congress pursuant to section 21 of Public Law 111–139, or (3) a program related 

to a program identified in the most recent Catalog of Federal Domestic Assistance, published pursuant to the Federal Program Information Act (Public Law 95–220, as amended by Public Law 98– 

169). 

H. DISCLOSURE OF DIRECTED RULE MAKINGS

In compliance with Sec. 3(i) of H. Res. 5 (114th Congress), the 

following statement is made concerning directed rule makings: The 

Committee estimates that the bill requires no directed rule makings within the meaning of such section. 

VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS 

REPORTED 

A. TEXT OF EXISTING LAW AMENDED OR REPEALED BY THE BILL, AS

REPORTED

In compliance with clause 3(e)(1)(A) of rule XIII of the Rules of 

the House of Representatives, the text of each section proposed to 

be amended or repealed by the bill, as reported, is shown below: 

TEXT OF EXISTING LAW AMENDED OR REPEALED BY THE BILL, AS

REPORTED

In compliance with clause 3(e)(1)(A) of rule XIII of the Rules of 

the House of Representatives, the text of each section proposed to 

be amended or repealed by the bill, as reported, is shown below: 


SSpencer on DSK4SPTVN1PROD with REPORTS
17 

INTERNAL REVENUE CODE OF 1986 

* * * * * * * 

Subtitle F—Procedure and Administration 

* * * * * * * 

CHAPTER 61—INFORMATION AND RETURNS 

* * * * * * * 

Subchapter A—Returns and Records 

* * * * * * * 

PART III—INFORMATION RETURNS 

* * * * * * * 

Subpart A—Information Concerning Persons Subject to 

Special Provisions 

* * * * * * * 

SEC. 6033. RETURNS BY EXEMPT ORGANIZATIONS. 

(a) ORGANIZATIONS REQUIRED TO FILE.— (1) IN GENERAL.—Except as provided in paragraph (3), every 

organization exempt from taxation under section 501(a) shall 

file an annual return, stating specifically the items of gross income, receipts, and disbursements, and such other information 

for the purpose of carrying out the internal revenue laws as 

the Secretary may by forms or regulations prescribe, and shall 

keep such records, render under oath such statements, make 

such other returns, and comply with such rules and regulations as the Secretary may from time to time prescribe; except 

that, in the discretion of the Secretary, any organization described in section 401(a) may be relieved from stating in its return any information which is reported in returns filed by the 

employer which established such organization. 

(2) BEING A PARTY TO CERTAIN REPORTABLE TRANSACTIONS.— Every tax-exempt entity described in section 4965(c) shall file 

(in such form and manner and at such time as determined by 

the Secretary) a disclosure of— 

(A) such entity’s being a party to any prohibited tax 

shelter transaction (as defined in section 4965(e)), and 

(B) the identity of any other party to such transaction 

which is known by such tax-exempt entity. 

(3) EXCEPTIONS FROM FILING.— (A) MANDATORY EXCEPTIONS.—Paragraph (1) shall not 

apply to— 

(i) churches, their integrated auxiliaries, and conventions or associations of churches, 

(ii) any organization (other than a private foundation, as defined in section 509(a)) described in subparagraph (C), the gross receipts of which in each taxable year are normally not more than $5,000, or 


SSpencer on DSK4SPTVN1PROD with REPORTS
18 

(iii) the exclusively religious activities of any religious order. 

(B) DISCRETIONARY EXCEPTIONS.—The Secretary may relieve any organization required under paragraph (1) (other 

than an organization described in section 509(a)(3)) to file 

an information return from filing such a return where he 

determines that such filing is not necessary to the efficient 

administration of the internal revenue laws. 

(C) CERTAIN ORGANIZATIONS.—The organizations referred to in subparagraph (A)(ii) are— 

(i) a religious organization described in section 

501(c)(3); 

(ii) an educational organization described in section 

170(b)(1)(A)(ii); 

(iii) a charitable organization, or an organization for 

the prevention of cruelty to children or animals, described in section 501(c)(3), if such organization is supported, in whole or in part, by funds contributed by 

the United States or any State or political subdivision 

thereof, or is primarily supported by contributions of 

the general public; 

(iv) an organization described in section 501(c)(3), if 

such organization is operated, supervised, or controlled by or in connection with a religious organization described in clause (i); 

(v) an organization described in section 501(c)(8); 

and 

(vi) an organization described in section 501(c)(1), if 

such organization is a corporation wholly owned by 

the United States or any agency or instrumentality 

thereof, or a wholly-owned subsidiary of such a corporation. 

(b) CERTAIN ORGANIZATIONS DESCRIBED IN SECTION 501(C)(3).— 

Every organization described in section 501(c)(3) which is subject 

to the requirements of subsection (a) shall furnish annually information, at such time and in such manner as the Secretary may by 

forms or regulations prescribe, setting forth— 

(1) its gross income for the year, 

(2) its expenses attributable to such income and incurred 

within the year, 

(3) its disbursements within the year for the purposes for 

which it is exempt, 

(4) a balance sheet showing its assets, liabilities, and net 

worth as of the beginning of such year, 

(5) the total of the contributions and gifts received by it during the year, and the names and addresses of all substantial 

contributors, 

(6) the names and addresses of its foundation managers 

(within the meaning of section 4946(b)(1)) and highly compensated employees, 

(7) the compensation and other payments made during the 

year to each individual described in paragraph (6), 

(8) in the case of an organization with respect to which an 

election under section 501(h) is effective for the taxable year, 


SSpencer on DSK4SPTVN1PROD with REPORTS
19 

the following amounts for such organization for such taxable 

year: 

(A) the lobbying expenditures (as defined in section 

4911(c)(1)), 

(B) the lobbying nontaxable amount (as defined in section 4911(c)(2)), 

(C) the grass roots expenditures (as defined in section 

4911(c)(3)), and 

(D) the grass roots nontaxable amount (as defined in section 4911(c)(4)), 

(9) such other information with respect to direct or indirect 

transfers to, and other direct or indirect transactions and relationships with, other organizations described in section 501(c) 

(other than paragraph (3) thereof) or section 527 as the Secretary may require to prevent— 

(A) diversion of funds from the organization’s exempt 

purpose, or 

(B) misallocation of revenues or expenses, 

(10) the respective amounts (if any) of the taxes imposed on 

the organization, or any organization manager of the organization, during the taxable year under any of the following provisions (and the respective amounts (if any) of reimbursements 

paid by the organization during the taxable year with respect 

to taxes imposed on any such organization manager under any 

of such provisions): 

(A) section 4911 (relating to tax on excess expenditures 

to influence legislation), 

(B) section 4912 (relating to tax on disqualifying lobbying expenditures of certain organizations), 

(C) section 4955 (relating to taxes on political expenditures of section 501(c)(3) organizations), except to the extent that, by reason of section 4962, the taxes imposed 

under such section are not required to be paid or are credited or refunded, and 

(D) section 4959 (relating to taxes on failures by hospital 

organizations), 

(11) the respective amounts (if any) of— 

(A) the taxes imposed with respect to the organization 

on any organization manager, or any disqualified person, 

during the taxable year under section 4958 (relating to 

taxes on private excess benefit from certain charitable organizations), and 

(B) reimbursements paid by the organization during the 

taxable year with respect to taxes imposed under such section, except to the extent that, by reason of section 4962, 

the taxes imposed under such section are not required to 

be paid or are credited or refunded, 

(12) such information as the Secretary may require with respect to any excess benefit transaction (as defined in section 

4958), 

(13) such information with respect to disqualified persons as 

the Secretary may prescribe, 

(14) such information as the Secretary may require with respect to disaster relief activities, including the amount and use 

of qualified contributions to which section 1400S(a) applies, 


SSpencer on DSK4SPTVN1PROD with REPORTS
20 

(15) in the case of an organization to which the requirements 

of section 501(r) apply for the taxable year— 

(A) a description of how the organization is addressing 

the needs identified in each community health needs assessment conducted under section 501(r)(3) and a description of any such needs that are not being addressed together with the reasons why such needs are not being addressed, and 

(B) the audited financial statements of such organization 

(or, in the case of an organization the financial statements 

of which are included in a consolidated financial statement 

with other organizations, such consolidated financial statement). 

(16) such other information for purposes of carrying out the 

internal revenue laws as the Secretary may require. 

For purposes of paragraph (8), if section 4911(f) applies to the organization for the taxable year, such organization shall furnish the 

amounts with respect to the affiliated group as well as with respect 

to such organization. 

(c) ADDITIONAL PROVISIONS RELATING TO PRIVATE FOUNDA- TIONS.—In the case of an organization which is a private foundation (within the meaning of section 509(a))— 

(1) the Secretary shall by regulations provide that the private foundation shall include in its annual return under this 

section such information (not required to be furnished by subsection (b) or the forms or regulations prescribed thereunder) 

as would have been required to be furnished under section 

6056 (relating to annual reports by private foundations) as 

such section 6056 was in effect on January 1, 1979, and 

(2) the foundation managers shall furnish copies of the annual return under this section to such State officials, at such 

times, and under such conditions, as the Secretary may by regulations prescribe. 

Nothing in paragraph (1) shall require the inclusion of the name 

and address of any recipient (other than a disqualified person within the meaning of section 4946) of 1 or more charitable gifts or 

grants made by the foundation to such recipient as an indigent or 

needy person if the aggregate of such gifts or grants made by the 

foundation to such recipient during the year does not exceed 

$1,000. 

(d) SECTION TO APPLY TO NONEXEMPT CHARITABLE TRUSTS AND

NONEXEMPT PRIVATE FOUNDATIONS.—The following organizations 

shall comply with the requirements of this section in the same 

manner as organizations described in section 501(c)(3) which are 

exempt from tax under section 501(a): 

(1) NONEXEMPT CHARITABLE TRUSTS.—A trust described in 

section 4947(a)(1) (relating to nonexempt charitable trusts). 

(2) NONEXEMPT PRIVATE FOUNDATIONS.—A private foundation which is not exempt from tax under section 501(a). 

(e) SPECIAL RULES RELATING TO LOBBYING ACTIVITIES.— (1) REPORTING REQUIREMENTS.— (A) IN GENERAL.—If this subsection applies to an organization for any taxable year, such organization— 

(i) shall include on any return required to be filed 

under subsection (a) for such year information setting 


SSpencer on DSK4SPTVN1PROD with REPORTS
21 

forth the total expenditures of the organization to 

which section 162(e)(1) applies and the total amount of 

the dues or other similar amounts paid to the organization to which such expenditures are allocable, and 

(ii) except as provided in paragraphs (2)(A)(i) and 

(3), shall, at the time of assessment or payment of 

such dues or other similar amounts, provide notice to 

each person making such payment which contains a 

reasonable estimate of the portion of such dues or 

other similar amounts to which such expenditures are 

so allocable. 

(B) ORGANIZATIONS TO WHICH SUBSECTION APPLIES.— 

(i) IN GENERAL.—This subsection shall apply to any 

organization which is exempt from taxation under section 501 other than an organization described in section 501(c)(3). 

(ii) SPECIAL RULE FOR IN-HOUSE EXPENDITURES.— 

This subsection shall not apply to the in-house expenditures (within the meaning of section 

162(e)(5)(B)(ii)) of an organization for a taxable year if 

such expenditures do not exceed $2,000. In determining whether a taxpayer exceeds the $2,000 limit 

under this clause, there shall not be taken into account overhead costs otherwise allocable to activities 

described in subparagraphs (A) and (D) of section 

162(e)(1). 

(iii) COORDINATION WITH SECTION 527(F).—This subsection shall not apply to any amount on which tax is 

imposed by reason of section 527(f). 

(C) ALLOCATION.—For purposes of this paragraph— 

(i) IN GENERAL.—Expenditures to which section 

162(e)(1) applies shall be treated as paid out of dues 

or other similar amounts to the extent thereof. 

(ii) CARRYOVER OF LOBBYING EXPENDITURES IN EXCESS OF DUES.—If expenditures to which section 

162(e)(1) applies exceed the dues or other similar 

amounts for any taxable year, such excess shall be 

treated as expenditures to which section 162(e)(1) applies which are paid or incurred by the organization 

during the following taxable year. 

(2) TAX IMPOSED WHERE ORGANIZATION DOES NOT NOTIFY.— 

(A) IN GENERAL.—If an organization— 

(i) elects not to provide the notices described in 

paragraph (1)(A) for any taxable year, or 

(ii) fails to include in such notices the amount allocable to expenditures to which section 162(e)(1) applies (determined on the basis of actual amounts rather than the reasonable estimates under paragraph 

(1)(A)(ii)), 

then there is hereby imposed on such organization for such 

taxable year a tax in an amount equal to the product of 

the highest rate of tax imposed by section 11 for the taxable year and the aggregate amount not included in such 

notices by reason of such election or failure. 


SSpencer on DSK4SPTVN1PROD with REPORTS
22 

(B) WAIVER WHERE FUTURE ADJUSTMENTS MADE.—The 

Secretary may waive the tax imposed by subparagraph 

(A)(ii) for any taxable year if the organization agrees to adjust its estimates under paragraph (1)(A)(ii) for the following taxable year to correct any failures. 

(C) TAX TREATED AS INCOME TAX.—For purposes of this 

title, the tax imposed by subparagraph (A) shall be treated 

in the same manner as a tax imposed by chapter 1 (relating to income taxes). 

(3) EXCEPTION WHERE DUES GENERALLY NONDEDUCTIBLE.— Paragraph (1)(A) shall not apply to an organization which establishes to the satisfaction of the Secretary that substantially 

all of the dues or other similar amounts paid by persons to 

such organization are not deductible without regard to section 

162(e). 

(f) CERTAIN ORGANIZATIONS DESCRIBED IN SECTION 501(C)(4).— 

Every organization described in section 501(c)(4) which is subject 

to the requirements of subsection (a) shall include on the return required under subsection (a) the information referred to in paragraphs (11), (12) and (13) of subsection (b) with respect to such organization. 

(g) RETURNS REQUIRED BY POLITICAL ORGANIZATIONS.— (1) IN GENERAL.—This section shall apply to a political organization (as defined by section 527(e)(1)) which has gross receipts of $25,000 or more for the taxable year. In the case of 

a political organization which is a qualified State or local political organization (as defined in section 527(e)(5)), the preceding 

sentence shall be applied by substituting ‘‘$100,000’’ for 

‘‘$25,000’’. 

(2) ANNUAL RETURNS.—Political organizations described in 

paragraph (1) shall file an annual return— 

(A) containing the information required, and complying 

with the other requirements, under subsection (a)(1) for organizations exempt from taxation under section 501(a), 

with such modifications as the Secretary considers appropriate to require only information which is necessary for 

the purposes of carrying out section 527, and 

(B) containing such other information as the Secretary 

deems necessary to carry out the provisions of this subsection. 

(3) MANDATORY EXCEPTIONS FROM FILING.—Paragraph (2) 

shall not apply to an organization— 

(A) which is a State or local committee of a political 

party, or political committee of a State or local candidate, 

(B) which is a caucus or association of State or local officials, 

(C) which is an authorized committee (as defined in section 301(6) of the Federal Election Campaign Act of 1971) 

of a candidate for Federal office, 

(D) which is a national committee (as defined in section 

301(14) of the Federal Election Campaign Act of 1971) of 

a political party, 

(E) which is a United States House of Representatives or 

United States Senate campaign committee of a political 

party committee, 


SSpencer on DSK4SPTVN1PROD with REPORTS
23 

(F) which is required to report under the Federal Election Campaign Act of 1971 as a political committee (as defined in section 301(4) of such Act), or 

(G) to which section 527 applies for the taxable year 

solely by reason of subsection (f)(1) of such section. 

(4) DISCRETIONARY EXCEPTION.—The Secretary may relieve 

any organization required under paragraph (2) to file an information return from filing such a return if the Secretary determines that such filing is not necessary to the efficient administration of the internal revenue laws. 

(h) CONTROLLING ORGANIZATIONS.—Each controlling organization 

(within the meaning of section 512(b)(13)) which is subject to the 

requirements of subsection (a) shall include on the return required 

under subsection (a)— 

(1) any interest, annuities, royalties, or rents received from 

each controlled entity (within the meaning of section 

512(b)(13)), 

(2) any loans made to each such controlled entity, and 

(3) any transfers of funds between such controlling organization and each such controlled entity. 

(i) ADDITIONAL NOTIFICATION REQUIREMENTS.—Any organization 

the gross receipts of which in any taxable year result in such organization being referred to in subsection (a)(3)(A)(ii) or (a)(3)(B)— 

(1) shall furnish annually, in electronic form, and at such 

time and in such manner as the Secretary may by regulations 

prescribe, information setting forth— 

(A) the legal name of the organization, 

(B) any name under which such organization operates or 

does business, 

(C) the organization’s mailing address and Internet web 

site address (if any), 

(D) the organization’s taxpayer identification number, 

(E) the name and address of a principal officer, and 

(F) evidence of the continuing basis for the organization’s exemption from the filing requirements under subsection (a)(1), and 

(2) upon the termination of the existence of the organization, 

shall furnish notice of such termination. 

(j) LOSS OF EXEMPT STATUS FOR FAILURE TO FILE RETURN OR NO- TICE.— 

(1) IN GENERAL.—If an organization described in subsection 

(a)(1) or (i) fails to file an annual return or notice required 

under either subsection for 3 consecutive years, such organization’s status as an organization exempt from tax under section 

501(a) shall be considered revoked on and after the date set by 

the Secretary for the filing of the third annual return or notice. 

The Secretary shall publish and maintain a list of any organization the status of which is so revoked. 

(2) APPLICATION NECESSARY FOR REINSTATEMENT.—Any organization the tax-exempt status of which is revoked under paragraph (1) must apply in order to obtain reinstatement of such 

status regardless of whether such organization was originally 

required to make such an application. 

(3) RETROACTIVE REINSTATEMENT IF REASONABLE CAUSE

SHOWN FOR FAILURE.—If, upon application for reinstatement of 


SSpencer on DSK4SPTVN1PROD with REPORTS
24 

status as an organization exempt from tax under section 

501(a), an organization described in paragraph (1) can show to 

the satisfaction of the Secretary evidence of reasonable cause 

for the failure described in such paragraph, the organization’s 

exempt status may, in the discretion of the Secretary, be reinstated effective from the date of the revocation under such 

paragraph. 

(k) ADDITIONAL PROVISIONS RELATING TO SPONSORING ORGANIZA- TIONS.—Every organization described in section 4966(d)(1) shall, on 

the return required under subsection (a) for the taxable year— 

(1) list the total number of donor advised funds (as defined 

in section 4966(d)(2)) it owns at the end of such taxable year, 

(2) indicate the aggregate value of assets held in such funds 

at the end of such taxable year, and 

(3) indicate the aggregate contributions to and grants made 

from such funds during such taxable year. 

(l) ADDITIONAL PROVISIONS RELATING TO SUPPORTING ORGANIZA- TIONS.—Every organization described in section 509(a)(3) shall, on 

the return required under subsection (a)— 

(1) list the supported organizations (as defined in section 

509(f)(3)) with respect to which such organization provides support, 

(2) indicate whether the organization meets the requirements of clause (i), (ii), or (iii) of section 509(a)(3)(B), and 

(3) certify that the organization meets the requirements of 

section 509(a)(3)(C). 

(m) ADDITIONAL INFORMATION REQUIRED FROM CO-OP INSUR- ERS.—An organization described in section 501(c)(29) shall include 

on the return required under subsection (a) the following information: 

(1) The amount of the reserves required by each State in 

which the organization is licensed to issue qualified health 

plans. 

(2) The amount of reserves on hand. 

(n) CROSS REFERENCES.—For provisions relating to statements, 

etc., regarding exempt status of organizations, see section 6001. 

For reporting requirements as to certain liquidations, dissolutions, 

terminations, and contractions, see section 6043(b). For provisions 

relating to penalties for failure to file a return required by this section, see section 6652(c).For provisions relating to information required in connection with certain plans of deferred compensation, 

see section 6058. 

* * * * * * * 

CHAPTER 68—ADDITIONS TO THE TAX, ADDITIONAL AMOUNTS, AND ASSESSABLE PENALTIES 

* * * * * * * 

Subchapter A—Additions to the Tax and 

Additional Amounts 

* * * * * * * 


SSpencer on DSK4SPTVN1PROD with REPORTS
25 

PART I—GENERAL PROVISIONS 

* * * * * * * 

SEC. 6652. FAILURE TO FILE CERTAIN INFORMATION RETURNS, REGISTRATION STATEMENTS, ETC. 

(a) RETURNS WITH RESPECT TO CERTAIN PAYMENTS AGGREGATING

LESS THAN $10.—In the case of each failure to file a statement of 

a payment to another person required under the authority of— 

(1) section 6042(a)(2) (relating to payments of dividends ag- gregating less than $10), or 

(2) section 6044(a)(2) (relating to payments of patronage divi- dends aggregating less than $10), 

on the date prescribed therefor (determined with regard to any extension of time for filing), unless it is shown that such failure is 

due to reasonable cause and not to willful neglect, there shall be 

paid (upon notice and demand by the Secretary and in the same 

manner as tax) by the person failing to so file the statement, $1 

for each such statement not so filed, but the total amount imposed 

on the delinquent person for all such failures during the calendar 

year shall not exceed $1,000. 

(b) FAILURE TO REPORT TIPS.—In the case of failure by an employee to report to his employer on the date and in the manner prescribed therefor any amount of tips required to be so reported by 

section 6053(a) which are wages (as defined in section 3121(a)) or 

which are compensation (as defined in section 3231(e)), unless it is 

shown that such failure is due to reasonable cause and not due to 

willful neglect, there shall be paid by the employee, in addition to 

the tax imposed by section 3101 or section 3201 (as the case may 

be) with respect to the amount of tips which he so failed to report, 

an amount equal to 50 percent of such tax. 

(c) RETURNS BY EXEMPT ORGANIZATIONS AND BY CERTAIN

TRUSTS.— 

(1) ANNUAL RETURNS UNDER SECTION 6033(A)(1) OR 6012(A)(6).— (A) PENALTY ON ORGANIZATION.—In the case of— 

(i) a failure to file a return required under section 

6033(a)(1) (relating to returns by exempt organizations) or section 6012(a)(6) (relating to returns by political organizations) on the date and in the manner 

prescribed therefor (determined with regard to any extension of time for filing), or 

(ii) a failure to include any of the information required to be shown on a return filed under section 

6033(a)(1) or section 6012(a)(6) or to show the correct 

information, 

there shall be paid by the exempt organization $20 for 

each day during which such failure continues. The maximum penalty under this subparagraph on failures with 

respect to any 1 return shall not exceed the lesser of 

$10,000 or 5 percent of the gross receipts of the organization for the year. In the case of an organization having 

gross receipts exceeding $1,000,000 for any year, with respect to the return required under section 6033(a)(1) or 

section 6012(a)(6) for such year, in applying the first sentence of this subparagraph, the amount of the penalty for 

each day during which a failure continues shall be $100 in 


SSpencer on DSK4SPTVN1PROD with REPORTS
26 

lieu of the amount otherwise specified, and, in lieu of applying the second sentence of this subparagraph, the maximum penalty under this subparagraph shall not exceed 

$50,000. 

(B) MANAGERS.— (i) IN GENERAL.—The Secretary may make a written 

demand on any organization subject to penalty under 

subparagraph (A) specifying therein a reasonable future date by which the return shall be filed (or the information furnished) for purposes of this subparagraph. 

(ii) FAILURE TO COMPLY WITH DEMAND.—If any person fails to comply with any demand under clause (i) 

on or before the date specified in such demand, there 

shall be paid by the person failing to so comply $10 for 

each day after the expiration of the time specified in 

such demand during which such failure continues. The 

maximum penalty imposed under this subparagraph 

on all persons for failures with respect to any 1 return 

shall not exceed $5,000. 

(C) PUBLIC INSPECTION OF ANNUAL RETURNS AND RE- PORTS.—In the case of a failure to comply with the requirements of section 6104(d) with respect to any annual return 

on the date and in the manner prescribed therefor (determined with regard to any extension of time for filing) or 

report required under section 527(j), there shall be paid by 

the person failing to meet such requirements $20 for each 

day during which such failure continues. The maximum 

penalty imposed under this subparagraph on all persons 

for failures with respect to any 1 return or report shall not 

exceed $10,000. 

(D) PUBLIC INSPECTION OF APPLICATIONS FOR EXEMPTION

AND NOTICE OF STATUS.—In the case of a failure to comply 

with the requirements of section 6104(d) with respect to 

any exempt status application materials (as defined in 

such section) or notice materials (as defined in such section) on the date and in the manner prescribed therefor, 

there shall be paid by the person failing to meet such requirements $20 for each day during which such failure 

continues. 

(E) NO PENALTY FOR CERTAIN ANNUAL NOTICES.—This 

paragraph shall not apply with respect to any notice required under section 6033(i). 

(2) RETURNS UNDER SECTION 6034 OR 6043(B).— 

(A) PENALTY ON ORGANIZATION OR TRUST.—In the case of 

a failure to file a return required under section 6034 (relating to returns by certain trusts) or section 6043(b) (relating to terminations, etc., of exempt organizations), on 

the date and in the manner prescribed therefor (determined with regard to any extension of time for filing), 

there shall be paid by the exempt organization or trust 

failing so to file $10 for each day during which such failure 

continues, but the total amount imposed under this subparagraph on any organization or trust for failure to file 

any 1 return shall not exceed $5,000. 


SSpencer on DSK4SPTVN1PROD with REPORTS
27 

(B) MANAGERS.—The Secretary may make written demand on an organization or trust failing to file under subparagraph (A) specifying therein a reasonable future date 

by which such filing shall be made for purposes of this 

subparagraph. If such filing is not made on or before such 

date, there shall be paid by the person failing so to file $10 

for each day after the expiration of the time specified in 

the written demand during which such failure continues, 

but the total amount imposed under this subparagraph on 

all persons for failure to file any 1 return shall not exceed 

$5,000. 

(C) SPLIT-INTEREST TRUSTS.—In the case of a trust which 

is required to file a return under section 6034(a), subparagraphs (A) and (B) of this paragraph shall not apply and 

paragraph (1) shall apply in the same manner as if such 

return were required under section 6033, except that— 

(i) the 5 percent limitation in the second sentence of 

paragraph (1)(A) shall not apply, 

(ii) in the case of any trust with gross income in excess of $250,000, in applying the first sentence of 

paragraph (1)(A), the amount of the penalty for each 

day during which a failure continues shall be $100 in 

lieu of the amount otherwise specified, and in lieu of 

applying the second sentence of paragraph (1)(A), the 

maximum penalty under paragraph (1)(A) shall not 

exceed $50,000, and 

(iii) the third sentence of paragraph (1)(A) shall be 

disregarded. 

In addition to any penalty imposed on the trust pursuant 

to this subparagraph, if the person required to file such return knowingly fails to file the return, such penalty shall 

also be imposed on such person who shall be personally 

liable for such penalty. 

(3) DISCLOSURE UNDER SECTION 6033(A)(2).— 

(A) PENALTY ON ENTITIES.—In the case of a failure to file 

a disclosure required under section 6033(a)(2), there shall 

be paid by the tax-exempt entity (the entity manager in 

the case of a tax-exempt entity described in paragraph (4), 

(5), (6), or (7) of section 4965(c)) $100 for each day during 

which such failure continues. The maximum penalty under 

this subparagraph on failures with respect to any 1 disclosure shall not exceed $50,000. 

(B) WRITTEN DEMAND.— 

(i) IN GENERAL.—The Secretary may make a written 

demand on any entity or manager subject to penalty 

under subparagraph (A) specifying therein a reasonable future date by which the disclosure shall be filed 

for purposes of this subparagraph. 

(ii) FAILURE TO COMPLY WITH DEMAND.—If any entity or manager fails to comply with any demand under 

clause (i) on or before the date specified in such demand, there shall be paid by such entity or manager 

failing to so comply $100 for each day after the expiration of the time specified in such demand during 

which such failure continues. The maximum penalty 


SSpencer on DSK4SPTVN1PROD with REPORTS
28 

imposed under this subparagraph on all entities and 

managers for failures with respect to any 1 disclosure 

shall not exceed $10,000. 

(C) DEFINITIONS.—Any term used in this section which 

is also used in section 4965 shall have the meaning given 

such term under section 4965. 

(4) REASONABLE CAUSE EXCEPTION.—No penalty shall be imposed under this subsection with respect to any failure if it is 

shown that such failure is due to reasonable cause. 

(5) OTHER SPECIAL RULES.— 

(A) TREATMENT AS TAX.—Any penalty imposed under 

this subsection shall be paid on notice and demand of the 

Secretary and in the same manner as tax. 

(B) JOINT AND SEVERAL LIABILITY.—If more than 1 person is liable under this subsection for any penalty with respect to any failure, all such persons shall be jointly and 

severally liable with respect to such failure. 

(C) PERSON.—For purposes of this subsection, the term 

‘‘person’’ means any officer, director, trustee, employee, or 

other individual who is under a duty to perform the act in 

respect of which the violation occurs. 

(6) ADJUSTMENT FOR INFLATION.— 

(A) IN GENERAL.—In the case of any failure relating to 

a return required to be filed in a calendar year beginning 

after 2014, each of the dollar amounts under paragraphs 

(1), (2), and (3) shall be increased by such dollar amount 

multiplied by the cost-of-living adjustment determined 

under section 1(f)(3) determined by substituting ‘‘calendar 

year 2013’’ for ‘‘calendar year 1992’’ in subparagraph (B) 

thereof. 

(B) ROUNDING.—If any amount adjusted under subparagraph (A)— 

(i) is not less than $5,000 and is not a multiple of 

$500, such amount shall be rounded to the next lowest 

multiple of $500, and 

(ii) is not described in clause (i) and is not a multiple of $5, such amount shall be rounded to the next 

lowest multiple of $5. 

(d) ANNUAL REGISTRATION AND OTHER NOTIFICATION BY PENSION

PLAN.— 

(1) REGISTRATION.—In the case of any failure to file a registration statement required under section 6057(a) (relating to 

annual registration of certain plans) which includes all participants required to be included in such statement, on the date 

prescribed therefor (determined without regard to any extension of time for filing), unless it is shown that such failure is 

due to reasonable cause, there shall be paid (on notice and demand by the Secretary and in the same manner as tax) by the 

person failing so to file, an amount equal to $1 for each participant with respect to whom there is a failure to file, multiplied 

by the number of days during which such failure continues, but 

the total amount imposed under this paragraph on any person 

for any failure to file with respect to any plan year shall not 

exceed $5,000. 


SSpencer on DSK4SPTVN1PROD with REPORTS
29 

(2) NOTIFICATION OF CHANGE OF STATUS.—In the case of failure to file a notification required under section 6057(b) (relating to notification of change of status) on the date prescribed 

therefor (determined without regard to any extension of time 

for filing), unless it is shown that such failure is due to reasonable cause, there shall be paid (on notice and demand by the 

Secretary and in the same manner as tax) by the person failing 

so to file, $1 for each day during which such failure continues, 

but the total amounts imposed under this paragraph on any 

person for failure to file any notification shall not exceed 

$1,000. 

(e) INFORMATION REQUIRED IN CONNECTION WITH CERTAIN PLANS

OF DEFERRED COMPENSATION, ETC..—In the case of failure to file 

a return or statement required under section 6058 (relating to information required in connection with certain plans of deferred 

compensation), 6047 (relating to information relating to certain 

trusts and annuity and bond purchase plans), or 6039D (relating 

to returns and records with respect to certain fringe benefit plans) 

on the date and in the manner prescribed therefor (determined 

with regard to any extension of time for filing), unless it is shown 

that such failure is due to reasonable cause, there shall be paid (on 

notice and demand by the Secretary and in the same manner as 

tax) by the person failing so to file, $25 for each day during which 

such failure continues, but the total amount imposed under this 

subsection on any person for failure to file any return shall not exceed $15,000. This subsection shall not apply to any return or 

statement which is an information return described in section 

6724(d)(1)(C)(ii) or a payee statement described in section 

6724(d)(2)(Y). 

(f) RETURNS REQUIRED UNDER SECTION 6039C.— 

(1) IN GENERAL.—In the case of each failure to make a return 

required by section 6039C which contains the information required by such section on the date prescribed therefor (determined with regard to any extension of time for filing), unless 

it is shown that such failure is due to reasonable cause and not 

to willful neglect, the amount determined under paragraph (2) 

shall be paid (upon notice and demand by the Secretary and 

in the same manner as tax) by the person failing to make such 

return. 

(2) AMOUNT OF PENALTY.—For purposes of paragraph (1), the 

amount determined under this paragraph with respect to any 

failure shall be $25 for each day during which such failure continues. 

(3) LIMITATION.—The amount determined under paragraph 

(2) with respect to any person for failing to meet the requirements of section 6039C for any calendar year shall not exceed 

the lesser of— 

(A) $25,000, or 

(B) 5 percent of the aggregate of the fair market value 

of the United States real property interests owned by such 

person at any time during such year. 

For purposes of the preceding sentence, fair market value shall 

be determined as of the end of the calendar year (or, in the 

case of any property disposed of during the calendar year, as 

of the date of such disposition). 


SSpencer on DSK4SPTVN1PROD with REPORTS
30 

(h) FAILURE TO GIVE NOTICE TO RECIPIENTS OF CERTAIN PENSION, ETC., DISTRIBUTIONS.—In the case of each failure to provide 

notice as required by section 3405(e)(10)(B), at the time prescribed 

therefor, unless it is shown that such failure is due to reasonable 

cause and not to willful neglect, there shall be paid, on notice and 

demand of the Secretary and in the same manner as tax, by the 

person failing to provide such notice, an amount equal to $10 for 

each such failure, but the total amount imposed on such person for 

all such failures during any calendar year shall not exceed $5,000. 

(i) FAILURE TO GIVE WRITTEN EXPLANATION TO RECIPIENTS OF

CERTAIN QUALIFYING ROLLOVER DISTRIBUTIONS.—In the case of 

each failure to provide a written explanation as required by section 

402(f), at the time prescribed therefor, unless it is shown that such 

failure is due to reasonable cause and not to willful neglect, there 

shall be paid, on notice and demand of the Secretary and in the 

same manner as tax, by the person failing to provide such written 

explanation, an amount equal to $100 for each such failure, but the 

total amount imposed on such person for all such failures during 

any calendar year shall not exceed $50,000. 

(j) FAILURE TO FILE CERTIFICATION WITH RESPECT TO CERTAIN

RESIDENTIAL RENTAL PROJECTS.—In the case of each failure to provide a certification as required by section 142(d)(7) at the time prescribed therefor, unless it is shown that such failure is due to reasonable cause and not to willful neglect, there shall be paid, on notice and demand of the Secretary and in the same manner as tax, 

by the person failing to provide such certification, an amount equal 

to $100 for each such failure. 

(k) FAILURE TO MAKE REPORTS REQUIRED UNDER SECTION

1202.— 

In the case of a failure to make a report required under section 

1202(d)(1)(C) which contains the information required by such section on the date prescribed therefor (determined with regard to any 

extension of time for filing), there shall be paid (on notice and demand by the Secretary and in the same manner as tax) by the person failing to make such report, an amount equal to $50 for each 

report with respect to which there was such a failure. In the case 

of any failure due to negligence or intentional disregard, the preceding sentence shall be applied by substituting ‘‘$100’’ for ‘‘$50’’. 

In the case of a report covering periods in 2 or more years, the penalty determined under preceding provisions of this subsection shall 

be multiplied by the number of such years. No penalty shall be imposed under this subsection on any failure which is shown to be 

due to reasonable cause and not willful neglect. 

(l) FAILURE TO FILE RETURN WITH RESPECT TO CERTAIN CORPORATE TRANSACTIONS.—In the case of any failure to make a return required under section 6043(c) containing the information required by such section on the date prescribed therefor (determined 

with regard to any extension of time for filing), unless it is shown 

that such failure is due to reasonable cause, there shall be paid (on 

notice and demand by the Secretary and in the same manner as 

tax) by the person failing to file such return, an amount equal to 

$500 for each day during which such failure continues, but the 

total amount imposed under this subsection with respect to any return shall not exceed $100,000. 


SSpencer on DSK4SPTVN1PROD with REPORTS
31 

(m) ALCOHOL AND TOBACCO TAXES FOR PENALTIES FOR FAILURE

TO FILE CERTAIN INFORMATION RETURNS.—with respect to alcohol 

and tobacco taxes, see, generally, subtitle E. 

(n) FAILURE TO MAKE REPORTS REQUIRED UNDER SECTIONS 3511, 

6053(C)(8), AND 7705.—In the case of a failure to make a report required under section 3511, 6053(c)(8), or 7705 which contains the 

information required by such section on the date prescribed therefor (determined with regard to any extension of time for filing), 

there shall be paid (on notice and demand by the Secretary and in 

the same manner as tax) by the person failing to make such report, 

an amount equal to $50 for each report with respect to which there 

was such a failure. In the case of any failure due to negligence or 

intentional disregard the preceding sentence shall be applied by 

substituting ‘‘$100’’ for ‘‘$50’’. 

* * * * * * * 

CHAPTER 76—JUDICIAL PROCEEDINGS 

* * * * * * * 

Subchapter B—Proceedings by Taxpayers and 

Third Parties 

* * * * * * * 

SEC. 7428. DECLARATORY JUDGMENTS RELATING TO STATUS AND 

CLASSIFICATION OF ORGANIZATIONS UNDER SECTION 

501(C)(3), ETC. 

(a) CREATION OF REMEDY.—In a case of actual controversy involving— 

(1) a determination by the Secretary— 

(A) with respect to the initial qualification or continuing 

qualification of an organization as an organization described in section 501(c)(3) which is exempt from tax under 

section 501(a) or as an organization described in section 

170(c)(2), 

(B) with respect to the initial classification or continuing 

classification of an organization as a private foundation (as 

defined in section 509(a)), 

(C) with respect to the initial classification or continuing 

classification of an organization as a private operating 

foundation (as defined in section 4942(j)(3)), or 

(D) with respect to the initial classification or continuing 

classification of a cooperative as an organization described 

in section 521(b) which is exempt from tax under section 

521(a), or 

(2) a failure by the Secretary to make a determination with 

respect to an issue referred to in paragraph (1), 

upon the filing of an appropriate pleading, the United States Tax 

Court, the United States Court of Federal Claims, or the district 

court of the United States for the District of Columbia may make 

a declaration with respect to such initial qualification or continuing 

qualification or with respect to such initial classification or continuing classification. Any such declaration shall have the force and 

effect of a decision of the Tax Court or a final judgment or decree 


SSpencer on DSK4SPTVN1PROD with REPORTS
32 

of the district court or the Court of Federal Claims, as the case 

may be, and shall be reviewable as such. For purposes of this section, a determination with respect to a continuing qualification or 

continuing classification includes any revocation of or other change 

in a qualification or classification. 

(b) LIMITATIONS.— (1) PETITIONER.—A pleading may be filed under this section 

only by the organization the qualification or classification of 

which is at issue. 

(2) EXHAUSTION OF ADMINISTRATIVE REMEDIES.—A declaratory judgment or decree under this section shall not be issued 

in any proceeding unless the Tax Court, the Court of Federal 

Claims, or the district court of the United States for the District of Columbia determines that the organization involved 

has exhausted administrative remedies available to it within 

the Internal Revenue Service. An organization requesting the 

determination of an issue referred to in subsection (a)(1) shall 

be deemed to have exhausted its administrative remedies with 

respect to a failure by the Secretary to make a determination 

with respect to such issue at the expiration of 270 days after 

the date on which the request for such determination was 

made if the organization has taken, in a timely manner, all 

reasonable steps to secure such determination. 

(3) TIME FOR BRINGING ACTION.—If the Secretary sends by 

certified or registered mail notice of his determination with respect to an issue referred to in subsection (a)(1) to the organization referred to in paragraph (1), no proceeding may be initiated under this section by such organization unless the pleading is filed before the 91st day after the date of such mailing. 

(4) NONAPPLICATION FOR CERTAIN REVOCATIONS.—No action 

may be brought under this section with respect to any revocation of status described in section 6033(j)(1). 

(c) VALIDATION OF CERTAIN CONTRIBUTIONS MADE DURING PEND- ENCY OF PROCEEDINGS.— 

(1) IN GENERAL.—If— 

(A) the issue referred to in subsection (a)(1) involves the 

revocation of a determination that the organization is described in section 170(c)(2), 

(B) a proceeding under this section is initiated within 

the time provided by subsection (b)(3), and 

(C) either— 

(i) a decision of the Tax Court has become final 

(within the meaning of section 7481), or 

(ii) a judgment of the district court of the United 

States for the District of Columbia has been entered, 

or 

(iii) a judgment of the Court of Federal Claims, has 

been entered, 

and such decision or judgment, as the case may be, determines that the organization was not described in section 

170(c)(2), 

then, notwithstanding such decision or judgment, such organization shall be treated as having been described in section 

170(c)(2) for purposes of section 170 for the period beginning 

on the date on which the notice of the revocation was pubVerDate Sep 11 2014 01:44 Apr 17, 2015 Jkt 049006 PO 00000 Frm 00032 Fmt 6659 Sfmt 6601 E:\HR\OC\HR071.XXX HR071

SSpencer on DSK4SPTVN1PROD with REPORTS
33 

lished and ending on the date on which the court first determined in such proceeding that the organization was not described in section 170(c)(2). 

(2) LIMITATION.—Paragraph (1) shall apply only— 

(A) with respect to individuals, and only to the extent 

that the aggregate of the contributions made by any individual to or for the use of the organization during the period specified in paragraph (1) does not exceed $1,000 (for 

this purpose treating a husband and wife as one contributor), and 

(B) with respect to organizations described in section 

170(c)(2) which are exempt from tax under section 501(a) 

(for this purpose excluding any such organization with respect to which there is pending a proceeding to revoke the 

determination under section 170(c)(2)). 

(3) EXCEPTION.—This subsection shall not apply to any individual who was responsible, in whole or in part, for the activities (or failures to act) on the part of the organization which 

were the basis for the revocation. 

(d) SUBPOENA POWER FOR DISTRICT COURT FOR DISTRICT OF CO- LUMBIA.—In any action brought under this section in the district 

court of the United States for the District of Columbia, a subpoena 

requiring the attendance of a witness at a trial or hearing may be 

served at any place in the United States. 

* * * * * * * 

B. CHANGES IN EXISTING LAW PROPOSED BY THE BILL, AS REPORTED

In compliance with clause 3(e)(1)(B) of rule XIII of the Rules of 

the House of Representatives, changes in existing law proposed by 

the bill, as reported, are shown as follows (existing law proposed 

to be omitted is enclosed in black brackets, new matter is printed 

in italic, existing law in which no change is proposed is shown in 

roman): 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e)(1)(B) of rule XIII of the Rules of 

the House of Representatives, changes in existing law proposed by 

the bill, as reported, are shown as follows (existing law proposed 

to be omitted is enclosed in black brackets, new matter is printed 

in italic, and existing law in which no change is proposed is shown 

in roman): 

INTERNAL REVENUE CODE OF 1986 

* * * * * * * 

Subtitle A—Income Taxes 

* * * * * * * 

CHAPTER 1—NORMAL TAXES AND SURTAXES 

* * * * * * * 


SSpencer on DSK4SPTVN1PROD with REPORTS
34 

Subchapter F—Exempt Organizations 

* * * * * * * 

PART I—GENERAL RULE 

* * * * * * * 

Sec. 506. Organizations required to notify Secretary of intent to operate as 501(c)(4). 

* * * * * * * 

SEC. 506. ORGANIZATIONS REQUIRED TO NOTIFY SECRETARY OF INTENT TO OPERATE AS 501(c)(4). 

(a) IN GENERAL.—An organization described in section 501(c)(4) 

shall, not later than 60 days after the organization is established, 

notify the Secretary (in such manner as the Secretary shall by regulation prescribe) that it is operating as such. 

(b) CONTENTS OF NOTICE.—The notice required under subsection 

(a) shall include the following information: 

(1) The name, address, and taxpayer identification number of 

the organization. 

(2) The date on which, and the State under the laws of which, 

the organization was organized. 

(3) A statement of the purpose of the organization. 

(c) ACKNOWLEDGMENT OF RECEIPT.—Not later than 60 days after 

receipt of such a notice, the Secretary shall send to the organization 

an acknowledgment of such receipt. 

(d) EXTENSION FOR REASONABLE CAUSE.—The Secretary may, for 

reasonable cause, extend the 60-day period described in subsection 

(a). 

(e) USER FEE.—The Secretary shall impose a reasonable user fee 

for submission of the notice under subsection (a). 

(f) REQUEST FOR DETERMINATION.—Upon request by an organization to be treated as an organization described in section 501(c)(4), 

the Secretary may issue a determination with respect to such treatment. Such request shall be treated for purposes of section 6104 as 

an application for exemption from taxation under section 501(a). 

* * * * * * * 

Subtitle F—Procedure and Administration 

* * * * * * * 

CHAPTER 61—INFORMATION AND RETURNS 

* * * * * * * 

Subchapter A—Returns and Records 

* * * * * * * 

PART III—INFORMATION RETURNS 

* * * * * * * 


SSpencer on DSK4SPTVN1PROD with REPORTS
35 

Subpart A—Information Concerning Persons Subject to 

Special Provisions 

* * * * * * * 

SEC. 6033. RETURNS BY EXEMPT ORGANIZATIONS. 

(a) ORGANIZATIONS REQUIRED TO FILE.— (1) IN GENERAL.—Except as provided in paragraph (3), every 

organization exempt from taxation under section 501(a) shall 

file an annual return, stating specifically the items of gross income, receipts, and disbursements, and such other information 

for the purpose of carrying out the internal revenue laws as 

the Secretary may by forms or regulations prescribe, and shall 

keep such records, render under oath such statements, make 

such other returns, and comply with such rules and regulations as the Secretary may from time to time prescribe; except 

that, in the discretion of the Secretary, any organization described in section 401(a) may be relieved from stating in its return any information which is reported in returns filed by the 

employer which established such organization. 

(2) BEING A PARTY TO CERTAIN REPORTABLE TRANSACTIONS.— 

Every tax-exempt entity described in section 4965(c) shall file 

(in such form and manner and at such time as determined by 

the Secretary) a disclosure of— 

(A) such entity’s being a party to any prohibited tax 

shelter transaction (as defined in section 4965(e)), and 

(B) the identity of any other party to such transaction 

which is known by such tax-exempt entity. 

(3) EXCEPTIONS FROM FILING.— (A) MANDATORY EXCEPTIONS.—Paragraph (1) shall not 

apply to— 

(i) churches, their integrated auxiliaries, and conventions or associations of churches, 

(ii) any organization (other than a private foundation, as defined in section 509(a)) described in subparagraph (C), the gross receipts of which in each taxable year are normally not more than $5,000, or 

(iii) the exclusively religious activities of any religious order. 

(B) DISCRETIONARY EXCEPTIONS.—The Secretary may relieve any organization required under paragraph (1) (other 

than an organization described in section 509(a)(3)) to file 

an information return from filing such a return where he 

determines that such filing is not necessary to the efficient 

administration of the internal revenue laws. 

(C) CERTAIN ORGANIZATIONS.—The organizations referred to in subparagraph (A)(ii) are— 

(i) a religious organization described in section 

501(c)(3); 

(ii) an educational organization described in section 

170(b)(1)(A)(ii); 

(iii) a charitable organization, or an organization for 

the prevention of cruelty to children or animals, described in section 501(c)(3), if such organization is supported, in whole or in part, by funds contributed by 

the United States or any State or political subdivision 


SSpencer on DSK4SPTVN1PROD with REPORTS
36 

thereof, or is primarily supported by contributions of 

the general public; 

(iv) an organization described in section 501(c)(3), if 

such organization is operated, supervised, or controlled by or in connection with a religious organization described in clause (i); 

(v) an organization described in section 501(c)(8); 

and 

(vi) an organization described in section 501(c)(1), if 

such organization is a corporation wholly owned by 

the United States or any agency or instrumentality 

thereof, or a wholly-owned subsidiary of such a corporation. 

(b) CERTAIN ORGANIZATIONS DESCRIBED IN SECTION 501(C)(3).— 

Every organization described in section 501(c)(3) which is subject 

to the requirements of subsection (a) shall furnish annually information, at such time and in such manner as the Secretary may by 

forms or regulations prescribe, setting forth— 

(1) its gross income for the year, 

(2) its expenses attributable to such income and incurred 

within the year, 

(3) its disbursements within the year for the purposes for 

which it is exempt, 

(4) a balance sheet showing its assets, liabilities, and net 

worth as of the beginning of such year, 

(5) the total of the contributions and gifts received by it during the year, and the names and addresses of all substantial 

contributors, 

(6) the names and addresses of its foundation managers 

(within the meaning of section 4946(b)(1)) and highly compensated employees, 

(7) the compensation and other payments made during the 

year to each individual described in paragraph (6), 

(8) in the case of an organization with respect to which an 

election under section 501(h) is effective for the taxable year, 

the following amounts for such organization for such taxable 

year: 

(A) the lobbying expenditures (as defined in section 

4911(c)(1)), 

(B) the lobbying nontaxable amount (as defined in section 4911(c)(2)), 

(C) the grass roots expenditures (as defined in section 

4911(c)(3)), and 

(D) the grass roots nontaxable amount (as defined in section 4911(c)(4)), 

(9) such other information with respect to direct or indirect 

transfers to, and other direct or indirect transactions and relationships with, other organizations described in section 501(c) 

(other than paragraph (3) thereof) or section 527 as the Secretary may require to prevent— 

(A) diversion of funds from the organization’s exempt 

purpose, or 

(B) misallocation of revenues or expenses, 

(10) the respective amounts (if any) of the taxes imposed on 

the organization, or any organization manager of the organizaVerDate Sep 11 2014 01:44 Apr 17, 2015 Jkt 049006 PO 00000 Frm 00036 Fmt 6659 Sfmt 6601 E:\HR\OC\HR071.XXX HR071

SSpencer on DSK4SPTVN1PROD with REPORTS
37 

tion, during the taxable year under any of the following provisions (and the respective amounts (if any) of reimbursements 

paid by the organization during the taxable year with respect 

to taxes imposed on any such organization manager under any 

of such provisions): 

(A) section 4911 (relating to tax on excess expenditures 

to influence legislation), 

(B) section 4912 (relating to tax on disqualifying lobbying expenditures of certain organizations), 

(C) section 4955 (relating to taxes on political expenditures of section 501(c)(3) organizations), except to the extent that, by reason of section 4962, the taxes imposed 

under such section are not required to be paid or are credited or refunded, and 

(D) section 4959 (relating to taxes on failures by hospital 

organizations), 

(11) the respective amounts (if any) of— 

(A) the taxes imposed with respect to the organization 

on any organization manager, or any disqualified person, 

during the taxable year under section 4958 (relating to 

taxes on private excess benefit from certain charitable organizations), and 

(B) reimbursements paid by the organization during the 

taxable year with respect to taxes imposed under such section, except to the extent that, by reason of section 4962, 

the taxes imposed under such section are not required to 

be paid or are credited or refunded, 

(12) such information as the Secretary may require with respect to any excess benefit transaction (as defined in section 

4958), 

(13) such information with respect to disqualified persons as 

the Secretary may prescribe, 

(14) such information as the Secretary may require with respect to disaster relief activities, including the amount and use 

of qualified contributions to which section 1400S(a) applies, 

(15) in the case of an organization to which the requirements 

of section 501(r) apply for the taxable year— 

(A) a description of how the organization is addressing 

the needs identified in each community health needs assessment conducted under section 501(r)(3) and a description of any such needs that are not being addressed together with the reasons why such needs are not being addressed, and 

(B) the audited financial statements of such organization 

(or, in the case of an organization the financial statements 

of which are included in a consolidated financial statement 

with other organizations, such consolidated financial statement). 

(16) such other information for purposes of carrying out the 

internal revenue laws as the Secretary may require. 

For purposes of paragraph (8), if section 4911(f) applies to the organization for the taxable year, such organization shall furnish the 

amounts with respect to the affiliated group as well as with respect 

to such organization. 


SSpencer on DSK4SPTVN1PROD with REPORTS
38 

(c) ADDITIONAL PROVISIONS RELATING TO PRIVATE FOUNDA- TIONS.—In the case of an organization which is a private foundation (within the meaning of section 509(a))— 

(1) the Secretary shall by regulations provide that the private foundation shall include in its annual return under this 

section such information (not required to be furnished by subsection (b) or the forms or regulations prescribed thereunder) 

as would have been required to be furnished under section 

6056 (relating to annual reports by private foundations) as 

such section 6056 was in effect on January 1, 1979, and 

(2) the foundation managers shall furnish copies of the annual return under this section to such State officials, at such 

times, and under such conditions, as the Secretary may by regulations prescribe. 

Nothing in paragraph (1) shall require the inclusion of the name 

and address of any recipient (other than a disqualified person within the meaning of section 4946) of 1 or more charitable gifts or 

grants made by the foundation to such recipient as an indigent or 

needy person if the aggregate of such gifts or grants made by the 

foundation to such recipient during the year does not exceed 

$1,000. 

(d) SECTION TO APPLY TO NONEXEMPT CHARITABLE TRUSTS AND

NONEXEMPT PRIVATE FOUNDATIONS.—The following organizations 

shall comply with the requirements of this section in the same 

manner as organizations described in section 501(c)(3) which are 

exempt from tax under section 501(a): 

(1) NONEXEMPT CHARITABLE TRUSTS.—A trust described in 

section 4947(a)(1) (relating to nonexempt charitable trusts). 

(2) NONEXEMPT PRIVATE FOUNDATIONS.—A private foundation which is not exempt from tax under section 501(a). 

(e) SPECIAL RULES RELATING TO LOBBYING ACTIVITIES.— (1) REPORTING REQUIREMENTS.— 

(A) IN GENERAL.—If this subsection applies to an organization for any taxable year, such organization— 

(i) shall include on any return required to be filed 

under subsection (a) for such year information setting 

forth the total expenditures of the organization to 

which section 162(e)(1) applies and the total amount of 

the dues or other similar amounts paid to the organization to which such expenditures are allocable, and 

(ii) except as provided in paragraphs (2)(A)(i) and 

(3), shall, at the time of assessment or payment of 

such dues or other similar amounts, provide notice to 

each person making such payment which contains a 

reasonable estimate of the portion of such dues or 

other similar amounts to which such expenditures are 

so allocable. 

(B) ORGANIZATIONS TO WHICH SUBSECTION APPLIES.— 

(i) IN GENERAL.—This subsection shall apply to any 

organization which is exempt from taxation under section 501 other than an organization described in section 501(c)(3). 

(ii) SPECIAL RULE FOR IN-HOUSE EXPENDITURES.— 

This subsection shall not apply to the in-house expenditures (within the meaning of section 


SSpencer on DSK4SPTVN1PROD with REPORTS
39 

162(e)(5)(B)(ii)) of an organization for a taxable year if 

such expenditures do not exceed $2,000. In determining whether a taxpayer exceeds the $2,000 limit 

under this clause, there shall not be taken into account overhead costs otherwise allocable to activities 

described in subparagraphs (A) and (D) of section 

162(e)(1). 

(iii) COORDINATION WITH SECTION 527(F).—This subsection shall not apply to any amount on which tax is 

imposed by reason of section 527(f). 

(C) ALLOCATION.—For purposes of this paragraph— 

(i) IN GENERAL.—Expenditures to which section 

162(e)(1) applies shall be treated as paid out of dues 

or other similar amounts to the extent thereof. 

(ii) CARRYOVER OF LOBBYING EXPENDITURES IN EXCESS OF DUES.—If expenditures to which section 

162(e)(1) applies exceed the dues or other similar 

amounts for any taxable year, such excess shall be 

treated as expenditures to which section 162(e)(1) applies which are paid or incurred by the organization 

during the following taxable year. 

(2) TAX IMPOSED WHERE ORGANIZATION DOES NOT NOTIFY.— (A) IN GENERAL.—If an organization— 

(i) elects not to provide the notices described in 

paragraph (1)(A) for any taxable year, or 

(ii) fails to include in such notices the amount allocable to expenditures to which section 162(e)(1) applies (determined on the basis of actual amounts rather than the reasonable estimates under paragraph 

(1)(A)(ii)), 

then there is hereby imposed on such organization for such 

taxable year a tax in an amount equal to the product of 

the highest rate of tax imposed by section 11 for the taxable year and the aggregate amount not included in such 

notices by reason of such election or failure. 

(B) WAIVER WHERE FUTURE ADJUSTMENTS MADE.—The 

Secretary may waive the tax imposed by subparagraph 

(A)(ii) for any taxable year if the organization agrees to adjust its estimates under paragraph (1)(A)(ii) for the following taxable year to correct any failures. 

(C) TAX TREATED AS INCOME TAX.—For purposes of this 

title, the tax imposed by subparagraph (A) shall be treated 

in the same manner as a tax imposed by chapter 1 (relating to income taxes). 

(3) EXCEPTION WHERE DUES GENERALLY NONDEDUCTIBLE.— 

Paragraph (1)(A) shall not apply to an organization which establishes to the satisfaction of the Secretary that substantially 

all of the dues or other similar amounts paid by persons to 

such organization are not deductible without regard to section 

162(e). 

(f) CERTAIN ORGANIZATIONS DESCRIBED IN SECTION 501(C)(4).— 

Every organization described in section 501(c)(4) which is subject 

to the requirements of subsection (a) shall øinclude on the return 

required under subsection (a) the information¿ include on the return required under subsection (a)— 


SSpencer on DSK4SPTVN1PROD with REPORTS
40 

(1) the information referred to in paragraphs (11), (12) and 

(13) of subsection (b) with respect to such organizationø.¿, and 

(2) in the case of the first such return filed by such an organization after submitting a notice to the Secretary under section 

506(a), such information as the Secretary shall by regulation require in support of the organization’s treatment as an organization described in section 501(c)(4). 

(g) RETURNS REQUIRED BY POLITICAL ORGANIZATIONS.— (1) IN GENERAL.—This section shall apply to a political organization (as defined by section 527(e)(1)) which has gross receipts of $25,000 or more for the taxable year. In the case of 

a political organization which is a qualified State or local political organization (as defined in section 527(e)(5)), the preceding 

sentence shall be applied by substituting ‘‘$100,000’’ for 

‘‘$25,000’’. 

(2) ANNUAL RETURNS.—Political organizations described in 

paragraph (1) shall file an annual return— 

(A) containing the information required, and complying 

with the other requirements, under subsection (a)(1) for organizations exempt from taxation under section 501(a), 

with such modifications as the Secretary considers appropriate to require only information which is necessary for 

the purposes of carrying out section 527, and 

(B) containing such other information as the Secretary 

deems necessary to carry out the provisions of this subsection. 

(3) MANDATORY EXCEPTIONS FROM FILING.—Paragraph (2) 

shall not apply to an organization— 

(A) which is a State or local committee of a political 

party, or political committee of a State or local candidate, 

(B) which is a caucus or association of State or local officials, 

(C) which is an authorized committee (as defined in section 301(6) of the Federal Election Campaign Act of 1971) 

of a candidate for Federal office, 

(D) which is a national committee (as defined in section 

301(14) of the Federal Election Campaign Act of 1971) of 

a political party, 

(E) which is a United States House of Representatives or 

United States Senate campaign committee of a political 

party committee, 

(F) which is required to report under the Federal Election Campaign Act of 1971 as a political committee (as defined in section 301(4) of such Act), or 

(G) to which section 527 applies for the taxable year 

solely by reason of subsection (f)(1) of such section. 

(4) DISCRETIONARY EXCEPTION.—The Secretary may relieve 

any organization required under paragraph (2) to file an information return from filing such a return if the Secretary determines that such filing is not necessary to the efficient administration of the internal revenue laws. 

(h) CONTROLLING ORGANIZATIONS.—Each controlling organization 

(within the meaning of section 512(b)(13)) which is subject to the 

requirements of subsection (a) shall include on the return required 

under subsection (a)— 


SSpencer on DSK4SPTVN1PROD with REPORTS
41 

(1) any interest, annuities, royalties, or rents received from 

each controlled entity (within the meaning of section 

512(b)(13)), 

(2) any loans made to each such controlled entity, and 

(3) any transfers of funds between such controlling organization and each such controlled entity. 

(i) ADDITIONAL NOTIFICATION REQUIREMENTS.—Any organization 

the gross receipts of which in any taxable year result in such organization being referred to in subsection (a)(3)(A)(ii) or (a)(3)(B)— 

(1) shall furnish annually, in electronic form, and at such 

time and in such manner as the Secretary may by regulations 

prescribe, information setting forth— 

(A) the legal name of the organization, 

(B) any name under which such organization operates or 

does business, 

(C) the organization’s mailing address and Internet web 

site address (if any), 

(D) the organization’s taxpayer identification number, 

(E) the name and address of a principal officer, and 

(F) evidence of the continuing basis for the organization’s exemption from the filing requirements under subsection (a)(1), and 

(2) upon the termination of the existence of the organization, 

shall furnish notice of such termination. 

(j) LOSS OF EXEMPT STATUS FOR FAILURE TO FILE RETURN OR NO- TICE.— 

(1) IN GENERAL.—If an organization described in subsection 

(a)(1) or (i) fails to file an annual return or notice required 

under either subsection for 3 consecutive years, such organization’s status as an organization exempt from tax under section 

501(a) shall be considered revoked on and after the date set by 

the Secretary for the filing of the third annual return or notice. 

The Secretary shall publish and maintain a list of any organization the status of which is so revoked. 

(2) APPLICATION NECESSARY FOR REINSTATEMENT.—Any organization the tax-exempt status of which is revoked under paragraph (1) must apply in order to obtain reinstatement of such 

status regardless of whether such organization was originally 

required to make such an application. 

(3) RETROACTIVE REINSTATEMENT IF REASONABLE CAUSE

SHOWN FOR FAILURE.—If, upon application for reinstatement of 

status as an organization exempt from tax under section 

501(a), an organization described in paragraph (1) can show to 

the satisfaction of the Secretary evidence of reasonable cause 

for the failure described in such paragraph, the organization’s 

exempt status may, in the discretion of the Secretary, be reinstated effective from the date of the revocation under such 

paragraph. 

(k) ADDITIONAL PROVISIONS RELATING TO SPONSORING ORGANIZA- TIONS.—Every organization described in section 4966(d)(1) shall, on 

the return required under subsection (a) for the taxable year— 

(1) list the total number of donor advised funds (as defined 

in section 4966(d)(2)) it owns at the end of such taxable year, 

(2) indicate the aggregate value of assets held in such funds 

at the end of such taxable year, and 


SSpencer on DSK4SPTVN1PROD with REPORTS
42 

(3) indicate the aggregate contributions to and grants made 

from such funds during such taxable year. 

(l) ADDITIONAL PROVISIONS RELATING TO SUPPORTING ORGANIZA- TIONS.—Every organization described in section 509(a)(3) shall, on 

the return required under subsection (a)— 

(1) list the supported organizations (as defined in section 

509(f)(3)) with respect to which such organization provides support, 

(2) indicate whether the organization meets the requirements of clause (i), (ii), or (iii) of section 509(a)(3)(B), and 

(3) certify that the organization meets the requirements of 

section 509(a)(3)(C). 

(m) ADDITIONAL INFORMATION REQUIRED FROM CO-OP INSURERS.—An organization described in section 501(c)(29) shall include 

on the return required under subsection (a) the following information: 

(1) The amount of the reserves required by each State in 

which the organization is licensed to issue qualified health 

plans. 

(2) The amount of reserves on hand. 

(n) CROSS REFERENCES.—For provisions relating to statements, 

etc., regarding exempt status of organizations, see section 6001. 

For reporting requirements as to certain liquidations, dissolutions, 

terminations, and contractions, see section 6043(b). For provisions 

relating to penalties for failure to file a return required by this section, see section 6652(c).For provisions relating to information required in connection with certain plans of deferred compensation, 

see section 6058. 

* * * * * * * 

CHAPTER 68—ADDITIONS TO THE TAX, ADDITIONAL AMOUNTS, AND ASSESSABLE PENALTIES 

* * * * * * * 

Subchapter A—Additions to the Tax and 

Additional Amounts 

* * * * * * * 

PART I—GENERAL PROVISIONS 

* * * * * * * 

SEC. 6652. FAILURE TO FILE CERTAIN INFORMATION RETURNS, REGISTRATION STATEMENTS, ETC. 

(a) RETURNS WITH RESPECT TO CERTAIN PAYMENTS AGGREGATING

LESS THAN $10.—In the case of each failure to file a statement of 

a payment to another person required under the authority of— 

(1) section 6042(a)(2) (relating to payments of dividends aggregating less than $10), or 

(2) section 6044(a)(2) (relating to payments of patronage dividends aggregating less than $10), 


SSpencer on DSK4SPTVN1PROD with REPORTS
43 

on the date prescribed therefor (determined with regard to any extension of time for filing), unless it is shown that such failure is 

due to reasonable cause and not to willful neglect, there shall be 

paid (upon notice and demand by the Secretary and in the same 

manner as tax) by the person failing to so file the statement, $1 

for each such statement not so filed, but the total amount imposed 

on the delinquent person for all such failures during the calendar 

year shall not exceed $1,000. 

(b) FAILURE TO REPORT TIPS.—In the case of failure by an employee to report to his employer on the date and in the manner prescribed therefor any amount of tips required to be so reported by 

section 6053(a) which are wages (as defined in section 3121(a)) or 

which are compensation (as defined in section 3231(e)), unless it is 

shown that such failure is due to reasonable cause and not due to 

willful neglect, there shall be paid by the employee, in addition to 

the tax imposed by section 3101 or section 3201 (as the case may 

be) with respect to the amount of tips which he so failed to report, 

an amount equal to 50 percent of such tax. 

(c) RETURNS BY EXEMPT ORGANIZATIONS AND BY CERTAIN

TRUSTS.— 

(1) ANNUAL RETURNS UNDER SECTION 6033(A)(1) OR 6012(A)(6).— 

(A) PENALTY ON ORGANIZATION.—In the case of— 

(i) a failure to file a return required under section 

6033(a)(1) (relating to returns by exempt organizations) or section 6012(a)(6) (relating to returns by political organizations) on the date and in the manner 

prescribed therefor (determined with regard to any extension of time for filing), or 

(ii) a failure to include any of the information required to be shown on a return filed under section 

6033(a)(1) or section 6012(a)(6) or to show the correct 

information, 

there shall be paid by the exempt organization $20 for 

each day during which such failure continues. The maximum penalty under this subparagraph on failures with 

respect to any 1 return shall not exceed the lesser of 

$10,000 or 5 percent of the gross receipts of the organization for the year. In the case of an organization having 

gross receipts exceeding $1,000,000 for any year, with respect to the return required under section 6033(a)(1) or 

section 6012(a)(6) for such year, in applying the first sentence of this subparagraph, the amount of the penalty for 

each day during which a failure continues shall be $100 in 

lieu of the amount otherwise specified, and, in lieu of applying the second sentence of this subparagraph, the maximum penalty under this subparagraph shall not exceed 

$50,000. 

(B) MANAGERS.— 

(i) IN GENERAL.—The Secretary may make a written 

demand on any organization subject to penalty under 

subparagraph (A) specifying therein a reasonable future date by which the return shall be filed (or the information furnished) for purposes of this subparagraph. 


SSpencer on DSK4SPTVN1PROD with REPORTS
44 

(ii) FAILURE TO COMPLY WITH DEMAND.—If any person fails to comply with any demand under clause (i) 

on or before the date specified in such demand, there 

shall be paid by the person failing to so comply $10 for 

each day after the expiration of the time specified in 

such demand during which such failure continues. The 

maximum penalty imposed under this subparagraph 

on all persons for failures with respect to any 1 return 

shall not exceed $5,000. 

(C) PUBLIC INSPECTION OF ANNUAL RETURNS AND RE- PORTS.—In the case of a failure to comply with the requirements of section 6104(d) with respect to any annual return 

on the date and in the manner prescribed therefor (determined with regard to any extension of time for filing) or 

report required under section 527(j), there shall be paid by 

the person failing to meet such requirements $20 for each 

day during which such failure continues. The maximum 

penalty imposed under this subparagraph on all persons 

for failures with respect to any 1 return or report shall not 

exceed $10,000. 

(D) PUBLIC INSPECTION OF APPLICATIONS FOR EXEMPTION

AND NOTICE OF STATUS.—In the case of a failure to comply 

with the requirements of section 6104(d) with respect to 

any exempt status application materials (as defined in 

such section) or notice materials (as defined in such section) on the date and in the manner prescribed therefor, 

there shall be paid by the person failing to meet such requirements $20 for each day during which such failure 

continues. 

(E) NO PENALTY FOR CERTAIN ANNUAL NOTICES.—This 

paragraph shall not apply with respect to any notice required under section 6033(i). 

(2) RETURNS UNDER SECTION 6034 OR 6043(B).— (A) PENALTY ON ORGANIZATION OR TRUST.—In the case of 

a failure to file a return required under section 6034 (relating to returns by certain trusts) or section 6043(b) (relating to terminations, etc., of exempt organizations), on 

the date and in the manner prescribed therefor (determined with regard to any extension of time for filing), 

there shall be paid by the exempt organization or trust 

failing so to file $10 for each day during which such failure 

continues, but the total amount imposed under this subparagraph on any organization or trust for failure to file 

any 1 return shall not exceed $5,000. 

(B) MANAGERS.—The Secretary may make written demand on an organization or trust failing to file under subparagraph (A) specifying therein a reasonable future date 

by which such filing shall be made for purposes of this 

subparagraph. If such filing is not made on or before such 

date, there shall be paid by the person failing so to file $10 

for each day after the expiration of the time specified in 

the written demand during which such failure continues, 

but the total amount imposed under this subparagraph on 

all persons for failure to file any 1 return shall not exceed 

$5,000. 


SSpencer on DSK4SPTVN1PROD with REPORTS
45 

(C) SPLIT-INTEREST TRUSTS.—In the case of a trust which 

is required to file a return under section 6034(a), subparagraphs (A) and (B) of this paragraph shall not apply and 

paragraph (1) shall apply in the same manner as if such 

return were required under section 6033, except that— 

(i) the 5 percent limitation in the second sentence of 

paragraph (1)(A) shall not apply, 

(ii) in the case of any trust with gross income in ex- cess of $250,000, in applying the first sentence of 

paragraph (1)(A), the amount of the penalty for each 

day during which a failure continues shall be $100 in 

lieu of the amount otherwise specified, and in lieu of 

applying the second sentence of paragraph (1)(A), the 

maximum penalty under paragraph (1)(A) shall not 

exceed $50,000, and 

(iii) the third sentence of paragraph (1)(A) shall be 

disregarded. 

In addition to any penalty imposed on the trust pursuant 

to this subparagraph, if the person required to file such return knowingly fails to file the return, such penalty shall 

also be imposed on such person who shall be personally 

liable for such penalty. 

(3) DISCLOSURE UNDER SECTION 6033(A)(2).— (A) PENALTY ON ENTITIES.—In the case of a failure to file 

a disclosure required under section 6033(a)(2), there shall 

be paid by the tax-exempt entity (the entity manager in 

the case of a tax-exempt entity described in paragraph (4), 

(5), (6), or (7) of section 4965(c)) $100 for each day during 

which such failure continues. The maximum penalty under 

this subparagraph on failures with respect to any 1 disclosure shall not exceed $50,000. 

(B) WRITTEN DEMAND.— 

(i) IN GENERAL.—The Secretary may make a written 

demand on any entity or manager subject to penalty 

under subparagraph (A) specifying therein a reasonable future date by which the disclosure shall be filed 

for purposes of this subparagraph. 

(ii) FAILURE TO COMPLY WITH DEMAND.—If any entity or manager fails to comply with any demand under 

clause (i) on or before the date specified in such demand, there shall be paid by such entity or manager 

failing to so comply $100 for each day after the expiration of the time specified in such demand during 

which such failure continues. The maximum penalty 

imposed under this subparagraph on all entities and 

managers for failures with respect to any 1 disclosure 

shall not exceed $10,000. 

(C) DEFINITIONS.—Any term used in this section which 

is also used in section 4965 shall have the meaning given 

such term under section 4965. 

(4) NOTICES UNDER SECTION 506.— (A) PENALTY ON ORGANIZATION.—In the case of a failure 

to submit a notice required under section 506(a) (relating 

to organizations required to notify Secretary of intent to operate as 501(c)(4)) on the date and in the manner preVerDate Sep 11 2014 01:44 Apr 17, 2015 Jkt 049006 PO 00000 Frm 00045 Fmt 6659 Sfmt 6603 E:\HR\OC\HR071.XXX HR071

SSpencer on DSK4SPTVN1PROD with REPORTS
46 

scribed therefor, there shall be paid by the organization 

failing to so submit $20 for each day during which such 

failure continues, but the total amount imposed under this 

subparagraph on any organization for failure to submit 

any one notice shall not exceed $5,000. 

(B) MANAGERS.—The Secretary may make written demand on an organization subject to penalty under subparagraph (A) specifying in such demand a reasonable future 

date by which the notice shall be submitted for purposes of 

this subparagraph. If such notice is not submitted on or before such date, there shall be paid by the person failing to 

so submit $20 for each day after the expiration of the time 

specified in the written demand during which such failure 

continues, but the total amount imposed under this subparagraph on all persons for failure to submit any one notice shall not exceed $5,000. 

ø(4)¿ (5) REASONABLE CAUSE EXCEPTION.—No penalty shall 

be imposed under this subsection with respect to any failure if 

it is shown that such failure is due to reasonable cause. 

ø(5)¿ (6) OTHER SPECIAL RULES.— 

(A) TREATMENT AS TAX.—Any penalty imposed under 

this subsection shall be paid on notice and demand of the 

Secretary and in the same manner as tax. 

(B) JOINT AND SEVERAL LIABILITY.—If more than 1 person is liable under this subsection for any penalty with respect to any failure, all such persons shall be jointly and 

severally liable with respect to such failure. 

(C) PERSON.—For purposes of this subsection, the term 

‘‘person’’ means any officer, director, trustee, employee, or 

other individual who is under a duty to perform the act in 

respect of which the violation occurs. 

ø(6)¿ (7) ADJUSTMENT FOR INFLATION.— 

(A) IN GENERAL.—In the case of any failure relating to 

a return required to be filed in a calendar year beginning 

after 2014, each of the dollar amounts under paragraphs 

(1), (2), and (3) shall be increased by such dollar amount 

multiplied by the cost-of-living adjustment determined 

under section 1(f)(3) determined by substituting ‘‘calendar 

year 2013’’ for ‘‘calendar year 1992’’ in subparagraph (B) 

thereof. 

(B) ROUNDING.—If any amount adjusted under subparagraph (A)— 

(i) is not less than $5,000 and is not a multiple of 

$500, such amount shall be rounded to the next lowest 

multiple of $500, and 

(ii) is not described in clause (i) and is not a multiple of $5, such amount shall be rounded to the next 

lowest multiple of $5. 

(d) ANNUAL REGISTRATION AND OTHER NOTIFICATION BY PENSION

PLAN.— 

(1) REGISTRATION.—In the case of any failure to file a registration statement required under section 6057(a) (relating to 

annual registration of certain plans) which includes all participants required to be included in such statement, on the date 

prescribed therefor (determined without regard to any extenVerDate Sep 11 2014 01:44 Apr 17, 2015 Jkt 049006 PO 00000 Frm 00046 Fmt 6659 Sfmt 6601 E:\HR\OC\HR071.XXX HR071

SSpencer on DSK4SPTVN1PROD with REPORTS
47 

sion of time for filing), unless it is shown that such failure is 

due to reasonable cause, there shall be paid (on notice and demand by the Secretary and in the same manner as tax) by the 

person failing so to file, an amount equal to $1 for each participant with respect to whom there is a failure to file, multiplied 

by the number of days during which such failure continues, but 

the total amount imposed under this paragraph on any person 

for any failure to file with respect to any plan year shall not 

exceed $5,000. 

(2) NOTIFICATION OF CHANGE OF STATUS.—In the case of failure to file a notification required under section 6057(b) (relating to notification of change of status) on the date prescribed 

therefor (determined without regard to any extension of time 

for filing), unless it is shown that such failure is due to reasonable cause, there shall be paid (on notice and demand by the 

Secretary and in the same manner as tax) by the person failing 

so to file, $1 for each day during which such failure continues, 

but the total amounts imposed under this paragraph on any 

person for failure to file any notification shall not exceed 

$1,000. 

(e) INFORMATION REQUIRED IN CONNECTION WITH CERTAIN PLANS

OF DEFERRED COMPENSATION, ETC..—In the case of failure to file 

a return or statement required under section 6058 (relating to information required in connection with certain plans of deferred 

compensation), 6047 (relating to information relating to certain 

trusts and annuity and bond purchase plans), or 6039D (relating 

to returns and records with respect to certain fringe benefit plans) 

on the date and in the manner prescribed therefor (determined 

with regard to any extension of time for filing), unless it is shown 

that such failure is due to reasonable cause, there shall be paid (on 

notice and demand by the Secretary and in the same manner as 

tax) by the person failing so to file, $25 for each day during which 

such failure continues, but the total amount imposed under this 

subsection on any person for failure to file any return shall not exceed $15,000. This subsection shall not apply to any return or 

statement which is an information return described in section 

6724(d)(1)(C)(ii) or a payee statement described in section 

6724(d)(2)(Y). 

(f) RETURNS REQUIRED UNDER SECTION 6039C.— 

(1) IN GENERAL.—In the case of each failure to make a return 

required by section 6039C which contains the information required by such section on the date prescribed therefor (determined with regard to any extension of time for filing), unless 

it is shown that such failure is due to reasonable cause and not 

to willful neglect, the amount determined under paragraph (2) 

shall be paid (upon notice and demand by the Secretary and 

in the same manner as tax) by the person failing to make such 

return. 

(2) AMOUNT OF PENALTY.—For purposes of paragraph (1), the 

amount determined under this paragraph with respect to any 

failure shall be $25 for each day during which such failure continues. 

(3) LIMITATION.—The amount determined under paragraph 

(2) with respect to any person for failing to meet the requireVerDate Sep 11 2014 01:44 Apr 17, 2015 Jkt 049006 PO 00000 Frm 00047 Fmt 6659 Sfmt 6601 E:\HR\OC\HR071.XXX HR071

SSpencer on DSK4SPTVN1PROD with REPORTS
48 

ments of section 6039C for any calendar year shall not exceed 

the lesser of— 

(A) $25,000, or 

(B) 5 percent of the aggregate of the fair market value 

of the United States real property interests owned by such 

person at any time during such year. 

For purposes of the preceding sentence, fair market value shall 

be determined as of the end of the calendar year (or, in the 

case of any property disposed of during the calendar year, as 

of the date of such disposition). 

(h) FAILURE TO GIVE NOTICE TO RECIPIENTS OF CERTAIN PENSION, ETC., DISTRIBUTIONS.—In the case of each failure to provide 

notice as required by section 3405(e)(10)(B), at the time prescribed 

therefor, unless it is shown that such failure is due to reasonable 

cause and not to willful neglect, there shall be paid, on notice and 

demand of the Secretary and in the same manner as tax, by the 

person failing to provide such notice, an amount equal to $10 for 

each such failure, but the total amount imposed on such person for 

all such failures during any calendar year shall not exceed $5,000. 

(i) FAILURE TO GIVE WRITTEN EXPLANATION TO RECIPIENTS OF

CERTAIN QUALIFYING ROLLOVER DISTRIBUTIONS.—In the case of 

each failure to provide a written explanation as required by section 

402(f), at the time prescribed therefor, unless it is shown that such 

failure is due to reasonable cause and not to willful neglect, there 

shall be paid, on notice and demand of the Secretary and in the 

same manner as tax, by the person failing to provide such written 

explanation, an amount equal to $100 for each such failure, but the 

total amount imposed on such person for all such failures during 

any calendar year shall not exceed $50,000. 

(j) FAILURE TO FILE CERTIFICATION WITH RESPECT TO CERTAIN

RESIDENTIAL RENTAL PROJECTS.—In the case of each failure to provide a certification as required by section 142(d)(7) at the time prescribed therefor, unless it is shown that such failure is due to reasonable cause and not to willful neglect, there shall be paid, on notice and demand of the Secretary and in the same manner as tax, 

by the person failing to provide such certification, an amount equal 

to $100 for each such failure. 

(k) FAILURE TO MAKE REPORTS REQUIRED UNDER SECTION

1202.— 

In the case of a failure to make a report required under section 

1202(d)(1)(C) which contains the information required by such section on the date prescribed therefor (determined with regard to any 

extension of time for filing), there shall be paid (on notice and demand by the Secretary and in the same manner as tax) by the person failing to make such report, an amount equal to $50 for each 

report with respect to which there was such a failure. In the case 

of any failure due to negligence or intentional disregard, the preceding sentence shall be applied by substituting ‘‘$100’’ for ‘‘$50’’. 

In the case of a report covering periods in 2 or more years, the penalty determined under preceding provisions of this subsection shall 

be multiplied by the number of such years. No penalty shall be imposed under this subsection on any failure which is shown to be 

due to reasonable cause and not willful neglect. 

(l) FAILURE TO FILE RETURN WITH RESPECT TO CERTAIN CORPORATE TRANSACTIONS.—In the case of any failure to make a reVerDate Sep 11 2014 01:44 Apr 17, 2015 Jkt 049006 PO 00000 Frm 00048 Fmt 6659 Sfmt 6601 E:\HR\OC\HR071.XXX HR071

SSpencer on DSK4SPTVN1PROD with REPORTS
49 

turn required under section 6043(c) containing the information required by such section on the date prescribed therefor (determined 

with regard to any extension of time for filing), unless it is shown 

that such failure is due to reasonable cause, there shall be paid (on 

notice and demand by the Secretary and in the same manner as 

tax) by the person failing to file such return, an amount equal to 

$500 for each day during which such failure continues, but the 

total amount imposed under this subsection with respect to any return shall not exceed $100,000. 

(m) ALCOHOL AND TOBACCO TAXES FOR PENALTIES FOR FAILURE

TO FILE CERTAIN INFORMATION RETURNS.—with respect to alcohol 

and tobacco taxes, see, generally, subtitle E. 

(n) FAILURE TO MAKE REPORTS REQUIRED UNDER SECTIONS 3511, 

6053(C)(8), AND 7705.—In the case of a failure to make a report required under section 3511, 6053(c)(8), or 7705 which contains the 

information required by such section on the date prescribed therefor (determined with regard to any extension of time for filing), 

there shall be paid (on notice and demand by the Secretary and in 

the same manner as tax) by the person failing to make such report, 

an amount equal to $50 for each report with respect to which there 

was such a failure. In the case of any failure due to negligence or 

intentional disregard the preceding sentence shall be applied by 

substituting ‘‘$100’’ for ‘‘$50’’. 

* * * * * * * 

CHAPTER 76—JUDICIAL PROCEEDINGS 

* * * * * * * 

Subchapter B—Proceedings by Taxpayers and 

Third Parties 

* * * * * * * 

SEC. 7428. DECLARATORY JUDGMENTS RELATING TO STATUS AND 

CLASSIFICATION OF ORGANIZATIONS UNDER SECTION 

501(C)(3), ETC. 

(a) CREATION OF REMEDY.—In a case of actual controversy involving— 

(1) a determination by the Secretary— 

(A) with respect to the initial qualification or continuing 

qualification of an organization as an organization described in section 501(c)(3) which is exempt from tax under 

section 501(a) or as an organization described in section 

170(c)(2), 

(B) with respect to the initial classification or continuing 

classification of an organization as a private foundation (as 

defined in section 509(a)), 

(C) with respect to the initial classification or continuing 

classification of an organization as a private operating 

foundation (as defined in section 4942(j)(3)), øor¿ 

(D) with respect to the initial classification or continuing 

classification of a cooperative as an organization described 

in section 521(b) which is exempt from tax under section 

521(a), or 


SSpencer on DSK4SPTVN1PROD with REPORTS
50 

(E) with respect to the initial classification or continuing 

classification of an organization described in section 

501(c)(4) which is exempt from tax under section 501(a), or 

(2) a failure by the Secretary to make a determination with 

respect to an issue referred to in paragraph (1), 

upon the filing of an appropriate pleading, the United States Tax 

Court, the United States Court of Federal Claims, or the district 

court of the United States for the District of Columbia may make 

a declaration with respect to such initial qualification or continuing 

qualification or with respect to such initial classification or continuing classification. Any such declaration shall have the force and 

effect of a decision of the Tax Court or a final judgment or decree 

of the district court or the Court of Federal Claims, as the case 

may be, and shall be reviewable as such. For purposes of this section, a determination with respect to a continuing qualification or 

continuing classification includes any revocation of or other change 

in a qualification or classification. 

(b) LIMITATIONS.— (1) PETITIONER.—A pleading may be filed under this section 

only by the organization the qualification or classification of 

which is at issue. 

(2) EXHAUSTION OF ADMINISTRATIVE REMEDIES.—A declaratory judgment or decree under this section shall not be issued 

in any proceeding unless the Tax Court, the Court of Federal 

Claims, or the district court of the United States for the District of Columbia determines that the organization involved 

has exhausted administrative remedies available to it within 

the Internal Revenue Service. An organization requesting the 

determination of an issue referred to in subsection (a)(1) shall 

be deemed to have exhausted its administrative remedies with 

respect to a failure by the Secretary to make a determination 

with respect to such issue at the expiration of 270 days after 

the date on which the request for such determination was 

made if the organization has taken, in a timely manner, all 

reasonable steps to secure such determination. 

(3) TIME FOR BRINGING ACTION.—If the Secretary sends by 

certified or registered mail notice of his determination with respect to an issue referred to in subsection (a)(1) to the organization referred to in paragraph (1), no proceeding may be initiated under this section by such organization unless the pleading is filed before the 91st day after the date of such mailing. 

(4) NONAPPLICATION FOR CERTAIN REVOCATIONS.—No action 

may be brought under this section with respect to any revocation of status described in section 6033(j)(1). 

(c) VALIDATION OF CERTAIN CONTRIBUTIONS MADE DURING PENDENCY OF PROCEEDINGS.— 

(1) IN GENERAL.—If— 

(A) the issue referred to in subsection (a)(1) involves the 

revocation of a determination that the organization is described in section 170(c)(2), 

(B) a proceeding under this section is initiated within 

the time provided by subsection (b)(3), and 

(C) either— 

(i) a decision of the Tax Court has become final 

(within the meaning of section 7481), or 


SSpencer on DSK4SPTVN1PROD with REPORTS
51 

(ii) a judgment of the district court of the United 

States for the District of Columbia has been entered, 

or 

(iii) a judgment of the Court of Federal Claims, has 

been entered, 

and such decision or judgment, as the case may be, determines that the organization was not described in section 

170(c)(2), 

then, notwithstanding such decision or judgment, such organization shall be treated as having been described in section 

170(c)(2) for purposes of section 170 for the period beginning 

on the date on which the notice of the revocation was published and ending on the date on which the court first determined in such proceeding that the organization was not described in section 170(c)(2). 

(2) LIMITATION.—Paragraph (1) shall apply only— 

(A) with respect to individuals, and only to the extent 

that the aggregate of the contributions made by any individual to or for the use of the organization during the period specified in paragraph (1) does not exceed $1,000 (for 

this purpose treating a husband and wife as one contributor), and 

(B) with respect to organizations described in section 

170(c)(2) which are exempt from tax under section 501(a) 

(for this purpose excluding any such organization with respect to which there is pending a proceeding to revoke the 

determination under section 170(c)(2)). 

(3) EXCEPTION.—This subsection shall not apply to any individual who was responsible, in whole or in part, for the activities (or failures to act) on the part of the organization which 

were the basis for the revocation. 

(d) SUBPOENA POWER FOR DISTRICT COURT FOR DISTRICT OF COLUMBIA.—In any action brought under this section in the district 

court of the United States for the District of Columbia, a subpoena 

requiring the attendance of a witness at a trial or hearing may be 

served at any place in the United States. 

* * * * * * * 


SSpencer on DSK4SPTVN1PROD with REPORTS
(52) 

VII. ADDITIONAL VIEWS 

We support the improvements made by H.R. 1295 for section 

501(c)(4) organizations applying to the Internal Revenue Service for 

tax exemption. However, we believe the bill can do more. 

Currently, section 501(c)(4) organizations are permitted to engage in political campaign activities. However, an organization’s 

primary activity cannot be engaging in political campaigning. We 

are concerned that the information that would be provided in the 

newly required notice and first annual information return of the organization may not be sufficient to identify in all cases organizations engaging in an impermissible amount of political activity. 

According to the Center for Responsive Politics, section 501(c)(4) 

organizations spent more than $250 million during the 2012 election cycle, up from $92 million in 2010 and just $1 million in 2006. 

Given the increase in spending by section 501(c)(4) organizations, 

Democrats on the Committee offered an amendment that would require these organizations to include statements in their notice and 

first information return indicating whether they engaged, or plan 

to engage, in political activity or filed, or plan to file, reports with 

the Federal Election Commission. The Republicans voted against 

this amendment. 

Sincerely, 

SANDER M. LEVIN, 

Ranking Member. 

Æ 


SSpencer on DSK4SPTVN1PROD with REPORTS