The Internal Revenue Service recently released a memorandum modifying and clarifying procedures for Section 501(c)(4) applicants seeking exemption after December 23, 2014, which may potentially be engaged in political campaign intervention or providing private benefit to a political party, but that otherwise do not present any issues regarding their exempt status.

The memo directs the Exempt Organizations Determinations Unit (EOD) of the IRS to offer, by letter, an optional expedited process to such pending applicants. The process permits these organizations to make representations under penalties of perjury regarding their past, current, and anticipated future political campaign intervention and social welfare activity. More specifically, an organization must attest that it has spent and anticipates that it will spend:

  • 60% or more of both its total expenditures and its total time (measured by employee and volunteer hours) on activities that promote social welfare; and
  • 40% or less of both its total expenditures and total time (measured by employee and volunteer hours) on direct or indirect participation or intervention in any political campaign on behalf of (or in opposition to) any candidate for public office.

Once these representations are made, the organization receives a favorable determination letter without further review, within one month.

If the organization does not opt in to the faster review process within 45 days of the date of the letter, the EOD will review all of the facts and circumstances in the pending application to determine if the organization is operated primarily for social welfare purposes, including by evaluating possible political issues. This may involve multiple IRS reviewers and requests to the organization for additional information.

To summarize, this expedited procedure is available when an organization:

  1. Applies for recognition of exemption under Section 501(c)(4) and presents no other issues with regard to exempt status;
  2. Receives Letter 5228 from the IRS offering the optional expedited process; and
  3. Makes the representations required for eligibility included in Letter 5228 within 45 days of the date of the letter.

The memo also directs the IRS to promptly review any pending applications that were submitted prior December 23, 2014 and outlines the steps for doing so, including documenting such review and recommendations.

For further information, see Memorandum for Exempt Organizations Determinations Unit and Exempt Organizations Technical Unit Employees.