As part of an ongoing effort to modernize its operations and reduce administrative burdens, the Internal Revenue Service (IRS) has revised and updated the Form 8940 for tax-exempt organizations, charities, and nonexempt charitable trusts seeking certain kinds of approvals or determination from the IRS, and mandated the form be submitted electronically via Pay.gov. The move, announced in Revenue Procedure 2023-12, is expected to standardize the format and presentation of miscellaneous determination requests, streamline review of these requests by the IRS, and reduce the possibility for errors that commonly arose in the preparation and processing of the paper versions of the form.
The Form 8940 will continue to be used to request:
- Advance approval of private foundation scholarship procedures;
- Advance approval of certain private foundation set-asides;
- Advance approval of private foundation voter registration activities;
- Exemption from Form 990 filing requirements;
- Advance approval that a potential grant or contribution constitutes an "unusual grant" excluded from certain public support calculations;
- Change in type (or initial determination of type) of a Section 509(a)(3) supporting organization;
- Reclassification of foundation status, including a voluntary request from a public charity for private foundation status; and
- Termination of private foundation status by operating as a public charity.
Additionally, the IRS has broadened the use of the Form 8940 by requiring that requests from government entities to voluntarily relinquish exempt status under Section 501(c)(3) and requests by Canadian registered charities to be included in the IRS database of charitable organizations (Tax Exempt Organization Search) be submitted on Form 8940. Previously, requests to voluntarily relinquish Section 501(c)(3) status were made by general correspondence, and requests by Canadian registered charities were submitted on Form 1023. Furthermore, although there have been calls for Form 8940 to be reformed to require a tax-exempt organization to use the form to seek explicit IRS approval of expanded or changed activities, this change was not included in the updated version of the form that was released. However, organizations must still notify the IRS of material changes in activities on their IRS annual return filing (Form 990, Form 990-EZ, or Form 990-PF).
Additionally, applicants for Section 501(c)(3) tax-exempt status who are requesting an advance approval of scholarship procedures or an exemption from filing Form 990 should include that request with their Form 1023 application for recognition of 501(c)(3) status, rather than separately filing Form 8940.
The required user fees, if any, for Form 8940 vary, depending on the type of miscellaneous request submitted, and are subject to periodic change by the IRS. For 2023, the user fees remain at the amounts set out in the schedule of fees in Appendix A of Revenue Procedure 2023-5. When a fee applies, applicants will be required to pay the fee through Pay.gov when submitting the form. Payment can be made directly from a bank account or by credit or debit card.
The IRS will continue to accept paper versions of the prior version of the Form 8940, which was last revised in June 2011, until Sunday, July 2, 2023. Starting Monday, July 3, 2023, the new online version of the Form 8940 must be used and submitted electronically.
For more information on these issues, contact Venable's Nonprofit Organizations Practice.