Insights & News

Tax Insights, July 20, 2016
Tracking Tax News You Need to Know

July 20, 2016

Temporary Regulations Address Notice Requirement for Civic Groups
The IRS has released final and temporary regulations (TD 9775) relating to the requirement, added by the Protecting Americans from Tax Hikes Act of 2015, that organizations must notify the IRS of their intent to operate under Section 501(c)(4) (section references are to the Internal Revenue Code of 1986, as amended). Section 501(c)(4) describes social welfare organizations). The regulations affect organizations described in Section 501(c)(4) (Section 501(c)(4) organizations) that are organized after Dec. 18, 2015, and certain Section 501(c)(4) organizations existing on that date. The text of the temporary regulations serves as the text of the proposed regulations. The IRS has developed a new electronic form, Form 8976, “Notice of Intent to Operate Under Section 501(c)(4),” for use by organizations submitting the notification. In accordance with Section 506(a), the temporary regulations generally require a Section 501(c)(4) organization to submit the notification to the IRS on Form 8976 (or its successor) no later than 60 days after the date the organization is organized. Form 8976 must be submitted in accordance with the form and its instructions, be accompanied by a payment of a user fee of $50 (paid by credit card or direct debit as part of the filing process), and include the information required by Section 506(b) (i.e., the name, address and taxpayer identification number of the organization; the date on which, and the state under the laws of which, the organization was organized; and a statement of the purpose of the organization). Further, the temporary regulations provide that within 60 days after receipt of the notification, the IRS will send the organization an acknowledgment of such receipt. The temporary regulations clarify that this acknowledgment is not a determination with respect to tax-exempt status. Thus, it is not a determination on which an organization may rely or a determination (or a failure to make a determination) with respect to which the organization may seek declaratory judgment under Section 7428. An organization must file Form 1024, Application for Recognition of Exemption Under Section 501(a), to receive a determination that the IRS agrees that the organization qualifies as an organization described in Section 501(c)(4).

Penalties apply for failure to file Form 8976 within the mandated 60-day time period.  The penalties can be assessed on the organization and on individuals within the organization responsible for such filings. Section 6652(c)(4) imposes late fees of $20 per day up to a maximum of $5,000 on organizations that fail to file Form 8976 within the required time period.  Also, the IRS may, if Form 8976 is not timely filed, issue a written demand specifying a future date by which the form must be filed, after which the IRS can assess a penalty on the organization’s officers and directors of $20 per day up to a maximum of $5,000

Barges Are Real Property for REIT Purposes
In Private Letter Ruling 201628009, the IRS ruled that certain facilities (which consisted of a boat or barge that was securely and substantially moored, unable to be moved from its mooring without the use of tools, and connected to land-based utilities) qualify as real property for purposes of Sections 856(c)(2)(C) and 856(c)(3)(A) and as real estate assets for purposes of Sections 856(c)(4)(A) and 856(c)(5)(B).

Parking Garage Will Not Disqualify Rents for REIT Purposes
In substantially identical rulings (Private Letter Rulings 201628020 and 201628021), the IRS ruled that a parking garage is an inherently permanent structure and therefore (1) the rents received with respect to a building’s tenants by the taxpayer, a REIT, will not fail to qualify as “rents from real property” for purposes of Section 856(d) because of the parking services that such tenants may receive from the use of the parking garage and (2) the taxpayer’s allocable share of income received with respect to parking lease rents and storage agreement fees from the parking garage will qualify as “rents from real property” for purposes of Section 856(d).

Comments on Proposed Debt-Equity Regulations Released
Numerous organizations have submitted comments on the Proposed Debt-Equity Regulations (see our prior coverage here). Some of the organizations (along with links to their comments) are listed below:

Competent Authority Arrangement to B.V.I. FATCA IGA Available
The British Virgin Islands and U.S. competent authorities have signed an arrangement under the two jurisdictions’ 2014 intergovernmental agreement to implement the information reporting and withholding tax provisions of the FATCA.

New Jersey Tax Division Creates New Partnership Tax Returns
In Technical Bulletin (TB-55(R)), the New Jersey Tax Division announced that for tax years beginning on or after Jan. 1, 2015, the division created two new partnership tax returns, Forms NJ-1065 and NJ-CBT-1065. Form PART-100, which partnerships previously used to report both the gross income tax filing fee and the corporation business tax, is eliminated for tax years beginning on or after Jan. 1, 2015.

Information contained in this publication should not be construed as legal advice or opinion or as a substitute for the advice of counsel. The articles by these authors may have first appeared in other publications. The content provided is for educational and informational purposes for the use of clients and others who may be interested in the subject matter. We recommend that readers seek specific advice from counsel about particular matters of interest. 

Copyright © 2016 Stradley Ronon Stevens & Young, LLP. All rights reserved.

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