2024 annual revenue procedures for exempt organizations

Executive summary: 

Exempt organization annual revenue procedures contain minor changes

The 2024 annual revenue procedures, effective Jan. 2, 2024, contain certain updates to exempt organization user fees and processes, including new procedures for organizations seeking reclassification from section 501(c)(3) to another paragraph of section 501(c).

2024 annual revenue procedures for exempt organizations

Summary of exempt organization revenue procedures

The 2024 annual revenue procedures that affect exempt organizations are as follows:

• Rev. Proc. 2024-1 – Letter rulings, information letters, and determination letters
• Rev. Proc. 2024-2 – Technical advice
• Rev. Proc. 2024-3 – Areas in which rulings will not be issued (domestic)
• Rev. Proc. 2024-5 – Determination letters (exempt organizations)

User fee adjustments

Most user fees remain the same for 2024. However, the user fees for certain determination requests have an increase in 2024.

In Rev. Proc. 2024-1, the user fees for private letter ruling requests remain the same as in 2023 (i.e., typically $38,000; reduced fees of $3,000 and $8,500 for certain “small” organizations).

In Rev. Proc. 2024-5, certain user fees increased from $2,500 to $3,500 as of Jan. 2, 2024, and other user fees will increase from $550 to $600 as of July 1, 2024: 

• Requests for which user fees increased from $2,500 to $3,500 as of Jan. 2, 2024:
  • Group exemption letters (Note: The IRS is not currently accepting group exemption applications).
  • Advance approval of set asides.
  • Advance approval of grant making procedures.
  • Advance approval of voter registration activities.
• Requests for which user fees will increase from $550 to $600 as of July 1, 2024: 
  • Reclassification of private foundation status.
  • Section 507 terminations – advance or final ruling.
  • Changes to annual information return filing requirements (including subordinate organizations).
  • Unusual grants rulings.
  • Other determinations under the jurisdiction of the Determinations Office not otherwise described or covered in Rev. Proc. 2024-5.

Section 501(c)(3) organizations seeking reclassification under a different paragraph of section 501(c)

In a change of current position, Rev. Proc. 2024-5 provides that the IRS will issue determination letters to section 501(c)(3) organizations seeking reclassification to a different paragraph of section 501(c). 

To be eligible, the organization must submit an application (i.e., either Form 1024 or Form 1024-A) establishing that it satisfies the requirements of the 501(c) status requested. It must also demonstrate that it has distributed its assets to another section 501(c)(3) organization or government entity as of the application submission date. These procedures also apply to automatically revoked section 501(c)(3) organizations seeking reinstatement as an organization described in a different paragraph of section 501(c). Favorable determinations will be effective as of the submission date of the application.

Generally, organizations seeking classification under section 501(c)(4) must submit Form 8976, Notice of Intent to Operate Under Section 501(c)(4), within 60 days of formation. However, as the IRS notes in the Exempt Organizations (EO) Update issued Jan 2, 2024, section 501(c)(3) organizations seeking reclassification to section 501(c)(4) may be unable to meet this requirement. In the EO Update, the IRS states that these organizations may have reasonable cause for failure to file Form 8976 within 60 days of formation if they submit Form 8976 within 60 days of seeking to be described in Section 501(c)(4).

Additional highlights

• Rev. Proc. 2024-3 does not contain any changes to exempt organization “no rule” areas 
• Rev. Proc. 2024-5 also contains revisions throughout to reflect mandatory e-filing of Form 8940, Request for Miscellaneous Determination.

This article was written by Alexandra O. Mitchell, Morgan Souza, Lauren Nowakowski and originally appeared on 2024-01-10.
2022 RSM US LLP. All rights reserved.
https://rsmus.com/insights/tax-alerts/2024/2024-annual-revenue-procedures-for-exempt-organizations.html

The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.