The IRS Introduces New Procedures for Nonprofits Making Miscellaneous Determination Requests

In the midst of tax season, the IRS released Rev. Proc. 2023-12 establishing new procedures for nonprofit and tax-exempt entities making miscellaneous determination requests. As with recent procedural changes to Forms 1023, 1024 and 1024-A filings, Rev. Proc. 2023-12 requires that taxpayers submit a Form 8940 request exclusively through www.pay.gov. While the pay.gov platform has its faults, one can hope that receipt of Forms 8940 in electronic format will speed up IRS processing times. Per IRS statistics, any Form 8940 post-marked after mid-October of 2022 has yet to even be assigned to an IRS reviewer as of the time of this writing. 

There are a variety of contexts in which a nonprofit would file a Form 8940 seeking guidance from the IRS. Most commonly, we submit Forms 8940 on behalf of clients to request a change in public charity status (e.g., to convert from a 509(a)(3) supporting organization to a 509(a)(1) publicly supported charity) or to request approval that a proposed grant constitutes an “unusual grant” for public charity test purposes. All of these requests, which traditionally require a Form 8940, must now be filed through pay.gov.

Nevertheless, the IRS has provided a 90-day grace period for Form 8940 filings postmarked on or after April 4, 2023, so nonprofits that sent filings to the IRS by mail on or after the rollout date (or that will do so in the near future) need not worry. However, at the end of the grace period on July 3, 2023, physical copies of the Form must be replaced with electronic filings.

Rev. Proc. 2023-12 also expands the scope of rulings requested using Form 8940. Accordingly, certain determination requests that were previously made by way of letter requests or general correspondence to the IRS must now be made exclusively by filing Form 8940, including: (i) requests by government entities for voluntary termination of their section 501(c)(3) exemption status; (ii) requests by Canadian registered charities for inclusion in the Tax Exempt Organization Search database of organizations eligible to receive tax-deductible charitable contributions or a determination denoting public charity classification; and (iii) notice of private foundations of their intent to terminate their private foundation status under section 507(b)(1)(B) of the Code.

Similar to other electronic federal filings, Form 8940 must be uploaded with all attachments, exhibits and related forms as a single document. For example, if your organization is classified as a 509(a)(3) supporting organization and it is seeking reclassification as a publicly supported charity under sections 509(a)(1) and 170(b)(1)(A)(vi), you will need to submit an electronic copy of a completed Schedule A to its Form 990 and any other supporting narrative statements.

At Bricker Graydon, we have an extensive exempt organization practice, and we regularly advise nonprofits on various forms of ruling requests. We believe the new electronic filing procedures for Form 8940 will streamline the process for both tax professionals and organizations seeking a determination from the IRS.