Revenue Procedure 98-19

Bulletin No. 1998-7
February 17, 1998

Internal Revenue

HIGHLIGHTS
OF THIS ISSUE

These synopses are intended only as aids to the reader in
identifying tbe sub'ect matter covered. They may not be
relied upon as adoritatiw interpretations.

INCOME TAX

G1FT TAX
Rev. Rul. 98-8, page 24.

T.D. 8745, page 15.

F~nalregulations under section 171 of the Code relate to the
federal income tax treatment of bond premium and bond issuance premium.

Disposition of qualifying income interest. If a surviving
spouse acquires the remainder interest in a trust subject to
a QPlP election under section 2056(b1(7)of the Code n connect~onwith the transfer by the surviving spouse of property
or cash to the holder of the rerna~~der
interest, the surviving
spouse makes a g~ftunder sections 251 1, 2512, and 2519
of the Code.

T.D. 8747, page 18.

T.D. 8743, page 26.

Final regulations under section 2808 of the Code relate to
deductions available upon demolition of a buildirrg.

T.D. 8746, page 4,

Final regulations under section 1396 of the Code relate to
the period employers may use in computing the empowerment zone employment credit.

T.D. 8749, page 16.
Final regulations under section 1202 of the Code relate to
the 5Upercent exchsion for gain from certa~nsmall business stock.

EXEMPT ORGANlZATfONS
Rev. Proc. 98-19, page 30.
Organizations excepted from reporting lobbying expenditures. This procedure provides guidance to organizb
tions exempt from taxation under Code section 501!a) on

Final regulations under section 2102 of the Code permit the
reformation of a personal residence trust or a qualrhed personal res~dencetrust ~norder to comply with the applicable
requirements for such trusts.

T.D. 8744, page 20.
Find regulations under sect~on2518 of the Code relate to
the treatment of disclaimers for estate and gift tax ptJr-

ooses.

EMPLOYMENT TAX
Announcement 98-9, page 35.
This announcement provides corrections to the 1998 Circular E, Employer's Tax Guide IPublication 15).

the applicat~onof amendments made to Code sections
162Iel and 6033{e) by section 13222 of the Omnibus Budget Reconciliation Act of 1993. Rev. Procs. 95-35 and
95-35A superseded.

ADMINISTRATIVE

Announcement 48-10,page 35.
A list is grven of organizatlons now classified as private foun
datlons.

This procedure sets forth the acceptable form of written assurances that will except the sale or exchange of a principal
residence from intormation reporting.

Rev. Proc. 98-20, page 32.

Finding Usts begin on page 46.
Announcement of Disbarmerib and Suspensions begins on page 37.

Department of the Treasury
Internal Revenue Service

3

Part Ill. Administrative, Procedural, and -Miscellaneous
?e CFR 601.1C5.

E m m i ~ t ~ ofrerurnr
on
and

rl21mrf i r rrfind. crcrl~f.or o h r e m e n ! :
dprrrm~narronofrorrrr! ILU liubiliy.
(Alrr §b 16?. 501, and60331

Rev, Proc. 98-19
SECTION 1. PURPOSE
This Revenue Procedure provides guidance to organizations exempt from taxat ~ o nunder 5 501(a) of rhe Internal Revenue C d e of 1986 on certain exceptions
from the reponing and notice requirements of $ 6 0 3 3 ( e ) ( l ) and the tax imposed by § M331ek21. The revenue procedure updates and supersedes Rev. Proc.
95-35, 1995--2 C.B 391. as modified by
Rev. Proc. 95-35A. 1995-2 C.B. 392.
Rev. Proc. 95-35 and Rev. Proc. 953 5 A were issued pursuant to the Secretary's auhority to relieve taxexempr organiza~ionsfrom the burden of meeting the
reporrrng and notice requirements of
$ 6033(e)( 1 ) or the tax imposed by
5 6033(eX 1)where the organizarion establishes ro the satisfaction of Ihe Secretary
that substantjally all of the dues or other
similar amounrs paid by persons to such
organization are not deductible w i h u t regard to § 162(e). Rev. P ~ M 95-35
.
and
Rev. Proc. 95-35A identify c t h t a x ~ x empt organizations thal are trwted as satisfying the requirements of § 6033(e)(3) and
are thus not su b~ectto the reporting and norice requirements of $ 6033(e)(I) or the tax
imposed by 4 M)33(e)(2). h e d u r e s for
other exempt organizations lo establish
rhar ~ h c ysatisfy the requirements of
9 tr0331e)!3) are also provided.
111 11gh1of comments submitted in response to Rev. Proc. 95-35. the Service
has determined that the requirements
should be modified to funher relieve the
burden of (i 6033(e)(I f . rhis revenue procedure retains the requirements set out h
Rev. Proc. 95-35, and Rev. Proc. 95-35A.
with the m d ~ f i c a t i o nthat he amount of
annual dues (or similar amounts) thar may
be received by organizations described in
P 4.02 wirhour becoming subject to ~e requiremenls of § 6033(e) is increased to
$75 or less.

SEC. 2. BACKGROUND
Sectton 6033I.e) imposes reponing and
notice requirements on tax-rxempl orga-

nizations (other bar, 3 501(c)r3j orgmi- reasonably estimated to k nondeduct~ble
zations) tbar.incur lobbying and political for the following taxable year by the
expenditures to which 5 162(e) applies amount of the underestimate.
nondeductible lobbying expenditures").
Section 6033(e)(3) provides t h a t
Section 162(e) denies a deduction. other- 5 6033(e)(l)(A) shall not apply to an exwise allowable under $ 162(a) as an ordi- empt organization that establishes to the
nary and necessary trade or business ex- satisfacrion of the Secretary h a t subsranpense, for certain lobbying and political tially all the ducs or similar amounts paid
expenditures. Secrion 162(e)(3) denies a by pmons to the orgmization are not dededucrion for the ducs (or other similar ductible withou! regard to 6 162(e). The
amounts) paid ro cenain tax-exempt orga- tax imposed by Q: 6033(e)(2XA) only apnizations to the extent that the organiza- plies to organizations subject to the notice
tion, at h e lime the dues are assessed or requirements of § 6033(e}( 1)(A).
paid. noufies the dues payer that the dues
are allocable to nondeduciible lobbying SEC. 3. SCOPE

expenditures.
Section 6033(e)(I) requires a tax-exempt organization that pays or incurs
nondeductible lobbying expenditures to
notify its memkrs, at the time the dues
(or other similar amounts) are assessed or
paid, of its reasonabie estmate of the partion of the dues that is allwable to those
expenditures. Secrion 6033(e)( 1 ) does
not, however, apply to tax-exempt organizations desa-ilxd in 501(c)(3), or to organizations thai eslablish to the satisfaction of h e S e c r e w y that substantialIy all
the dues they receive are not deductible
without regard ro 5 162(e). Ln addition,
organizations whose lobbying and poli tical expenditures consist solely of cenain
in-house expenditures for nondeductible
lobbying and whose total such expenditures do not exceed $2,000 in a taxable
year are not subject to the reporting and
nolice requirements of 8 6033(e)(l).
Secuon 6033(e)(2)!A) provides thar if a
tax-exempt organization fails lo provide
h e notices required by 5 6033(e){ I), or if
t h e notices u n d e r e s t i m a t e the actual
a m o u n t of d u e s a l l o c a b l e to nondtductible lobbying expenditures, the organization is subject to tax (at the highest
rate imposed by 3 1 1 ) on rhe aggregate
amount o f d u e s allocabIe to nondeduclible lobbying expendirures paid during the taxable year hat was not reponed
on the notices. However, 5 6033(e)(2)(B)
provides that if a tax would be imposed
on the ~rpanizationbecause its estimate
of the nondeductible portion of the dues
was less than the actual amount dlocable
to nondeductible lobbying expenditures,
I h e Secrerary may waive the tax if the nrgarbation agrees to increase h e m o u n t

This revenue procedure (i) sets forth
specific circumstances in which cenain
tax-exempt organizations are trealtd as
meetrng the requirements of 4 6033(e)(3),
and (ii) provides guidance to other exempt organizations regarding how they
may establish &at h e y sattsfy the requirements of § 6033(e?i3).

SEC. 4. APPLICATION
.O 1 Exempt Organizations Aulornotically Excepted Under Section 6033irX31.
Organizations recognized by the Service
as exempt from taxation under 5 501(a).
other rhan (i) social welfare organizations
descrikd in 4 501 (c)(4) that are not veterans organizarions, (ii) agricultural and
honiculnrral organizations descrikd in $
501 ( c ) ( 5 ) . and (iii) organizations described in 5 50 1 (c)(6),are treated as satisfying the requirements of 4 6033(e)(3).
.02 Section 501 ( c ) ( 41 Soclal Welfare
Orgunizalions and Secrron 501 ( c ) ( S )
Agriculturul and Horticulrural 0rgani:ations. Social welfare organ~za~ions
recognized by the Service as exempt from mation under $ 501(c){4) and agricultural

and horticultural organizations recognized by h e Service as exempt from timation under § SO I (c)(5) are treated a satisfying the requiremenw of § 6033(e)(3) if
either (i) more than 90 percent of all annual dues (or similar amounts) are received from persons, families. or enrilles
who each pay annual dues (or s ~ m ~ l a r
amounts) of $75 or less, or (ii) more rhm
90 prcent of all annual dues (or similar
amounrsl are received from organlzatlon5
described tn 9 501(c)(3). sraIe goi'ernments, local governments, enrlrles whose

1990-7 I.R.B.

February 17, 1998
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t t r m p t from tax under 3 115,
vr pryanlzatlons excepted under section
4-01 of 1h1j rerenue procedure.
-03 Srcrion _i(ll(clthl Oi.ganl:arions.
Organizations recognized by the Servrcl
as exempt from taxaiion under 5 5Oltc.)-

lion t~ ccnlidcred to meet the requirements of 3; 6033ie~(3),then all the organrLawns t h a ~are lreated as parts of rhe slngle organization are considered to meet
the requirements of f: 6033(e1(_1). For
purposes of this revenw procedure, it'ur(6) shall be treated as meeting the require- ganizations within the afiliared srructure
ments of $6033(e)(3) if more than 90 prr- are on different taxable years, the organic e n t of ail a n n u a l d u e s ( o r s ~ r n i l a r zations may base their calculations of anamounts) are received from organlzauons nual dues on any single reasonable raxdescribed in 501(c)(3). itate govern- able year.
.M E-rample oJAn AfJiliated Organi-aments, local govemmenrs, entities whose
income is exempt from tax under 9 115, nnn. .4 gmup of social welfare organizaor organizations excepted under section tions, each of u'hich IS recognized by the
Service as being described in 3 50 I (c)(4),
3.01 of thls revenue procedure.
share a common name and work jointly to
SEC. 5 . DEFINITIONS AND
promote a single purpose. Each organizaPROCEDURES
tion operates at either the nat~onal.state,
or local level. Individuals and farnil~es
.O1 A~lnualDues (or S~milar.4rnounu). that are interested In the purpose proFor purposes of this revenur: procedure. moted by the organizations pay annual
h e term "annual dues" means rhe m o u n l dues of $75 to one of the locai organizaan organization requires a perscn. family. tions. The total amount of dues collected
or entity to pay to lx recognized by the from individuals and families IS $ 9 5 0 ~ .
organization as a member for an annual Also, a number of corporations are memperiod. For purposes of this revenue pro- bers of the national organization and pay
cedure, "similar amounts" includes, but is annual dues of $500 d ~ r e c t l to
j it. The
not limited to, voluntary payments made total amount OF dues received from carp
by persons, f a m ~ l ~ eor
s , entities, assess- rations is $50.7. The organizations are
ments made by the organization to cover {inked by a structure that makes the imal
basic operating costs, md s ~ c i a assessl
organizations memkrs of the appropriate
ments imposed by the organization to state organizations and of the national orconduct lobbying activities.
ganization. Accordingiy, each local orga.02 Memher. For purposes of this rev- nization transfers a portion of the dues it
enue procedure, "member" is used in its collects to the appropriate state organlzabroadest sense and is not limited to per- lion and another portion to the national
sons with voting rights in the organization. organization as dues. These transfer
.03Treurment of Aflliated Organila- amounts are significantly greater than
rions. For purposes of this revenue proce- $75. Because the organizations share a
dure, if more than one organization de- name and coordinate their activities, they
scribed in § § 501(c)(4), 501(c)(S). or are treated as pans of a rrngle organiza501(c)(6) share a name, charter, historic tion for puqmses of determining whether
affilialion or similar charactenstics and they s a t i s f y the requirements of
coordinate their ac~iviries.all such organi- 8 6033(e)(3). Therefore, only rhe dues (or
zations shall be rreaied m parts of a single similar amounts) pald by persons other
organization. O n l y d u e s (or similar than the organizations treated as being
amounts) paid by persons other than the parts of the single organization are con.
organizations treated as being parts of the sidered for purposes of applying this revsingle organization shall be considered enue prmedure. The rota1 amount of anfor purposes of applying this revenue pro- nual dues paid by individuals and families
cedure, All annual dues payments made at the $75 level i s more than 90 percent of
by each person outside the organizational a l l annual dues paid to b t h the local affilsrrucrure"to any organization within the iated organizations by individuals and
single organization are considered for families, and to the national organization
purposes of applying this revenue proze- by corporations. Therefore, the s~ngleordurc lo be paid to {he single organization gan~tationsatisfies [he requirementr of §
fur a s ~ n g l emembership. If, under this 6033(e)(3),which means t h n all rhe affilrerenue procedure, the single organiza- iated local and state organizations. and the

income

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natlonal 0rganizal;un. are c ~ c cuns~dered
h
to have jarisfied the r ~ q u i r c n l s n ~o,f $

6033(e)(3).
.05 S e ~ , e n ~ f iD,.llur
~ . e - \ t ~ ~ o i , at ot he
inde.~-edfor lnflarion The 575 amount
for annual dues in seftlon 4 . ~ 2uill be Increased for taxable e a r s beginning after
D e c e m k r 3 1, 1998, by a cost-of-living
adjustment under $ 1(0(.3)of the Code,
rounded to rhe rlext highesr dollar.
-06 E s t a b l i ~ h i t ~that
$
an Ot;qonirution
is Desrrrhed it? $6033(cl(3). Any exempt
organlzatton that 1s not treated as ~ a t ~ s f y ing the requlremenrs of 5 6 0 3 3 ( e ) ( 3 )
under sectlon 4 of this revenue p r ~ e d u r e
may still establish that it sali5fies the requirements of $ 6033(e)(3\ b!- i r ) rnalntaining records establishing that 90 percent or more of the a n n u a l dues ror
similar amounts) paid to the or_p3nrza11nn
are not deductible without r r g x d to 5
162(e), and (ii) notifying the Service that
it is described in 3 6 0 3 ? ( e ) ( 3 )on any
Form 9W (Return of ~ r ~ a n i z a t i oExn
empt From Income T a x ) lh31 it IS required
to file. Unless an orgwlzation complies
with both of 1hu above requirements, it
will not have esiabt~rhedto the sarisfaction of the Service that kt meets the requirernenw of § 6033(e)(3). Add~~lonally.
an organization may request a p n v ~ l eletter ruling that substantially all the annual
dues (or similar amounts) paid to the orgsnizatlon are not deductible, either dlrectty or indirectly, w i t h o u t regard to
6 16212). To receive a favorable pnvate
letter ruling, the organization must provide the Service wilh evidence rFile Typeapplication/pdfFile Modified2007-03-27File Created2007-03-27