Monday, September 25, 2017

Reimbursements for Individual Health Premiums & the Myths of the 21st Century Cures Act

Background

Among my church clients, one of the most difficult changes from the Affordable Care Act (ACA) was the end of an employer's ability to reimburse employees for individual health insurance premiums.  Due to the financial and administrative costs of  group health insurance, many small churches and nonprofits reimburse employees for individual health insurance plans.  Pre-ACA law allowed this reimbursement and the reimbursement was nontaxable to the employee. 

Under the ACA, such a reimbursement plan became an ineligible health plan subject to fines of $100 per day per participant.  The reimbursement  still isn't taxable, but the plan creates fines to the employer.  In response to the ACA rules, many small employers stopped providing for insurance for employees, a result contradictory to the purposes of the ACA. Other employers weren't aware of the rule changes and continued with plans violating the ACA.  (In 2015, the IRS provided relief to employers violating these particular ACA rules by relieving them of any penalties through June 2015.  The 21st Century Cures Act provides this relief through December of 2016.)

The Myth

In December of 2016, The 21st Century Cures Act (the Act) was signed containing a provision allowing for small employers to reimburse for individual health plan premiums.  Unfortunately, the "Cures Act" did not cure the problem for many small employers, but instead created a myth that the problem was cured.  Once the Act was signed, word spread that individual health insurance premiums could once again be reimbursed and all the prior ACA created issues were rolled back.  Throughout the church and nonprofit community, it was assumed the old ways could be resumed (or continued for those who failed to understand the ACA.)  

The Truth

It is true that the Act provides for a method of providing health insurance through the reimbursement of individual health insurance premiums.  It is not true that the Act allows employers to return to the good ole days of pre-ACA practices.   

The Act created the Qualified Small Employer Health Reimbursement Account (QSEHRA) to provide for an employer's reimbursement of individual health insurance plan premiums and other medical expenses.  The QSEHRA is removed from the ACA's definition of a "group health plan".   The QSEHRA does not return to the days of old, and churches/nonprofits desiring to utilize the it must understand its rules and limitations.

A QSEHRA is for:
  • employers with fewer than 50 full time equivalent employees (FTEs); and 
  • employers not offering a group health plan.
The QSEHRA must:
  • be a written plan;
  • include notification of the plan to employees 90 days before the beginning of the year or for new employees, their eligibility for the plan.  IRS Notice 2017-20 granted relief from this provision for plans starting in 2017.  (There has not been any guidance issued to date, so the penalty relief may be suspended until such guidance is issued.) Penalties for failure to provide the notice are $50 per participant not receiving the notice;
  • be employer funded - no elective employee salary deferrals may be used;
  • reimburse for substantiated medical expenses and premiums;
  • limit reimbursements to annual amounts of $4,950 for an individual or $10,000 for a family plan.   If greater amounts are provided, the additional cash must be for unrestricted purposes or a non-qualifying group health plan not complying with the ACA is created;
  • provide for reimbursements on the same basis for all employees.  There may not be variations for position, length of service, etc; 
Employees should be aware that an insurance policy obtained from an exchange may be reimbursed, but the employee must notify the exchange of the employer reimbursement and cannot claim the reimbursed portion of the premiums for the premium credit.  This educational information is required to be part of any notice given to the employees regarding the plan. 
For churches/nonprofits desiring to institute a QSEHRA, steps should be taken to establish the plan in writing and to provide notice to the employees of the plan for 2018.  While notice requirements may be temporarily suspended, it is best to distribute a notice in accordance with the initial instructions to provide relevant information to employees.  Plans reimbursing individual health insurance premiums, outside of a qualifying QSEHRA, should be terminated immediately as such plans are currently subject to ACA penalties. 

Monday, September 18, 2017

New Guidance Provided for Determinations of Acceptable Foreign Grant Recipients

Background

Private foundations have very specific rules applicable to foreign grants that have long been ignored by churches and other public charities.  However, with the events of 9-11, governmental scrutiny of any charity's foreign expenditures greatly increased.  For charities filing Form 990, information on foreign expenditures is requested each year through Schedule F.  Schedule F requires reporting areas of foreign operations as well as a description of foreign activities and foreign recipients.  Churches don't file Form 990, so they escape this particular scrutiny by the IRS.  However, churches are subject to other filing requirement on foreign activities.  For example, when churches have funds in foreign accounts, they are subject to the financial bank account reporting (FBAR) on FinCen 114.  (For more information on reporting of foreign assets, including the FinCen 114 go to https://www.fincen.gov/resources/filing-information.)

As the IRS increases scrutiny of all charities' foreign activities, it is necessary to be familiar with the documentation, expected by the IRS, required to support the exempt purposes of the activities.  Without any specific guidance for churches and public charities, it is necessary to look to the long standing requirements placed on private foundations' foreign activities.  Therefore, when the IRS issues new guidance to private foundations regarding foreign activities, it is wisdom for all charities with foreign activities to become familiar with this guidance and the related criteria.

Expenditure Responsibility or Equivalency Determinations

Private foundations are required to operate foreign grants under one of two scenarios.

  1. Expenditure responsibility  - These requirements state that the grant funds will be segregated from other funds of the foreign charity and that all expenditures will be reported back to the grantor through the use of pictures, written reports, receipts, financial statements or other methods of reporting and documenting how the funds were specifically utilized.  Think of this requirement as similar to operating an accountable expense reimbursement plan with the grantee.
  2. Equivalency determination  - This is a process in which a qualified professional determines that the foreign recipient organization meets the qualifications of IRC Section 501(c)(3) and grants to it may be treated in the same manner as grants to U.S. 501(c)(3) charities. 

New Guidelines for Equivalency Determinations

IRS Rev. Proc. 2017-53 details out the new standards for equivalency determinations, now to be referred to as "preferred written advice" or PWA.  While binding on private foundations, the new standards provide an excellent guide for how churches and other public charities may establish foreign grant programs. The Rev. Proc. states that the equivalency determination is:

  • Based on current written advice - "Current" is defined as advice based on the grantee's current or previous year.  The advice may be relied on for a period of up to two years after the advice is provided depending on how recent the factual information is on which the advice is based. (As long as there is not a relevant law change affecting the advice during this two year period.) 
  • Prepared by a qualified tax practitioner - A qualified tax practitioner is an attorney, a certified public accountant or an enrolled agent who is subject to the IRS Circular 230 standards of practice. 
  • Indicates that the recipient is a qualifying public charity - The foreign grantee must meet the tests be the equivalent of a public charity as defined in IRC Section 509(a)(1), 509(a)(2) or certain 509(a)(3) organizations.  This includes churches, schools and hospitals as well as other organizations generally supported by donations or governmental support.  For some foreign grantees, this determination is made through specific testing as performed on U.S. public charities by using Form 990 Schedule A. 
  • Includes the statement that the grantor is reasonably relying on the written advice in accordance with IR Reg. Sec. 1.6664-4(c)(1). 
The preferred written advice should be in English and all attachments should be translated into English.  The advice should contain the following components.  
  • Copies of the grantee's organizational documents;
  • Descriptions of the grantee's exempt purposes and how these purposes align with 501(c)(3) exempt purposes;
  • Confirmation that upon dissolution the grantee's assets will be distributed to another charitable organization for charitable purposes or to a governmental entity;
  • Confirmation that the grantee does not have shareholders or members with an ownership interest in the grantee and that the grantee's assets will not be used for non-charitable purposes or for the private benefit of an individual except for the payment of reasonable compensation;
  • Confirmation that the grantee does not directly or indirectly intervene in any political campaign to any extent or work to influence legislation more than as an insubstantial part of its activities;
  • Disclosures of related or affiliated organizations that control the grantee or work in connection with the grantee;
  • Details of the grantee's activities, past, present and anticipated over the life or term of the grant.  These details should be specific as to sources of revenues and types of expenditures;
  • References to any relevant federal tax law applying to the grantee's operations;
  • Confirmation that the grantee has not been identified as or designated as a terrorist organization by the United States government.  (While not required, it is recommended that all key individuals associated with the grantee also be screened for terrorist designations.);
  • If the grantee, is a school, its organizational documents must include the required nondiscrimination policy as applicable to U.S. schools; and
  • Financial support testing for grantees meeting the  "public charity" test under 170(b)(1)(A)(vi) or 509(a)(2).  (Form 990 Schedule A schedules may be used for this requirement.) 

Application to Churches and Public Charities

It cannot be disputed that the required documentation of foreign activities is overwhelming and burdensome to a U.S. church or charity.  The days of blindly sending money to foreign grantees is over and operating in this manner is dangerous for a U.S. organization.  While appearing to be onerous in many aspects, the equivalency determination  can alleviate  many of the complications for churches and other public charities working in foreign countries. 

For example, a church may have a sister church it supports in Kenya.  Generally, the support provided to the Kenyan church must be specifically accounted for with documentation of the expenditures back to the U.S. church.  If preferred written advice or an equivalency determination is gained for the Kenyan church, then the U.S. church can provide support with less ongoing paperwork. 

In seeking an equivalency determination, churches and public charities should seek a qualified tax professional with experience with nonprofit organizations with extensive foreign activities.  Since, the above requirements are similar to the information provided to the IRS when exemption applications are filed, a professional experienced in filing exemption applications is also preferential. 

Thursday, September 14, 2017

IRS Issues Hurricane Irma Relief with Extended Filing Deadlines

In the wake of Hurricane Harvey, Hurricane Irma unleashed her fury in the Caribbean through the Florida Keys and up through the state of Florida.   As with Hurricane Harvey, the IRS is beginning to publish information providing various relief to those individuals and businesses located in the affected areas. 

For the federally declared disaster areas in Florida, Puerto Rico, St. John and St. Thomas caused by Hurricane Irma, the IRS has extended the due dates for returns due on or after September 4, 2017 through December 31, 2017 to January 31, 2018.  The extension generally applies to all returns due during this time period including Forms 1040 due at October 15, 2017, business returns due September 15 and October 15, 2017, excise and payroll returns due October 31, 2017 and Forms 990 due November 15, 2017.  Estimated tax payments due September 15, 2017, December 15, 2017 and January 15, 2018 are also extended until January 31, 2018.

For employers making federal tax deposits, the deposit delay granted is until September 19, 2017.  

There is no extension of time to file the annual Forms W-2, 1099-series or Forms 941 or 940 that are due at January 31, 2018.

The extension applies to: 

  • any individual who resides or works within the area; 
  • a relief worker working within the disaster area;
  • any individual or business whose residence or business isn't in the area, but the records needed to prepare returns are located within the disaster area; and 
  • any estate or trust with necessary records located within the disaster area.  
As the IRS processes all the effects of Hurricanes Harvey and Irma and disaster areas are continued to be declared, individuals and employers should continue to monitor the IRS website at https://www.irs.gov/newsroom/tax-relief-in-disaster-situations for more updates on relief provisions. 

Friday, September 8, 2017

IRS Provides Relief for Victims of Hurricane Harvey

As the number of counties included in federally declared disaster areas grows, the IRS is actively issuing announcements to provide relief to the victims of Hurricane Harvey.  Generally, the relief provisions described below are provided to victims residing in or employed in areas designated by FEMA as disaster areas related to Hurricane Harvey.  The updated list of these may be found at https://www.fema.gov/disasters.  

Retirement Plans & Hardship Distributions

Announcement 2017-11, 2017-39; News Release 2017-141 provides certain allowances may be made to allow for qualified retirement plans, including 403(b) plans, to make loans and/ or hardship distributions to participants.  Certain rules are loosened including the definition of an event deemed to be a hardship or the allowance of distributions during employment.   The relief does not extend to the 10% early distribution penalty, so this penalty would continue to apply as defined under current rules.  Employers, with plans, should review this information to determine if a plan has qualifying provisions and if so, what rules need to be followed to allow for the loans and/or hardship distributions.   The relief provisions are intricate in nature and should be followed with care to avoid disqualifying the plan or the distribution. 

Leave- sharing Programs

Notice 2017-48, 2017-39 IRB; News Release 2017-143 provides guidance for employers desiring to allow employees to participate in a leave-sharing program.  A leave-sharing program allows employees to forgo vacation, sick or other personal leave time in exchange for the value of the leave time being contributed to a qualifying charitable organization.  The charitable organization must be involved in Hurricane Harvey relief efforts.  The employees are not taxed on the value of the forgone time and the employers are allowed to treat the payment to the charity as a business expense under IRC Section 162 rather than a charitable donation under IRC Section 170(c). 

Extended Filing Deadlines

News Release, IR 2017-135, provides a new due date for returns. Various filing deadlines received an automatic extension of time to file as a result of Hurricane Harvey.  Relief is provided to persons residing in the designated areas, businesses located in the designated areas, relief workers to the designated areas and those outside of the area, but whose records may be in the designated areas.  For Texas counties, the extended due date is January 31, 2018.  This applies to federal income tax returns, federal payroll returns, various excise tax returns, estimated tax payments, and exempt organization information returns with due dates (including extended due dates) falling within the extended time period.  

The delay allowing for tax payment deposits was only extended until September 7, 2017.  Currently, all federal tax deposits are expected to be made in the regular "timely" manner.   However, the IRS has authority to abate penalties assessed on late tax deposits with a specific request from the taxpayer.   If notices are received assessing penalties for the late payment or late deposit of taxes, a taxpayer should write the IRS to detail the reasons for the late payment and request the abatement of related penalties. 

Additional time for filing of payroll reporting forms due at January 31, 2018, such as Forms W-2 and 1099-Misc, has not been granted.  

IRC Section 139 Plans - Disaster Relief Assistance

Business and nonprofit organizations may establish disaster relief assistance plans under the provisions of IRC Section 139 to assist victims of federally declared disasters. The plans provide a method of assisting persons affected by the disasters, including an organization's employees.  Assistance provided through the plans is tax free to the recipient.  For more information on these plans, see my blog posting earlier this month. 

Conclusion

As we move into the weekend, reports of Hurricane Irma indicate another serious disaster will occur.  Both taxpayers and employers should be diligent in staying informed regarding relief provisions provided by the IRS.  Relief should not be assumed by a taxpayer or employer until it is specifically provided for their location.  If Hurricane Irma delivers the devastation possible from a Category 5 hurricane, more disaster relief notices will be issued by the IRS in the days to come.  

More information on the various forms of relief provided by the IRS for victims of Hurricane Harvey is available at https://www.irs.gov/newsroom/help-for-victims-of-hurricane-harvey


Saturday, September 2, 2017

Section 139 Plans - Relief in the Midst of Disaster - An Avenue for Employers to Help Employees

As Hurricane Harvey has devastated our Texas coast, we at Sommerville & Associates, P.C. are praying for all of those affected.  As is evidenced across the country, everyone is looking for ways to reach out and alleviate any part of the pain and suffering of those affected by the hurricane and the corresponding floods.  As the rains continued to fall and the waters rose last week, the estimated recovery costs continued to climb.  No one knows what the cost will be, but it is now anticipated the cost will surpass the recovery costs of Hurricane Katrina.  

Many of our churches and nonprofit clients have been directly affected by Harvey, as have many of their employees.   With less than 15% of the affected residences insured for floods, much of the costs of rebuilding will come from personal resources supplemented by federal resources.  The nonprofit community has a deep desire to assist those in need, both employees and others, and many resources are already flowing into the nonprofit community.  

Nonprofit organizations, especially churches, may operate benevolence programs to assist the community with special needs.  Many programs are already established and provide a structure available to assist with needs arising from Harvey.  Generally recipients are not taxed on payments from a regular benevolence program, but an organization's employees may not receive tax free payments from a benevolence program due to limitations placed on such programs through IRC Section 102.

With limitations on assistance from benevolence plans for employees, there aren't many avenues available for employers to offer tax free assistance to employees.   After the 9/11 terror attacks, Congress decided to provide an avenue for employer to employee assistance in the case of certain disasters.  

Qualifying Disaster Relief – IRC Section 139


Congress enacted IRC Section 139 in 2002 as a means of clarifying the taxable nature of assistance payments received to victims of a qualifying disaster.  

Qualifying Disaster
A qualifying disaster is one that is the result of or related to: 
  • a terrorist action;
  • a Presidential declared disaster area; 
  • accident involving a common carrier; or
  • any other IRS declared qualifying disaster. 
Victims of one of these disasters create a qualifying charitable class allowing assistance to be provided to the victims.  This charitable class may include employees, their family members and major donors.  While any employer is allowed to set up, these plan are especially advantageous for nonprofit employers who have the ability to raise funds for the plans from donors. 


On August 26, 2017, President Trump signed a major disaster declaration for those portions of Texas that Hurricane Harvey severely affected. The designated counties include: Aransas, Bee, Brazoria, Calhoun, Chambers, Colorado, Fayette, Fort Bend, Galveston, Goliad, Hardin, Harris, Jackson, Jasper, Jefferson, Kleberg, Liberty, Matagorda, Montgomery, Newton, Nueces, Orange, Refugio, Sabine, San Jacinto, San Patricio, Victoria, Waller, and Wharton. This list can continue to grow, and we recommend that employers view the most accurate list at this FEMA website: https://www.fema.gov/disaster/4332#.

Qualifying Payments
Payments for these expenses are qualified disaster relief payments:
  • reasonable and necessary personal, family, living, or funeral expenses incurred because of a qualified disaster;
  • reasonable and necessary expenses for the repair or rehabilitation of a personal residence due to a qualified disaster (a personal residence can be a rented residence or one you own); and
  • reasonable and necessary expenses for the repair or replacement of the contents of a personal residence due to a qualified declared disaster.

Further, recipients of  qualified disaster relief payments do not have to account for all of their expenses, as long as the payments received are reasonably expected to be equal to the expenses the recipients incurred.

There are two key limitations to Section 139. Qualified disaster relief payments do not include:
  • payments for expenses otherwise paid for by insurance or other reimbursements; or
  • income replacement payments (i.e., payments of lost wages, lost business income, or unemployment compensation).
Setting Up the Plan
Organizations desiring to set up a Section 139 plan should determine: 
  • who will qualify for the assistance; 
  • how assistance can be requested (an application is recommended);
  • what type of assistance will be granted; and 
  • how the assistance will be paid or provided.
Summary

While a Section 139 plan doesn't provide for all instances where an employer may desire to assist an employee, it is certainly an avenue available to providing assistance during some of the most trying times a community may face.  For more information regarding these plan or a sample application, please feel free to contact me at elaine@nonprofit-tax.com or find more information and a sample plan at http://www.wkpz.com/help_for_employers_addressing_disaster.php.

Thursday, December 15, 2016

Limited Relief Offered for Employer Reimbursement of Individual Health Insurance Premiums

Finding a way onto the very end of the 21st Century Cures Act, signed by President Obama on December 13, 2016, are provisions allowing eligible employers to operate Health Reimbursement Accounts (HRA) on a limited basis without requiring full compliance with the provision of the Affordable Care Act (ACA).  

Under the ACA, an HRA must provide for certain preventative services to be provided free of charge, and it may not establish any annual limits on the dollar amount of benefits available for any individual.  HRA plans integrated with group health insurance plans meeting these two requirements are deemed to fulfill the requirements of the ACA.  However, HRA plans integrated with individual health insurance policies are not deemed to fulfill the requirements of the ACA, even if the individual policies meet the two ACA requirements.  HRA plans integrated with individual health insurance are subject to a penalty of $100 per day per participant since the health plans do not comply with the ACA.  (Notice 2015-17 provided penalty relief through June 30, 2015.)

The above provisions greatly affected and continue to affect nonprofit organizations of all sizes, but they dealt a substantial blow to smaller nonprofit organizations who are unable to justify the cost of the group health plans available to them.  Faced with substantial ACA penalties, many organizations are unable to offer any type of assistance to employees for health insurance.  

The 21st Century Cures Act addresses this issue in two different ways. 

ACA Penalties for Non-Compliant Health Plans
 In regards to the penalties, limited relief from the penalties arising from these rules was previously offered via Notice 2015-17 allowing for penalty relief for employers reimbursing employees for the cost of individual health insurance policies through June 30, 2015.  The "Cures" Act extends this relief for all years beginning on or before December 31, 2016.  For calendar year organizations, this covers all years through 2016.  For fiscal year organizations, it covers all years beginning on or before December 31, 2016.  

Exception to ACA Requirements for Small Employer HRA Plans
In regard to allowing for HRA plans (including those reimbursing for individual health insurance policies), the "Cures" Act creates a Small Employer HRA.  While the Small Employer HRA provides some relief, the relief is limited.   Qualifications of a Small Employer HRA are: 

  • The employer has fewer than 50 employees;
  • The employer may not offer a  group health plan to any of its employees;
  • The plan must be provided to all eligible employees, i.e., employees who are not part time or seasonal, have completed 90 days of services and are 25 or older (this prohibits a plan providing for just one or two employees and not for all eligible employees);
  • The plan must be funded solely by the eligible employer and not through a salary reduction plan; 
  • The plan only covers eligible medical expenses defined by IRC 213(d); 
  • The employer receives confirmation from participating employees that the employee maintains a policy providing minimum essential health coverage; and 
  • The total amount of the payments available during the plan year do not exceed $4,950 ($10,000 in the case of the arrangement providing for expenses of family members.)
Small Employer HRA plans are allowable for years beginning after December 31, 2016.  

Taxation of Payments:  Payments to the employee under the plan will be tax free as long as the employee maintains minimum essential health coverage.  If an employee does not maintain such coverage, the benefits paid under the plan are included in taxable compensation of the employee. 

Notification Requirements:  Employers offering the plans must provide written notice to employees including the (i) amount of the employee's permitted benefit under the plan; (ii) instructions to the employee to provide the plan benefits to any health insurance exchange in cases where the employee is applying for an advance payment of the premium assistance tax credit; and (iii) information regarding the taxable nature of the benefit where an employee does not maintain minimum health coverage.  

The written notice must be provided to employees at least 90 prior to the beginning of a plan year.  Since this is not possible for the 2017 plan year, the notice is required to be provided within 90 days of the enactment of the "Cures" Act or March 13, 2017.  

Summary
The new law offers some relief to small employers, but it does not return these employers to a pre-ACA position.  The new law's provision allowing for a monthly benefit of $412.50 to $833.33 may allow for the offset of a significant portion of an individual health plan premium, but it likely will not offset 100% of the premium especially for family plans.  Additionally, the requirement to provide the plan to all eligible employees prohibits an employer from providing the plan solely to one or more key employees, i.e. to an executive director or to a senior pastor.  Since penalty relief has only been granted through 2016, small nonprofit organizations should carefully review the application of the new law and swiftly act to create the plan, if it can be effectively used within the organization. 

Monday, February 1, 2016

501(c)(4) Organizations Face New Reporting Requirements


Organizations claiming exemption under IRC Section 501(c)(4) have received greater attention over the past two years amidst allegations of IRS targeting based on an organization's political and/or philosophical views.  Due to what is perceived by many as widespread unacceptable activity by (c)(4) organizations, there are various attempts to increase the regulation and oversight of these organizations.  One of these attempts was recently codified into law as a part of the recently enacted Protecting Americans from Tax Hikes (PATH) legislation.  Organizations formed under 501(c)(4) are now required to file an additional notification with the IRS.

Background

Unlike organizations organized under IRC Section 501(c)(3), organizations exempt under 501(c)(4) have the ability to operate as exempt organizations without receiving official notification of exempt status from the IRS.  These organizations are categorized as "self declarers".  The organizations have to follow the rules and file the required annual Form 990, but they do not have to file an application with the IRS to have their exempt status recognized.  An organization may file a Form 1024, Application for Recognition of Exemption under Section 501(a), if it wishes to receive IRS approval and receive a determination letter from the IRS.  

New Law

PATH has enacted IRC Section 506 requiring organizations formed under 501(c)(4) to notify the IRS of the intent to operate as a 501(c)(4) organization.  Notification must be made to the IRS within 60 days of the formation of an organization created after December 18, 2015.  Additionally, notification is required by any organization in existence at December 18, 2015 that has never filed either an exemption application, Form 1024, or an annual information return, Form 990, 990-EZ or 990-N.   The due date for notification by existing organizations is June 15, 2016.   Failure to comply with the notification requirements carries of penalty of $20 per day up to a maximum of $5,000.  

The notification includes 1) the name, address and employer identification number of the organization; 2) the state laws under which the organization was formed; 3) the date of the organization's formation; and 4) a statement of the purposes of the organization. (This notification is not a request for recognition of an organization's exempt status.  A request for determination of the organization's exempt status is required to be made in addition to the notification required under IRC Section 506.)

Extended Due Date

Due to the need for the IRS to issue regulations regarding the operation of the notification requirement, the due date for the notifications has been extended to 60 days after the issuance of the temporary regulations.  (Notice 2016-9)  Therefore, organizations are not required to provide notification at this time.  

Once this notification is fully operational, there will be very little time between an organization's date of formation and when failure to comply penalties begin to accrue.  Therefore, it is critical that professional working with and organizers of these organizations understand the substantial change  required by IRC Section 506.  The new requirement transforms an organization being able to operate as a self declared organization with no specific notification to the IRS of its existence, other than filing its annual return, to being required to immediately inform the IRS of its existence and purposes.