Rev. Proc. 72-31

Section 1. Purpose

The purpose of this Revenue Procedure is to state the conditions under which certain private foundations will be deemed to have reasonable cause for failure to comply with the private foundation requirements of sections 6011, 6033, 6056, 6104, and 6151 of the Internal Revenue Code of 1954 for filing of returns and payment of taxes.

Sec. 2. Background

Under section 6033 of the Code, most organizations described in section 501(c)(3) are required to file Form 990 if their gross receipts are normally more than $5,000 per year. Under sections 6011 and 6033 of the Code, private foundations, defined in section 509, are required to file returns regardless of the amount of gross receipts. In addition, section 6056 of the Code requires that private foundations having at least $5,000 of assets at any time during the taxable year must file an annual report of their activities; section 6104 requires that they publish notice of the availability of this report for public inspection. Private foundations must also pay a four percent excise tax on their net investment income and they may, by their actions, be required to pay certain other taxes imposed by chapter 42 of the Code. Organizations that fail to comply with any of the preceding requirements may be liable for the penalties provided by sections 6651 and 6652 of the Code if they are private foundations unless they have reasonable cause for such failure to comply. Therefore, it is necessary that organizations described in section 501(c)(3) of the Code know their foundation status under section 509 in order to determine their filing responsibilities and liability for the four percent excise tax and any other excise taxes that may be imposed on private foundations by chapter 42 of the Code.

Section 508(b) of the Code and Temporary Regulation 13.9 (relating to section 508(b)) provide, with certain exceptions, that an organization described in section 501(c)(3) will be presumed to be a private foundation unless it files notice with the Internal Revenue Service that it is not a private foundation within one year from the end of the month in which such organization was organized, or before the 90th day after final regulations under section 508(b) are filed with the Federal Register, whichever occurs later. Organizations may file such notice either by submitting a statement in connection with Form 1023, Application for Recognition of Exemption, claiming not to be a private foundation, or by filing a Form 4653, Notification Concerning Foundation Status, without admitting to being a private foundation. Some organizations have complied with the notice provision of section 508(b) but are still uncertain of their foundation status because they have not received a determination of foundation status from the Service.

Revenue Procedure 71-41, C.B. 1971-2, 577, provided temporary relief from the penalty provisions of sections 6651, 6652, and 6685 of the Code for certain organizations awaiting publication of regulations under section 509(a) or section 170(b)(1)(A) to help them determine their filing requirements under sections 6033, 6056, 6104 and 6151. This Revenue Procedure extends and clarifies those relief provisions without regard to publication of regulations.

Sec. 3. Instructions

To the extent provided below, an organization that is in fact a private foundation will be deemed to have reasonable cause for failure to comply with the private foundation requirements of sections 6011, 6033, 6056, 6104, and 6151 of the Code for filing of returns and payment of taxes until ninety days after it is issued a letter containing a determination of foundation status from the Service. Consequently, it will not be subject to the penalty provisions of sections 6651 and 6652 of the Code for this period.

This relief will only apply to a taxable year for which, prior to the due date for filing Form 990, the organization has filed notice (either by submitting a statement in connection with Form 1023, Application for Recognition of Exemption, claiming not to be a private foundation, or by filing a Form 4653, Notification Concerning Foundation Status, without admitting to being a private foundation), and will continue for subsequent years until 90 days after the date of the letter containing the determination of foundation status. However the relief will not apply to such returns and schedules that would be required of the organization whether or not it was a private foundation.

Within ninety days after the date of the letter containing the determination of foundation status, an organization that is in fact a private foundation must comply with all the pertinent requirements of sections 6011, 6033, 6056, 6104 and 6151 of the Code for all prior years and pay all taxes due, with interest as provided by law. It must also attach a statement to the returns that explains the basis for reasonable cause and cites this Revenue Procedure. This statement, together with the late returns, must be submitted to the Philadelphia Service Center, 11601 Roosevelt Boulevard, Philadelphia, Pennsylvania 19155, within the prescribed time period.

Sec. 4. Effect on Other Documents

This Revenue Procedure supersedes Revenue Procedure 71-41, C.B. 1971-2, 577.

¹ Also released as Technical Information Release 1172, dated May 12, 1972.