Overview
IRS Issues Guidance on Restructuring of Tax Exempt Entities
Under Revenue Procedure 2018-15, the IRS generally will not require a new exemption application from a domestic section 501(c) organization that changes its form or place of organization, obsoleting Revenue Rules 67-390 and 77-469. Under prior law, a new application for tax-exempt status generally was required when an organization went through certain restructuring transactions.
Under the revenue procedure, a new application generally will not be required when an organization that has already qualified as tax-exempt incorporates under the laws of a state, reincorporates under the laws of a different state, files articles of domestication under the laws of a different state, or merges with and into another corporation, so long as the surviving organization is a domestic business entity classified as a corporation that carries out the same purposes as the exempt organization that engaged in the corporate restructuring.
Certain exceptions apply. The restructuring organization must be in good standing with the state in which it was originally incorporated (or formed in the case of unincorporated associations). For a section 501(c)(3) organization, the articles of the surviving organization must continue to meet the organizational test. The rules do not apply if the surviving organization is a disregarded entity, limited liability company, partnership, or foreign business entity, or if the surviving organization obtains a new EIN.
The surviving organization must report the corporate restructuring on any required Form 990 for the applicable taxable year. In the case of a domestication or reincorporation in a different state, the surviving organization must also report a change of address.
IRS Issues Guidance on Qualified Opportunity Zones
Revenue Procedure 2018-16 provides guidance on Qualified Opportunity Zones (QOZs). Enacted as part of the 2017 tax legislation (Pub. L. No. 115-97), sections 1440Z-1 and 1400Z-2 generally allow deferral of gain on the sale of appreciated investments if the sales proceeds are invested in QOZs through “qualified opportunity funds” that are certified by the Department of Treasury’s Community Development Financial Institutions Fund. The revenue procedure provides government officials in states, US possessions, and the District of Columbia with procedures for nominating a census tract for designation as a QOZ.