SEC. 4. APPLICATION

.01 Exempt Organizations Automat- ically Excepted Under § 6033(e)(3). Organizations recognized by the Serv

.02 Member. For purposes of this revenue procedure, ‘‘member’’ is used in its broadest sense and is not limited to persons with voting rights in the organization.

.03 Treatment of Affiliated Organi- zations. For purposes of this revenue procedure, if more than one organization described in §§ 501(c)(4), 501(c)(5), or 501(c)(6) share a name, charter, historic affiliation or similar characteristics and coordinate their activities, all such organizations shall be treated as parts of a single organization. Only dues (or similar amounts) paid by persons other than the organizations treated as being parts of the single organization shall be considered for purposes of applying this revenue procedure. All annual dues payments made by each person outside the organizational structure to any organization within the single organization are considered for purposes of applying this revenue procedure to be paid to the single organization for a single membership. If, under this revenue procedure, the single organization is considered to meet the requirements of § 6033(e)(3), then all the organizations that are treated as parts of the single organization are considered to meet the requirements of § 6033(e)(3). For purposes of this revenue procedure, if organizations within the affiliated structure are on different taxable years, the organizations may base their calculations of annual dues on any single reasonable taxable year.

.04 Example of An Affiliated Orga- nization. A group of social welfare organizations, each of which is recognized by the Service as being described in § 501(c)(4), share a common name and work jointly to promote a single purpose. Each organization operates at either the national, state, or local level. Individuals and families that are interested in the purpose promoted by the organizations pay annual dues of $40 to one of the local organizations. The total amount of dues collected from individuals and families is $950x. Also, a number of corporations are members of the national organization and pay annual dues of $500 directly to it. The total amount of dues received from corporations is $50x. The organizations are linked by a structure that makes the local organizations members of the appropriate state organizations and of the national organization. Accordingly, each local organization transfers a portion of the dues it collects to the

392 1995–2 C.B.

appropriate state organization and another portion to the national organization as dues. These transfer amounts are significantly greater than $50. Because the organizations share a name and coordinate their activities, they are treated as parts of a single organization for purposes of determining whether they satisfy the requirements of § 6033(e)(3). Therefore, only the dues (or similar amounts) paid by persons other than the organizations treated as being parts of the single organization are considered for purposes of applying this revenue procedure. The total amount of annual dues paid by individuals and families at the $40 level is more than 90 percent of all annual dues paid to both the local affiliated organizations by individuals and families, and to the national organization by corporations. Therefore, the single organization satisfies the requirements of § 6033(e)(3), which means that all the affiliated local and state organizations, and the national organization, are each considered to have satisfied the requirements of § 6033(e)(3).

.05 Fifty Dollar Amount to be In- dexed for Inflation. The $50 amount for annual dues in section 4.02 will be increased for taxable years beginning after December 31, 1995, by a cost-ofliving adjustment under § 1(f)(3) of the Code, rounded to the next highest dollar.

.06 Establishing that an Organiza- tion is Described in § 6033(e)(3). Any exempt organization that is not treated as satisfying the requirements of § 6033(e)(3) under section 4 of this revenue procedure may still establish that it satisfies the requirements of § 6033(e)(3) by: (i) maintaining records establishing that 90 percent or more of the annual dues (or similar amounts) paid to the organization are not deductible without regard to § 162(e), and (ii) notifying the Service that it is described in § 6033(e)(3) on any Form 990 (Return of Organization Exempt From Income Tax) that it is required to file. Unless an organization complies with both of the above requirements, it will not have established to the satisfaction of the Service that it meets the requirements of section 6033(e)(3). Additionally, an organization may request a private letter ruling that substantially all the annual dues (or similar amounts) paid to the organization are not deductible, either directly or indirectly, without regard to § 162(e). To receive a favorable private letter ruling, the

organization must provide the Service with evidence establishing that 90 percent or more of all annual dues (or similar amounts) are not deductible, either directly or indirectly, without regard to § 162(e). If an organization receives a favorable private letter ruling, the Service will not contest the organization’s entitlement to exemption under § 6033(e)(3) for a subsequent year so long as the character of the organization’s membership is substantially similar to its membership at the time of the ruling. Ruling requests should be submitted to the Assistant Commissioner (Employee Plans and Exempt Organizations), Attention: CP:E:EO, Internal Revenue Service, P.O. Box 120, Ben Franklin Station, Washington, D.C. 20044, in accordance with Rev. Proc. 95–4, 1995–1 C.B. 397 (or as revised).

26 CFR 601.105: Examination of returns and claims for refund, credit, or abatement; determination of correct tax liability. (Also §§ 162, 501, 6033.)

Rev. Proc. 95–35A

Rev. Proc. 95–35, page 391, this Bulletin, clarifies the application of § 6033(e) to organizations exempt from taxation under § 501(a) of the Internal Revenue Code. In describing social welfare organizations recognized by the Service as exempt under § 501(c)(4) and agricultural and horticultural organizations recognized by the Service as exempt under § 501(c)(5) that are excepted from the requirements of § 6033(e), Rev. Proc. 95–35 inadvertently limited one of the exceptions to organizations that receive more than 90 percent of all annual dues (or similar amounts) from persons, families, or entities who each pay annual dues (or similar amounts) of less than $50. This revenue procedure modifies Rev. Proc. 95–35 by changing the amount of annual dues (or similar amounts) that may be received by such organizations without becoming subject to the requirements of § 6033(e) to $50 or less.

Section 4.02 of Rev. Proc. 95–35 is modified as follows: The phrase ‘‘less than $50’’ is replaced by ‘‘$50 or less’’.

EFFECT ON OTHER DOCUMENTS

Rev. Proc. 95–35 is modified.

26 CFR 601.105: Examination of returns and claims for refund, credit, or abatement; determination of correct tax liability. (Also Part I, § 42; 1.42–14.)

Rev. Proc. 95–36