The IRS has issued final regulations that establish an obligation of any organization which has an employer identification number (EIN) to provide updated information to the IRS regarding changes in the organization’s address or “responsible party” (defined below). The final regulations are applicable as of January 1, 2014. The IRS has implemented this new requirement by updating the instructions to Form 8822-B, Change of Address or Responsible Party – Business, as follows:
Beginning January 1, 2014, any entity with an EIN must file Form 8822-B to report the latest change to its responsible party. Form 8822-B must be filed within 60 days of the change. If the change in the identity of your responsible party occurred before 2014, and you have not previously notified the IRS of the change, file Form 8822-B before March 1, 2014, reporting only the most recent change.
The Form 8822-B instructions define the term “responsible party” for tax-exempt organizations as follows:
“Responsible party” is the person who has a level of control over, or entitlement to, the funds or assets in the entity that, as a practical matter, enables the individual, directly or indirectly, to control, manage, or direct the entity and the disposition of its funds and assets. The ability to fund the entity or the entitlement to the property of the entity alone, however, without any corresponding authority to control, manage, or direct the entity (such as in the case of a minor child beneficiary), does not cause the individual to be a responsible party.
IRS Publication 1635, Employer Identification Number, Understanding your EIN, indicates that, for an exempt organization, “the name and SSN or ITIN of a responsible and duly authorized member or officer of the exempt organization” should be listed as the “responsible party” when applying for an EIN. (Presumably, this same definition would apply in connection with the completion of the Form 8822-B.)
There has been some confusion regarding whether organizations that obtained their EIN prior to January of 2010 and/or that file an annual Form 990 are required to file a Form 8822-B to notify the IRS of their current “responsible party.” The confusion stems from the fact that, prior to 2010, the IRS did not require a “responsible party” to be listed on the application for an EIN, but rather required the “principal officer” to be listed. Therefore, an organization which obtained its EIN before 2010 likely does not have a “responsible party” on file with the IRS. In addition, exempt organizations that file Form 990 may utilize that form to notify the IRS of a change in address and must list the name and address of the “principal officer” of the organization on page 1 of the Form 990. However, the Form 990 does not specifically ask for the name of the “responsible party” to be listed, nor does it require that the social security number of the principal officer be listed. Therefore, it is unclear as to whether the information provided on Form 990 regarding the address and principal officer of the organization satisfies the requirement to provide the IRS with updated information about the organization’s address and responsible party as required under the new regulations.
Our firm contacted an attorney in the IRS’ Office of the Associate Chief Counsel (Procedure and Administration), the office responsible for drafting and issuing the new regulation, to clarify this issue. The IRS attorney stated that it is the IRS’ position that there is no exemption from the Form 8822-B filing requirement for “legacy” entities which obtained their EINs prior to the IRS’ requirement to list a “responsible party.” The IRS therefore believes that such organizations should now file the Form 8822-B so that the IRS’ records can be updated to reflect the current responsible party. Current authoritative guidance does not clearly support the IRS’ position as stated by the IRS attorney.
Based on the above, we believe that if the party that an organization considers its “responsible party” has changed and/or if an organization wishes to register a specific person as such (having not done so previously), filing Form 8822-B is advisable. The form is also used to report a change of mailing address or business location. Notifying the IRS of a change in mailing address or business location is essential.
There are no penalties for failure to file Form 8822-B notifying the IRS of a change in responsible party or a change in address, or for failure to do so within a particular timeframe. The primary risk associated with not having appropriate information on file with the IRS regarding a “responsible party” is the risk that an appropriate official of the organization may not receive important notices from the IRS. For most organizations, such a risk is very low, assuming the notices are sent to the organization’s correct address. Of course, any organization should ensure that the IRS is notified in a timely manner of any change to its mailing address.