rp-03-21.pdf

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Part III

Administrative, Procedural, and Miscellaneous

26 CFR 601.602: Forms and instructions. (Also, Part 1, Section 6033, 1.6033-2)

Rev. Proc. 2003-21

SECTION 1. PURPOSE

This revenue procedure supplements Rev. Proc. 83-23, 1983-1 C.B. 687, by relieving
certain United States possession organizations (other than private foundations) from the
requirement of having to file an annual information return on Form 990, Return of
Organization Exempt from Income Tax.
SEC. 2. BACKGROUND

.01 Section 6033(a)(1) of the Internal Revenue Code states that, with certain exceptions,
every organization exempt from taxation under section 501(a) shall file an annual
information return.
.02 Section 6033(a)(2)(B) of the Code provides that the Secretary may relieve any
organization from the requirement to file a return if the Secretary determines that such filing
is not necessary to the efficient administration of the internal revenue laws. Section 1.6033-
2(g)(6) of the Income Tax Regulations delegates this authority to the Commissioner.
.03 Rev. Proc. 83-23, 1983-1 C.B. 687, lists certain classes or groups of organizations
described in section 501(c) of the Code and exempt from tax under section 501(a) that are not
required to file an annual information return on Form 990. The list of organizations that are
not required to file an annual information returns includes, for tax years ending on or after
December 31, 1982, any organization (other than a private foundation) that normally has

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annual gross receipts of not more than $25,000. Rev. Proc. 94-17, 1994-1 C.B. 579, relieves
certain foreign organizations (other than private foundations) from the requirement to file an
annual return on Form 990. However, neither revenue procedure addresses organizations
formed in United States possessions. Further, these revenue procedures do not distinguish
between receipts from sources within the United States and from sources within United
States possessions.
.04 Sections 861 through 865 of the Code and the regulations thereunder describe what
types of income will be treated as income from sources within the United States.
.05 Section 7701(a)(9) of the Code defines “United States” when used in a geographical
sense as only the States and the District of Columbia.
.06 Section 7701(a)(30) of the Code defines “United States person” as a citizen or resident
of the United States, a domestic partnership, a domestic corporation, any estate that is not a
foreign estate (within the meaning of section 7701(a)(31) of the Code), or any trust if “(i) a
court within the United States is able to exercise primary supervision over the administration
of the trust, and (ii) one or more United States persons have the authority to control all
substantial decisions of the trust.”
.07 For purposes of this revenue procedure, a "United States possession organization" is
any organization created or organized in a possession of the United States.
.08 A number of organizations formed in United States possessions have asked the Service
for relief from filing Form 990 similar to the relief offered to foreign organizations. Because
they do not have more than $25,000 in receipts from United States sources and no significant
activity in the United States, the organizations believe the filing serves no useful purpose for
tax administration but imposes a significant burden on the affected organizations.

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SEC. 3. SCOPE
This revenue procedure applies to United States possession organizations exempt under
section 501(a) of the Code (other than private foundations) that normally do not have more
than $25,000 in annual gross receipts from sources within the United States and have no
significant activity in the United States. For purposes of the preceding sentence: (i) the tests
set forth in section 5 of Revenue Procedure 83-23 apply to determine whether the annual
gross receipts of an organization are not normally more than $25,000; (ii) an organization’s
gifts, grants, contributions and membership fees are considered to be from sources within the
United States only if they are received directly or indirectly from a United States person, as
defined in section 7701(a)(30) of the Code; for purposes of this provision, amounts received
from individuals who are bona fide residents of a United States possession will not be
considered to be from a United States person; and (iii) the source of an organization’s other
gross receipts is determined by applying rules provided in sections 861 through 865 of the
Code and the regulations thereunder (relating to the source of taxable income).
SEC. 4. PROCEDURE

.01 A United States possession organization (other than a private foundation) otherwise
required to file Form 990 will be relieved from the filing requirement for any year in which it
meets the following conditions:
(1) it normally does not receive more than $25,000 in gross receipts annually, as
defined in section 5 of Rev. Proc. 83-23, from: (i) gifts, grants, contributions and
membership fees received directly or indirectly from a United States person as defined in
section 7701(a)(30) of the Code; for purposes of this provision a United States person does
not include individuals who are bona fide residents of a United States possession; and (ii)

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other gross receipts from sources in the United States as determined under rules provided in
sections 861 through 865 of the Code and the regulations thereunder; and
(2) it has no significant activity in the United States, as "United States" is defined in
section 7701(a)(9) of the Code. For these purposes, the term “activity” includes lobbying
and political activity and the operation of a trade or business, but does not include investment
activity.
.02 If at any time an organization ceases to meet one or both of the conditions described in
section 4.01, the organization is required to file the annual information return for the year in
which it first ceased to qualify for relief under this procedure and for all subsequent years in
which the organization does not qualify.
SEC. 5. EFFECT ON OTHER DOCUMENTS

Rev. Proc. 83-23 is hereby supplemented.

SEC. 6. EFFECTIVE DATE

This revenue procedure applies for tax years ending on or after December 31, 2002.

SEC. 7. DRAFTING INFORMATION

The principal author of this revenue procedure is Mary Jo Salins of Exempt Organizations
Rulings and Agreements. For further information regarding this revenue procedure, contact
Ms. Salins at (202) 283-9453 (not a toll free number).