On April 17, 2025, the IRS issued Notice 2025-23, announcing its intent to publish a notice of proposed rulemaking (NPRM) suggesting the removal of a set of rules that previously designated certain partnership-related basis-shifting transactions as transactions of interest (TOIs). It also includes withdrawing Notice 2024-52. This change provides immediate penalty relief for disclosures on Forms 8886 and 8918, but for most NATP members, it’s unlikely to change your day-to-day work.

Potential impacts

The IRS and Treasury intend to remove Reg. §1.6011-18. These regulations identified certain partnership-related party basis adjustment transactions as TOIs and subject to rules for reportable transactions. These identified transactions typically involved transactions within partnerships where one partner’s basis in property increased without a corresponding income recognition, involving related parties. These rules looked especially hard at transactions designed to create mismatches or distort tax attributes. To be subject to the rules, the basis increase must exceed $10 million for 2025 or $25 million for tax years before 2025 and during the six-year lookback period.

Examples include:

• Property distributed to a related partner that triggers a §734(b) adjustment
• Property distributed to a related partner whose basis in the property is increased under §732(b)
• Those electing basis increases under §732(d) within two years
• A transfer of partnership interest to a related party that triggers a §743(b) adjustment

Examples of these transactions can be found in the regulations the IRS and Treasury intend to remove.

Because of dollar amount thresholds in place that trigger the reporting requirement, most NATP members were not impacted by the original disclosure requirement.

Current impacts

Notice 2025-23 provides relief by waiving penalties under:

• Section 6707A(a) for participants in these transactions
• Sections 6707(a) and §6708 for material advisors

IRS Notice 2024-54, which outlined proposed additional regulations on these transactions, has been withdrawn.

What you should do

If your client base includes partnerships with low-valued assets, or none at all, you likely don’t need to take any action.

If you serve partnership clients impacted by, or have been preparing disclosures under the current TOI rules, you can now rely on Notice 2025-23. This means:

• You may pause those disclosures
• Penalties related to those transactions are no longer applicable
• Continue maintaining documentation in case future guidance is issued

NATP perspective

While this change represents a notable policy shift at the IRS level, it does not represent a major development for the vast majority of NATP members. However, we will continue to monitor whether the IRS will reintroduce new guidance in the future and keep you informed.

As always, NATP is here to support you with insight and clarity on regulatory changes, whether widespread or niche.

Question: An unmarried individual, Samantha, filed her income tax return for 2024 on April 11. Samantha’s adjusted gross income (AGI) was $5,000 and had no federal income tax liability. She had $180 of income tax withheld during 2024. Samantha estimates that she will have approximately the same amount of AGI for 2025 and no income tax liability. On April 25, Samantha started a new job and believes she was exempt from federal tax withholding. Is she correct?

Answer: Yes, she is correct.

An individual may claim an exemption from federal income tax withholding in the current calendar year under the following conditions:

1. Had no federal income tax liability in the preceding calendar year, and
2. Anticipate having no federal income tax liability in the current calendar year [§3402(n)]

As long as Samantha meets these two conditions, she is exempt from the withholding and will have no income tax withheld from her paycheck.

To claim exemption from withholding, she should write “Exempt” on Form W-4, Employee’s Withholding Certificate, in the space below Step 4(c). Then, complete Steps 1(a), 1(b), and 5. Do not complete any other steps.

Nonprofit organizations are vital to our communities, and tax professionals are indispensable advisors to them. Although many nonprofits enjoy tax-exempt status, they still often must file annual information returns with the IRS.

Whether you’re advising these organizations as a tax professional or working within one, staying ahead of due dates and understanding key items is crucial. We will explore the filing deadlines, key items of interest and best practices for working with nonprofit organizations.

Filing deadlines

One of the primary responsibilities of tax professionals working with nonprofits is managing deadlines. Nonprofits have specific filing requirements and due dates that vary based on their year-end.

Form 990 filing deadline:

For most tax-exempt organizations operating on a calendar year, Form 990 is typically due by May 15. Which Form 990 an organization needs to file generally depends on its financial activity. For those on a fiscal year, the deadline falls on the 15th day of the fifth month after the close of the fiscal year. Timely submission is crucial to avoid penalties and maintain tax-exempt status.

Which Form 990 do exempt organizations file?
Status	Form to file
Annual gross receipts normally ≤ 50,000	990-N (e-Postcard) Organizations eligible to file the e-Postcard may choose to file a: 990, Return of Organization Exempt from Income Tax or 990-EZ, Short Form Return of Organization Exempt from Income Tax
Annual gross receipts < $200,000, and total assets < $500,000	990-EZ or 990
Annual gross receipts ≥ $200,000, or total assets ≥ $500,000	990
Private foundation – regardless of financial status	990-PF, Return of Private Foundation

Extensions and exceptions

An extension can be requested if a nonprofit needs more time to file. Form 990, 990-EZ, 990-PF and 990-N are due on the 15th day of the fifth month after the organization’s year-end (May 15 for calendar year organizations). A six-month automatic extension of time can be granted by filing Form 8868, Application for Extension of Time To File an Exempt Organization Return. Form 990-N is not eligible for an extension of time to file.

However, it’s important to note that an extension for filing does not extend the time to pay any taxes due. Tax professionals should ensure clients understand the extension process and its associated implications.

Key items of interest for tax professionals

Beyond deadlines, several specific issues require careful attention when advising nonprofit organizations.

Maintaining tax-exempt status

• IRS compliance requirements: Nonprofits must adhere to strict IRS guidelines. This includes operating exclusively for exempt purposes and avoiding excessive political or lobbying activities. Regularly reviewing organizational activities helps ensure compliance and minimizes the risks of revocation.

• Documentation and record keeping: Thorough documentation of activities, donations and expenditures is essential for compliance and critical in the event of an audit. Tax professionals should advise nonprofits on best practices for maintaining records that support their IRS filings and organizational missions.

Unrelated business income (UBI)

UBI is income from activities unrelated to the organization’s core exempt purpose is subject to taxation. Tax professionals need to work closely with nonprofits to identify any potential UBI, calculate the tax correctly and understand any applicable deductions.

Generally, unrelated business taxable income (UBTI) is gross income from a trade or business, regularly carried on, less the deductions allowed, which are directly connected with the trade or business but not substantially related to the organization’s exempt purpose.

An exempt organization with $1,000 or more of gross income from an unrelated business must file Form 990-T, Exempt Organization Business Income Tax Return (and proxy tax under section 6033(e). If the organization expects its annual tax to be $500 or more, quarterly estimated tax must also be paid. Form 990-W, Estimated Tax on Unrelated Business Taxable Income for Tax-Exempt Organizations, is the worksheet that can be used to calculate the amount of estimated tax payments required. The requirement to file Form 990-T is in addition to the obligation to file the annual information return.

Risk management

Engaging in unrelated business activities can jeopardize a nonprofit’s tax-exempt status if they become a substantial part of its overall operations. Regular assessments and strategic planning can help mitigate these risks.

Donor contributions and fundraising compliance

• Acknowledgment requirements: Nonprofits must provide proper documentation for donations, which is essential for donor tax deductions and compliance. Tax professionals can assist in establishing systems to track contributions accurately and issue timely acknowledgment letters.

• IRS reporting standards: Fundraising activities must be reported accurately on tax forms. Ensuring that all fundraising events are recorded correctly is a critical area of focus.

Best practices for tax professionals

• Develop a comprehensive tax calendar

  Maintain a detailed calendar of all federal, state, and local filing deadlines. This includes Form 990, payroll taxes, UBI filings, and other required filings.

• Conduct regular reviews

  Periodically review the nonprofit’s activities and financial records to ensure ongoing compliance. Internal audits can help identify issues early, preventing potential complications during an IRS audit.

• Educate and communicate

  Ensure that the nonprofit board and staff understand the importance of timely and accurate tax filings. Clear communication can foster a culture of compliance and make it easier to implement necessary changes.

• Invest in training and technology

  Utilize the latest accounting software and invest in regular training to stay current with evolving tax laws and compliance requirements. A well-informed team can prevent costly mistakes and safeguard the organization’s tax-exempt status.

Tax professionals can call the IRS Tax Exempt and Government Entities Customer Account Services at 877-829-5500 (toll-free number) for answers to questions about charities and other non-profit organizations.

For more information on this topic, check out our Preparing Form 990 for Tax Exempt Organizations On-Demand Webinar.