Is Your Charity Eligible? IRS Makes Filing For Tax Exemption Easier.

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What is Form 1023-EZ?

On July 1, 2014, the Internal Revenue Service introduced a new, shorter application for smaller charities to apply for tax-exempt status under Section 501(c)(3) of the Internal Revenue Code.  This new form is designed to streamline the application process and provide for shorter delays in IRS processing of applications.  The IRS currently has a backlog of more than 60,000 applications which have been pending for as long as nine months.

Instead of the more burdensome 26 page application, the new Form 1023-EZ is a three page form that must be completed online.  The new Form 1023-EZ is more of a certification process and does not require the user to submit financial data or organizational documents.  The user fee for Form 1023-EZ is $400.

Eligibility Requirements.

Organizations with assets of less than $250,000 and annual gross receipts of less than $50,000 (and whose expected gross receipts will not exceed this threshold for the next two years) are eligible to use this form.  The IRS Revenue Procedure issued in connection with Form 1023-EZ lists other certain criteria that render an applicant ineligible to use the new form, including foreign organizations, successors to for-profit entities, churches, schools, colleges, universities, hospitals, supporting organizations described in IRC Section 509(a)(3), HMOs, ACOs, and entities maintaining donor-advised funds.  Even in light of these eligibility restrictions, the IRS estimates that 70 percent of organizations seeking tax exempt status will be eligible to use the new form. 

In order to receive tax exempt status from the date of formation of the tax-exempt entity, an organization seeking an exemption must complete the Form 1023-EZ within 27 months after the end of the month in which the entity was formed. 

Organizations with a Pending Form 1023. 

Organizations that have already filed a Form 1023 may submit a Form 1023-EZ if their Form 1023 has not been assigned to an IRS agent for review. In such cases, the original Form 1023 will be withdrawn and generally no refund of the user fee will be issued. If the Form 1023 has already been assigned to an IRS agent for review, the IRS will not accept the Form 1023-EZ.

Topics:  501(c)(3), Applications, Form 1023 EZ, IRC, IRS, Non-Profits

Published In: Nonprofits Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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