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

By:  Lauren B. Ades, Esquire               

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 In such cases, the original Form 1023 will be withdrawn and generally no refund of the user fee will be issued.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.

What You Should Do Now.

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If you or your organization would like more information on the Form 1023-EZ and eligibility requirements or assistance in filing for federal tax exemption, please contact Lauren B. Ades at 410-339-6742 or you can dial our main line at 410-938-8800.





This information is provided for general information only.  None of the information provided herein should be construed as providing legal advice or a separate attorney client relationship. Applicability of the legal principles discussed may differ substantially in individual situations. You should not act upon the information presented herein without consulting an attorney of your choice about your particular situation. While PK Law has taken reasonable efforts to insure the accuracy of this material, the accuracy cannot be guaranteed and PK Law makes no warranties or representations as to its accuracy.