Form 1023-EZ Is Now Available for Filing

Earlier this week, the IRS rolled out the final (and fileable) version of Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, along with the applicable instructions. This is a very significant development. This form enables many small organizations to file for expedited and, in most cases, almost automatic approval of 501(c)(3) status.  (Previously, I wrote about the draft Form 1023-EZ and some of the negative reactions to its proposal.) 

Reading through the instructions and the IRS news release that accompanied the form’s issuance, I have the following initial reactions:

  • The form can be used only by organizations with assets of $250,000 or less and annual gross receipts of $50,000 or less. These amounts are reduced from the thresholds proposed in the draft form (assets of $500,000 or less and annual gross receipts of $200,000 or less.)  Thus, its relevance is mostly to relatively tiny organizations that are likely to be run entirely by volunteers.
  • The $50,000 gross receipts threshold cannot be exceeded in any of a new organization’s first three years.  This differs from the standard for eligibility to file a Form 990-N (e-Postcard), which is that the organization must have average gross receipts of $50,000 or less during the three years ending with the filing year.
  • As is the case with the 990-N, the 1023-EZ must be filed online (the site for the 1023-EZ is www.pay.gov.) There is a $400 user fee. Filers must complete an eligibility checklist (included in the 1023-EZ instructions), but that checklist does not get filed with the 1023-EZ.
  • An organization that has already filed a Form 1023 can now file a Form 1023-EZ, as long as the Form 1023 has not yet been assigned for review. This option might be very helpful to some organizations.
  • An organization may not request expedited handling of a Form 1023-EZ. It will be interesting to see how long it will typically take for the approval process when using a Form 1023-EZ.

I am sure that many practitioners are, like me, still skeptical about whether it is good policy to grant 501(c)(3) status with virtually no review, as will likely be the case with respect to most Form 1023-EZ applications.  Nonetheless, I hope that this new form does a good job serving the stated purpose of freeing up IRS resources for more valuable purposes than reviewing the applications of relatively tiny organizations.

 

E. Drew Cheney Posted By
E. Drew Cheney

Posted Under: Form 1023, Form 1023-EZ, Tax-exempt status

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