Good news for those of you starting new exempt organizations: the IRS just released a new form, called the 1023-EZ, which will make applying for tax-exempt status for some smaller organizations much easier. The new form is only three pages long, compared to the lengthy 26 page standard 1023 form. The simplified form will substantially reduce the legal expense of starting a 501(c)(3) and hopefully speed up the IRS approval process.
The IRS hopes that simplifying the approval process for smaller organizations will also reduce delays for larger organizations by freeing up more resources to review the lengthier applications. Currently, the IRS has more than 60,000 501(c)(3) applications in its backlog, with many of them pending for nine months or longer.
The IRS estimates that as many as 70 percent of all applicants will qualify to use the new 1023-EZ. Most organizations with gross receipts of $50,000 or less and assets of $250,000 or less are eligible.
However, the new application processes is still not without complications. For example, you will still have to decide whether your organization will be a public charity or private foundation. Further, certain types of organizations, such as churches, are categorically excluded from using the new form, even if they are small in size.
Therefore, it is still important that you confer with an attorney who can help determine if you qualify to use the 1023-EZ and to help you make other important decisions related to your non-profit organization. If you need assistance in this area, one of our business attorneys would be happy to assist you.
Thanks to our law clerk, Kelsey O’Gorman, who assisted in the post.