The IRS has released a final Form 1023-EZ, along with instructions and a revenue procedure covering the form. The effort to develop a simplified application for 501(c)(3) status, which we discussed in a previous post, has garnered a lot of attention largely due to the application backlog at the IRS, where many organizations have been waiting for more than a year for any movement on their application.
The final form is just three pages long, and has a filing fee of $400. It can only be filed electronically on pay.gov. In order to be eligible to file the Form 1023-EZ, an organization must meet the following requirements:
- Projected annual gross receipts of $50,000 or less in the current tax year and the next two years;
- Annual gross receipts of $50,000 or less during the past three years; and
- Total assets of $250,000 or less.
In addition, even organizations that meet the above requirements will not be eligible to use the form based on their structure or activities. For example, the following organizations would still need to file a full Form 1023-EZ regardless of size:
- LLCs or partnerships;
- Successors to a for-profit entity;
- Churches or associations of churches;
- Schools, colleges or universities;
- Supporting organizations; and
- Sponsoring organizations of donor-advised funds. See Revenue Procedure 2014-40 for a full listing of ineligible entities.
The IRS predicts that about 70 percent of new applicants would be eligible to use the new form. Not everyone views this development as good news, however. Critics of the simpler form fear that it will shortchange applicants out of some of the educational process that accompanies preparing the longer form, which can inform them of obligations and restrictions related to tax-exempt status. In addition, some fear that it will be harder for the IRS to identify abusive organizations. But for many smaller organizations, this is a welcome change that could get them on track to accomplish their mission much sooner.