On July 1, 2014, the IRS released a final version of the Form
1023-EZ, a simplified application for tax-exempt status that may be
used by smaller organizations. This three-page form drastically
reduces the burden on smaller charities by permitting them to
attest that they meet the organizational and operational tests for
tax-exempt status.
The Form 1023-EZ must be filed electronically on the website
www.Pay.gov, and carries with it a reduced user fee of $400
(which also must be paid electronically on that website). Unlike
with the Form 1023, an organization is not required to provide any
of its organizational documents to the IRS. Also, the Form 1023-EZ
does not require a narrative description of an organization's
activities, nor does it require budgetary information as part of
the application. There is a streamlined approval process for an
organization that files a Form 1023-EZ, which means that
organization may receive its determination letter within a few
weeks.
In order to use the Form 1023-EZ, an organization must be
"eligible" -- meaning it must qualify after completing
the
eligibility worksheet. An organization that does not qualify on
the eligibility worksheet must file a full Form 1023 in order to
apply for tax-exempt status. Even if an organization is eligible to
file the simplified form, it may decide to file the full Form 1023
in any event, in order to provide additional information to the IRS
for consideration in making a determination of tax-exempt status,
such as detailed budgetary information or a description of
potential future activities.
The IRS has promised to shift its attention to the "back
end" for entities that have opted to file the Form 1023-EZ,
and has suggested it will engage in more audits of such entities
once the entities are operational. It is yet to be seen, however,
whether the IRS will be able to divert the resources that will be
necessary, especially with the likely large increase in
applications for tax-exempt status now that the Form 1023-EZ is
available.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
