In our May 2014 blog post, "Introducing Form 1023-EZ," we provided an overview of the new streamlined three-page Form 1023-EZ, which the Internal Revenue Service (the "IRS") was set to introduce this summer for small charities seeking tax exemption. The IRS formally announced the Form 1023-EZ's introduction on July 1, 2014. Now that the form is live, we would like to highlight the following key updated points:
- In response to comments from tax practitioners, the IRS tightened the eligibility requirements. The Form is only available for use by organizations with annual gross receipts of $50,000 or less for the first three years (rather than $200,000 or less, as contemplated in the draft), and with less than $250,000 of assets (down from the $500,000 threshold contemplated in the draft).
- The Form must be filed online at the website, www.pay.gov.
- There is a $400 user fee.
- The filing organization must list the names, titles and mailing addresses of up to five officers, directors or trustees.
- The IRS has provided a worksheet in the Instructions that must be completed before filing the Form 1023-EZ (this is intended to help determine eligibility to use the Form).
- The Instructions provide that that "Submitting the application does not guarantee exemption will be recognized." Incomplete applications will be rejected, and the IRS reserves the right to contact the organization for more information. Moreover, the IRS notes that it "will select a statistically valid random sample of applications for pre-determination reviews, which may also result in requests for additional information." In May 2014, Sunita Lough, IRS TE/GE Commissioner, indicated that these "pre-determination reviews" were intended to help deter ineligible groups from applying for exemption using the Form.
- The Form 1023-EZ may only be utilized by certain groups seeking reinstatement after automatic revocation for failure to file three consecutive years of tax returns under Section 6033(j)(1) of the Internal Revenue Code—(1) groups eligible to file the Form 990-EZ or Form 990-N that are seeking reinstatement as of the revocation date within 15 months of revocation, and (2) groups seeking reinstatement as of the postmark date of the reinstatement application (see Sections 4 and 7 of Rev. Proc. 2014-11, available at http://www.irs.gov/pub/irs-drop/rp-14-11.pdf). Other automatically-revoked groups must continue to utilize the Form 1023 to seek reinstatement, as detailed in Rev. Proc. 2014-11.
Please click here to read the IRS's July 1, 2014 Press Release.
The new IRS Form 1023-EZ is now available online.
Additional information from the IRS about Form 1023-EZ can be found here.
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