On July 1, 2014, the IRS released the final version of Form 1023-EZ, Streamlined Application for Recognition of Exemption under Section 501(c)(3). This alternative three-page form offers a much simpler process for an organization applying for exemption from federal tax under Section 501(c)(3) compared to the existing 26-page Form 1023.
Only eligible organizations may use Form 1023-EZ. Eligibility to file Form 1023-EZ is limited to certain organizations with annual gross receipts of no more than $50,000 for the past three years and next three years as well as total assets of no more than $250,000. In addition, certain types of organizations (e.g., supporting organizations, controlled organizations, sponsoring organizations that maintain donor advised funds, hospitals, schools, colleges, universities, churches, and foreign organizations) may not be eligible to file Form 1023-EZ. The instructions include an eligibility worksheet questionnaire designed to help organizations determine filing eligibility.
The IRS will only accept electronic submissions of the Form 1023-EZ application. The IRS believes the new Form 1023-EZ and the recently released interactive version of Form 1023 will collectively improve its efficiency in processing exempt applications. The IRS intends to process new exempt applications within 9-month timelines by the end of 2014.
Generally, a favorable determination on an organization’s application for exemption may relate back to the organization’s legal formation date if timely filed within 27 months of that formation date. An organization must consider and fulfill its annual reporting obligations while an application is either being prepared or pending with the IRS.
By Mike West, CPA, JD, Senior Manager, mwest@legacycpas.com
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