IRS Introduces Short-Form 1023 for Obtaining Recognition of 501(c)(3) Status

Written by: Matthew J. Snyder, Esq.

The Internal Revenue Service has recently released a streamlined version of its Form 1023, which non-profit organizations use to apply for recognition of status as a 501(c)(3) organization. The “1023-EZ” is a mere 3 pages long compared to the standard Form 1023’s 26 pages. The purpose of the 1023-EZ is to make the application process easier for small non-profits, to lessen the administrative review burden on the IRS, and to free up valuable IRS resources to devote to examining applications from large, complex non-profits using the standard form.

Included in the 1023-EZ instructions is a 7-page “Form 1023-EZ Eligibility Worksheet” that an organization can use to determine whether it qualifies to use the short form. For instance, an organization may not use the 1023-EZ if its gross receipts for the past 3 years have exceeded $50,000, or if the non-profit reasonably expects its gross receipts for the next 3 years to exceed $50,000. Similarly, if the non-profit has total assets that exceed $250,000, then the organization will not qualify to use the short form. If the organization cannot use the 1023-EZ, it must use the standard 1023 form, however, the threshold requirements should permit the majority of small start-up non-profits to use the short form.

In addition to being a much shorter form, the 1023-EZ filing requirements are much less burdensome on the applicant. Unlike the standard Form 1023, a 1023-EZ applicant does not need to provide copies of its organizational documents, such as its Articles of Agreement and Bylaws, nor must it provide a narrative description of the non-profit’s activities or a copy of its conflict of interest policy. To a large extent, the 1023-EZ requires the applicant to self-certify that the relevant documents exist and policies have been adopted, and that the organization will comply with IRS requirements.

As if to underscore the government’s intent to streamline the filing process, the 1023-EZ can only be filed online. The application fee for all Form 1023-EZ applicants is $400, which is the same as the fee that is paid by small organizations that use the long form.

The IRS’ press release on the 1023-EZ can be found here: http://www.irs.gov/uac/Newsroom/New-1023-EZ-Form-Makes-Applying-for-501c3Tax-Exempt-Status-Easier-Most-Charities-Qualify

A copy of the 1023-EZ instructions (and eligibility worksheet) can be found here: http://www.irs.gov/file_source/pub/irs-pdf/i1023ez.pdf

Bottom line:
Most start-up non-profits should be able to qualify for use of the Form 1023-EZ. The short form will save time and expense for these entities, freeing up scarce resources to devote to their non-profit missions. In theory, the streamlined 1023-EZ application process should also result in quicker IRS review times and shorter waits for small non-profits to receive their 501(c)(3) determination letters.

The attorneys at Sulloway & Hollis, P.L.L.C. represent all types of non-profit organizations throughout the State of New Hampshire. Our representation includes all areas of law applicable to the creation and operation of non-profits, including formation and governance, compliance and taxation, and fundraising and contracts, among others. If you would like more information about the new IRS Form 1023-EZ, or are a new or existing New Hampshire non-profit interested in applying for tax-exempt status, please contact Matthew Snyder at msnyder@sulloway.com, or Peter Imse, Chair of the firm’s Real Estate, Development and Environmental Group, at pimse@sulloway.com.