Relief for Small Non-Profit Organizations Seeking 501(c)(3) Status
Jun 16, 2015
Our firm has recently received a number of questions from non-profit organizations asking about the simpler method that the IRS now offers to apply for 501(c)(3) tax-exempt status. The fact is that there is now a streamlined Form 1023-EZ that can be used to apply for 501(c)(3) status, however, it doesn’t apply to all organizations.
Before July 1, 2014, the only way to apply for 501(c)(3) tax-exempt status was to complete Form 1023, which can be up to 26 pages long, depending on which schedules are applicable to the organization. Since July 1, 2014, there is an alternate 3 page online Form 1023-EZ application available to small nonprofit organizations meeting certain criteria. This new electronic application should help speed up the time it takes the IRS to process and approve the tax-exempt status requests.
The instructions for Form 1023-EZ include an eligibility questionnaire comprised of 26 yes or no questions. If the organization answers “yes” to any of the questions, the organization is not eligible to file the Form 1023-EZ. Some of the main factors which may disqualify organizations are
- if the organization projects annual gross receipts will exceed $50,000 in any of the next three years,
- the organization has had gross receipts exceeding $50,000 in any of the past three years, or3) the organization has total assets in excess of $250,000. Organizations that do not qualify to file Form 1023-EZ would use Form 1023.
- the organization has total assets in excess of $250,000. Organizations that do not qualify to file Form 1023-EZ would use Form 1023.
Organizations that do not qualify to file Form 1023-EZ would use Form 1023. If an organization qualifies to file the Form 1023-EZ, it must complete the form on www.pay.gov. The organization must have an Employer Identification Number and be a corporation, an unincorporated association or a trust. It also requires organizing documents (such as Articles of Incorporation, if a corporation) with a specific language required. A $400 fee is also required to be paid by the organization when filing the 1023-EZ that must be paid by a credit or debit card or automatic debit from a bank account.
By: Brent Ringenberg, CPA