Big Changes Ahead for the Exemption Application Form 1023?

April 24, 2014 Posted by Jessica Shofler in IRS, News, Nonprofits

Recently, the IRSForm 1023 drafted a vastly simplified version of the exemption application, called Form 1023-EZ. In comparison to the 101 hours estimated by the IRS to complete the Form 1023, the IRS estimates that the Form 1023-EZ will take only approximately 14 hours. The 1023-EZ doesn’t require a narrative description of activities. It also doesn’t require budget information.

But the shorter and less burdensome version of the Form 1023 is intended only to be used if an organization meets specific criteria. Among other criteria, the draft instructions limit use of the form to organizations with annual revenues of less than $200,000 and assets of less than $500,000. It cannot be used by organizations that have been previously revoked by the IRS or organizations that are successors to revoked organizations (unless revocation is due to failure to file Forms 990). It cannot be used by churches, hospitals, or schools.

The simplified form certainly has the potential to lessen the ever-increasing backlog at the IRS for reviewing exemption applications, but will it increase fraud? The IRS will have trouble identifying ineligible organizations. There will be less of an opportunity for professionals to educate their clients about the federal laws regulating exempt organizations.

Late last month, the draft Form 1023-EZ was submitted to the Office of Management and Budget for review under the Paperwork Reduction Act.

If you have any comments about the form, they should be submitted on or before April 30 to be sure they are heard. And let us know what you think about the proposed form in the below comments section!

NOTE: The information contained herein is not intended to be legal advice and the reader should know that no Attorney-Client relationship or privilege is formed by the posting or reading of this article which is also not intended to solicit business.

Casey Summar, Partner, The Law Firm for Non-Profits,1812 W Burbank Blvd, #7445, Burbank, CA 91506

Comments are closed.