A Welcome Break on the Fee for 1023-EZ Application for Tax Exempt Status

Effective July 1, 2016, the application fee for filing the Form 1023EZ has been lowered to $275. The old fee was $400. That’s a savings of $125, and is a welcome relief to small nonprofits applying for tax exempt status.

The new streamlined Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, was introduced by the IRS in 2014 to provide relief for small nonprofits applying for tax exempt status from having to complete the full Form 1023, Application for Recognition of Exemption Under Section 501(c)(3). The full form is 26 pages long, and the IRS estimates it requires an average of 15 ½ hours to prepare, with 185 hours of other reading and record keeping; compared to 2 ½ pages and 5 ½ hours to prepare the EZ version, with an additional 12 ½ hours reading and record keeping. So the new 1023-EZ form is a winner when it comes to cutting down on paper work and time invested to comply with IRS requirements.

And customer satisfaction rates are way up for the IRS on the Streamlined EZ form compared to the regular long form.

Not every organization is eligible to complete the streamlined EZ form. Here is a summary of the not-so-short list of twenty-six points your organization needs to pass in order to qualify:

1. Gross receipts (estimated) will be less than $50,000 for each of the succeeding three years,
2. Did not exceed $50,000 in gross receipts in each of the past three years (if already operating),
3. Total assets valued at fair market value are less than $250,000,
4. Were formed under laws in the U.S. (States, territories and possessions),
5. Have a mailing address in the U.S. (States, territories and possessions),
6. Are not a successor to, or controlled by, an entity suspended as a terrorist organization,
7. Are organized as a corporation, unincorporated association, or a trust,
8. Are not a successor to a for-profit entity,
9. Are not a previously revoked organization, or a successor to a previously revoked organization, with the exception of a revocation due to not filing a Form 990 series form for three consecutive years,
10. Are not a church, convention or association of churches,
11. Are not a school, college or university,
12. Are not a hospital or medical research organization in conjunction with a hospital,
13. Are not a cooperative hospital service organization,
14. Are not a cooperative service organization of operating educational organizations,
15. Are not a charitable risk pool,
16. Are not going to be a supporting organization under section 509(a)(3),
17. Are not going to be providing credit counseling as a substantial part of your activities,
18. Plan to invest 5% or more of assets in securities or funds that are not publicly traded,
19. Do not plan to participate in partnerships in which losses would be shared with for profit entities,
20. Sell carbon credits or carbon offsets,
21. Are an HMO,
22. Are an Accountable Care Organization or engage in ACO activities,
23. Will maintain donor advised funds,
24. Organized and operated exclusively for testing for public safety,
25. A private operating foundation,
26. Applying for retroactive reinstatement of exemption after being automatically revoked.

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