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Easier Path to Become a 501(c)(3)? IRS Releases New Form

by Molly O'Connell

In follow-up to this article, we share this Nonprofit Quarterly piece that reports on the impacts of the new form after its first two years, and comments on whether there has been an over-correction by the IRS in streamlining this process.

Many small nonprofit have been frustrated (dismayed, discouraged) by long delays in processing applications for tax-exemption. On July 1, 2014 the Internal Revenue Service introduced a new, shorter (3 pages as opposed to 26) application form, Form 1023-EZ, to help small charities apply for 501(c)(3) tax-exempt status more easily.

The intention is that this streamlined form will speed the approval process for smaller groups and free up resources to review applications from larger, more complex organizations while reducing the application backlog.

During the comment period prior to the release of the new form, individuals and groups weighed in to urge the IRS to ensure this shorter form would not encourage fraud and abuse of nonprofit status.  The IRS responded by making several changes, including lowering the annual gross receipts threshold, that will help safe guard the sector and the public. Time will tell if these adjustments will fully address concerns.

Most organizations with annual gross receipts of $50,000 or less and assets of $250,000 or less are eligible.  The new 1023-EZ form must be filed on, accompanied by a $250 user fee (originally 400). The instructions include an eligibility checklist.

Organizations whose tax-exempt status was automatically revoked for failure to file are eligible to use the new 1023-EZ form (presuming other criteria does not disqualify them.)

If you are interested in starting a Maine nonprofit, don’t miss the starting a nonprofit section of our website, which includes a recommended start-up checklist and FAQs about the process.

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