By Katherine B. Miller, Esq.
For years, I have represented small non-profit organizations as they have struggled with an unwieldy form to apply to the IRS for recognition of tax exempt status. This application process is necessary for organizations to be deemed tax exempt pursuant to Internal Revenue Code Section 501(c)(3) (for charities) and the other subsections, such as 501(c)(4) for social welfare organizations. Currently, there is only one IRS form, Form 1023, which is used by large, well-heeled private foundations and the smallest, local organizations alike.
For small, struggling non-profits, the same form is also required for reinstatement, if the organization’s tax exempt status is revoked by the IRS for failure to file the appropriate documents with the IRS for three years in a row. For those organizations, completing the whole application a second time can be a real hurdle.
Now, the IRS has announced it has a draft Form 1023-EZ, just like other “EZ” tax forms, to make it easier for small organizations. The draft form should be available on the IRS website shortly, www.irs.gov
Not only will this make it easier for small organizations to be recognized as tax exempt by the IRS in the first place, it will provide a streamlined process for applying for reinstatement, should the organization’s tax exempt status be revoked by the IRS for failure to file annual reports. This should be a real improvement for small organizations, and should allow more of their dollars to go to their tax exempt purposes instead of towards paperwork. Now that’s what I call good news!