Effective July 1, 2014, the Internal Revenue Service (IRS) released Revenue Procedure 2014-40, which sets forth the procedures used to apply for an issue determination letter under Section 501(c)(3) of the Internal Revenue Code using the new Form 1023-EZ, Streamlined Application for Recognition of Exemption. The new shorter exemption application form is designed to assist small charities with the tax-exempt application process.
The new form, which is only three pages long, may only be used by small nonprofits with $250,000 or less in assets and annual (or projected annual) gross receipts of $50,000 for three years. The IRS anticipates that Form 1023-EZ will speed up the approval process for smaller groups and free up resources to review applications from larger, more complex organizations, thus reducing the exempt application backlog. Approximately 70% of all applicants will qualify to use the new form.
Form 1023-EZ must be completed and filed online. An applicant organization must complete an eligibility checklist online before proceeding to the actual Form 1023-EZ. A $400 user fee is due at the time the online form is electronically submitted. Form 1023-EZ can be efiled and payment can be made at www.pay.gov. The instructions to the new form and a copy of the revenue procedure can be found on the IRS website at www.irs.gov/charities. The IRS will accept for processing a completed Form 1023-EZ from an eligible organization that has a Form 1023 pending with the IRS if the pending form has not yet been assigned for review.
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