Louis E. Michelson, A Professional Corporation

Providing Legal and Tax Advisory Services to Nonprofit Organizations

Streamlined Exemption Application – Being Considered

April 18th, 2014 · No Comments · private inuremenet, tax exemption

Currently the only way to obtain recognition of 501(c)(3) status is to apply for tax-exemption using IRS Form 1023. The key word is “currently.”

A new streamlined application was drafted by the IRS and is being considered for use by small organizations. It was submitted to the Office of Management and Budget for review under the Paperwork Reduction Act. The comment period ends on April 30, 2014. See the following link if interested in commenting.

What makes this application process appealing?

– The application is 2 pages long (not the basic 12 pages, and as many as 25 pages)

– Checking a series of boxes to describe the organization in general terms and attesting that the new charity will comply with the basic 501(c)(3) requirements (does not require a narrative description of activities)

– No budget information is required.

What could possibly be wrong with this proposed form and proposed process?

-New organizations may have little understanding of the rules that charities need to live within. These rules include: prohibition on private inurement, private benefit rules, unrelated business taxable income and commerciality doctrine.

-It may increase the culture of non-compliance that exists among smaller nonprofit organizations.

If you are interested in the proposed Form 1023-EZ (which can NOT be used currently) see the following link. If interested in the proposed instructions for this form, see the following link.

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