Draft Form 1023-EZ - Streamlined exemption application 

April 29:  The IRS posted a draft version of Form 1023-EZ, Streamlined Application for Recognition of Exemption (as of April 23, 2014) and anticipates releasing a final version of Form 1023-EZ in mid to late summer of 2014.

Read the draft version of Form 1023-EZ [PDF 117 KB]


Although the IRS has not released draft instructions to Form 1023-EZ, a preliminary but incomplete draft of the instructions (as of February 10, 2014)—was submitted to OMB together with an earlier version of the draft form (download this version of the draft instructions).

Background

An entity seeking exemption from federal income tax as an organization described in section 501(c)(3) generally is required to apply to the IRS on Form 1023, Application for Recognition of Exemption. The IRS uses the information provided to determine if the applicant is exempt and whether the applicant is a public charity or a private foundation.


In an effort to provide an alternative in applying for recognition of exemption, the IRS developed the Form 1023-EZ as a shorter, less burdensome version of the 25-page Form 1023. This shorter form may be used if an organization meets specific criteria, as identified in the instructions to the form.


The IRS estimates that Form 1023-EZ will take approximately 14 hours to complete (as compared to the 101 hours it estimates for completion of Form 1023).

Form 1023-EZ

The draft version of Form 1023-EZ is a three-page application that simplifies the application process by limiting the questions asked to:


  • Identifying the organization (Part I), including the names and addresses of the organization’s officers, directors, and trustees
  • Defining the organization’s structure (Part II)
  • Inquiring about the organization’s specific activities (Part III)
  • Determining whether the organization is a public charity or private foundation (Part IV)

The February 2014 version of draft instructions strictly limit the types of organizations that can apply using the Form 1023-EZ and contain a 22-question eligibility worksheet for organizations to determine whether they can use Form 1023-EZ. Generally speaking, the organization must have (or project) gross receipts equal to or less than $200,000 and have total assets equal to or less than $500,000. Furthermore, the organization must qualify as a private foundation or a publicly supported public charity (i.e., described in sections 509(a)(1) and 170(b)(1)(A)(iv) or 170(b)(1)(A)(vi) or described in section 509(a)(2)).

Reinstatement of exempt status

Part V permits organizations whose exempt status was automatically revoked for failure to file required annual returns or notices for three consecutive years to use Form 1023-EZ to request reinstatement using the streamlined procedures under Rev. Proc. 2014-11, Section 4 or as of the postmark date of the application, as explained in Rev. Proc. 2014-11, Section 7. See TaxNewsFlash-Exempt Organizations (January 2, 2014).


Until the IRS releases instructions, it is unclear whether additional limitations would apply to an organization’s ability to use Form 1023-EZ to request reinstatement of its exempt status or how Part V interacts with the eligibility worksheet.



For more information, contact:


Rick Speizman, Partner-in-Charge of KPMG's Washington National Tax Exempt Organizations Tax group

+1 (202) 533-3084





©2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.


The KPMG logo and name are trademarks of KPMG International.


KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.


The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.


Direct comments, including requests for subscriptions, to us-kpmgwnt@kpmg.com.
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.

Share this

Share this

Subscribe

Current and future KPMG clients may subscribe to TaxNewsFlash email alerts.


Email your contact information.

Other TaxNewsFlash publications

TaxNewsFlash-Exempt Organizations by year