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).
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).
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