The IRS Just Made it Easier for Non-Profits to Achieve Tax-Exempt Status

In July, the IRS released Form 1023-EZ, which is a new, short-form (3 pages!) application for recognition of exemption from taxation.  The old Form 1023 is not going anywhere, but the new form allows for faster application by small non-profits that meet certain criteria.  Below is a summary of the requirements necessary to use the form:

  1. Income and Asset Limits.  An organization cannot have assets greater than $250,000 and annual gross receipts [1] greater than $50,000. 
     
  2. Required Information.  Form 1023-EZ requires only the most basic information about the applying organization, including contact information for the organization, officers, and directors; incorporation information; and general information about its activities.
     
  3. Ineligible Organizations.  Some organizations are categorically excluded from using Form 1023-EZ.  Excluded organizations generally include:
    1. Churches,
    2. Educational institutions,
    3. Supporting organizations,
    4. Organization planning to use certain financial arrangements (e.g. investing in hedge funds, participating in joint ventures, sharing profits and losses with non-501(c)(3) organizations),
    5. HMOs,
    6. Foreign organizations,
    7. Private operating foundations, and
    8. Organizations whose exemption has been revoked (for reasons other than failure to file Form 990).

Form 1023-EZ is much shorter and easier to complete, allowing small non-profits to economically achieve tax-exempt status by the IRS and avoid the burdensome disclosures required by the old form.

To learn more about how these changes affect your non-profit, please contact your Day Ketterer Non-Profit Attorney at 330-455-0173 or via email at mhochstetler@dayketterer.com.


1. In any of the last three years, the current year, or the next two years.