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IRS Takes Steps to Simplify Tax-Exempt Applications

Organizations that have gone through the IRS’s application process for recognition of tax-exempt status know that it is a time-consuming and complex process. The current application, Form 1023, is lengthy, fraught with technical terms, and daunting for many small up-and-coming organizations. In addition, the IRS has been known take over one year to approve applications, which may prevent many organizations from obtaining needed donor contributions, grants and other funds.

In an effort to simplify the application process for those organizations with $500,000 or less in assets, $200,000 or less in gross receipts for the past two years, and no more than $200,000 of gross receipts projected over the next three years, the IRS has released a draft Form 1023-EZ. The current draft form can be found here.

While filing the Form 1023-EZ will still require technical tax knowledge and professional guidance, the 2 page form is a significant improvement of the current  20+ page application. Certain classes of organizations will not be able to use the new simplified form, including churches, schools, universities, certain hospitals and foreign organizations, among others.