The IRS has adopted as final regulations the proposed regulations issued in June of 2014 that allowed for a streamlined application for tax-exempt status under IRC §501(c)(3) in T.D. 9819. These same regulations were issued in 2014 as temporary regulations which, with the issuance of the same regulations in final form, are now withdrawn.
The streamlined application process takes place entirely online, with the organization filling in Form 1023-EZ online at http://www.pay.gov. As the IRS described the process in the preamble to the final regulations:
The Treasury Department and the IRS have considered how the process of meeting the notice requirement of section 508 in seeking recognition of tax-exempt status may be made more efficient for certain smaller organizations. The IRS developed Form 1023-EZ to provide a simplified application form that relies more heavily on attestations by the organization that it meets the section 501(c)(3) organizational and operational requirements, which are explained in the accompanying form instructions. The new form was made available for use by eligible small organizations in July 2014, following the issuance of the temporary regulations and a revenue procedure describing the streamlined application process. The streamlined application process generally allows eligible small organizations to receive IRS determinations of tax-exempt status more quickly and allows the IRS to focus resources on more complex exemption applications and on compliance programs. This Treasury decision adopts the 2014 proposed regulations by amending §§ 1.501(a)-1, 1.501(c)(3)-1, and 1.508-1 to authorize the continued use of the IRS’ streamlined process by eligible organizations to meet the notice requirements of section 508.
On July 2, 2014, final and temporary regulations (TD 9674) authorizing the Commissioner to adopt a streamlined application process that eligible organizations may use to apply for recognition of tax-exempt status under section 501(c)(3) were published in the Federal Register (79 FR 37630). The final and temporary regulations were effective and applicable on July 1, 2014. The 2014 final regulations removed and reserved certain paragraphs of the longstanding final regulations addressed by corresponding paragraphs of the new temporary regulations. Under the temporary regulations, the IRS instituted the streamlined application process on Form 1023-EZ, “Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code,” the detailed procedures for which have been provided in annual revenue procedures, most recently in Rev. Proc. 2017-5, 2017-1 IRB 230, and in the instructions for Form 1023-EZ.
Generally, the following organizations qualify to use the “streamlined” process (Rev. Proc. 2017-5, Section 6.05(1)):
- The organization has projected annual gross receipts of $50,000 or less in the current taxable year and the next 2 years;
- The organization had annual gross receipts of $50,000 or less in each of the past 3 years for which the organization was in existence; and
- The organization has total assets the fair market value of which does not exceed $250,000. For purposes of this eligibility requirement, a good faith estimate of the fair market value of the organization’s assets is sufficient.
However, even if an organization meets those requirements, the use of Form 1023-EZ will not be available for the following organizations. (Rev. Proc. 2017-5, Section 6.05(2))
- Organizations formed under the laws of a foreign country (United States territories and possessions are not considered foreign countries);
- Organizations that do not have a mailing address in the United States (territories and possessions are considered the United States for this purpose);
- Organizations that are successors to, or controlled by, an entity suspended under § 501(p) (suspension of tax-exempt status of terrorist organizations);
- Organizations that are not corporations, unincorporated associations, or trusts, such as a limited liability corporation (LLC);
- Organizations that are formed as for-profit entities or are successors to for-profit entities;
- Organizations that were previously revoked or that are successors to a previously revoked organization (other than an organization the tax-exempt status of which was automatically revoked for failure to file a Form 990 series return or notice for three consecutive years under § 6033(j));
- Churches or conventions or associations of churches described in § 170(b)(1)(A)(i);
- Schools, colleges, or universities described in § 170(b)(1)(A)(ii);
- Hospitals or medical research organizations described in § 170(b)(1)(A)(iii) or § 501(r)(2)(A)(i) (cooperative hospital service organizations described in § 501(e));
- Cooperative service organizations of operating educational organizations described in § 501(f);
- Qualified charitable risk pools described in § 501(n);
- Supporting organizations described in § 509(a)(3);
- Organizations that have as a substantial purpose providing assistance to individuals through credit counseling activities such as budgeting, personal finance, financial literacy, mortgage foreclosure assistance, or other consumer credit areas;
- Organizations that invest, or intend to invest, five percent or more of their total assets in securities or funds that are not publicly traded;
- Organizations that participate, or intend to participate, in partnerships (including entities or arrangements treated as partnerships for Federal tax purposes) in which they share profits and losses with partners other than § 501(c)(3) organizations;
- Organizations that sell, or intend to sell, carbon credits or carbon offsets;
- Health Maintenance Organizations (HMOs);
- Accountable Care Organizations (ACOs), or organizations that engage in, or intend to engage in, ACO activities (such as participation in the Medicare Shared Savings Program (MSSP) or in activities unrelated to the MSSP described in Notice 2011-20, 2011-16 I.R.B. 652);
- Organizations that maintain, or intend to maintain, one or more donor advised funds;
- Organizations that are organized and operated exclusively for testing for public safety and that are requesting a foundation classification under § 509(a)(4);
- Private operating foundations;
- Organizations that are applying for retroactive reinstatement of exemption under sections 5 or 6 of Rev. Proc. 2014–11, 2014–3 I.R.B. 411, after being automatically revoked (see the annual EO revenue procedure for additional information);
- Agricultural research organizations described in § 170(b)(1)(A)(ix); and
- Organizations that are currently or were previously exempt under another subsection of § 501(c).
The PDF versions of the Form 1023-EZ, made available for information purposes only but which cannot be directly filed with the agency, are provided below. Note that the actual submission of information must be online via http://www.pay.gov, along with the required payment. (Form 1023-EZ)