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Non-Profit Organizations

Things you should consider before filing Form 1023-EZ

By February 16, 2015No Comments

Form 1023-EZ is a fairly new streamlined version of Form 1023, Application for Recognition Under Section 501(c)(3), which only certain organizations can be eligible to file and must be filed electronically. You can find the eligibility requirements by visiting the link at the bottom of this article. As an organization seeking tax-exempt status you should consider whether to file Form 1023-EZ or Form 1023 for a few reasons. Sure, Form 1023-EZ may be a quicker, easier way to obtain tax-exempt status, but there are some things you should be aware of as a filer.

Unlike Form 1023, Form 1023-EZ will require the filer to attest at a “will” level to certain legal representations including if the organization is organized and operated exclusively to further one or more exempt purposes, does not further nonexempt purposes, and is not organized or operated for the primary purpose of conducting trade or a business unrelated to the exempt purpose. If the organization does not feel fully confident with the answers to these questions, Form 1023 should be filed instead. Filing Form 1023 allows the filer to “test” its qualifications and present full disclosure of the organization’s intentions of operations so that the IRS can determine if the organization qualifies for tax-exempt status.

A private foundation should be concerned about the determination letter issued from filing Form 1023-EZ. The private foundation may not be able to accurately determine whether an incorrect attestation was made on the application. Therefore, Form 1023 may be preferred so that the IRS can provide an in-depth review and allow the IRS to determine the correct status. With recent comments from the National Association of State Charity Officials, filing Form 1023-EZ may be seen as a red flag by state regulators due to the belief that the form may increase opportunity for fraud.

The points listed above are just a few reasons a filer should consider filing Form 1023-EZ versus Form 1023.

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