on Thursday, July 3, 2014 in Blog, Tax Planning & Consulting by

IRS has released Form 1023-EZ (Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code), detailed instructions to the form, and an equally detailed revenue procedure covering the form. Form 1023-EZ is generally available for U.S. organizations with assets of $250,000 or less and annual gross receipts of $50,000 or less.

RIA observation: Contemporaneous with the publication of the form, the instructions and Rev Proc 2014-40, IRS also promulgated temporary regs that amend existing regs to, among other things, permit the use of Form 1023-EZ. See  41 for more details.

  1. An organization is a tax-exempt organization under Code Sec. 501(c)(3) if it is organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition, or for the prevention of cruelty to children or animals. With limited exceptions, an organization must notify IRS that it’s applying for Code Sec. 501(c)(3) status. (Code Sec. 508(a), Reg. § 1.508-1(a)) Reg. § 1.508-1(a) describes the process for giving notice, and requires that an organization “submit… a properly completed and executed Form 1023, exemption application.” Reg. § 1.501(a)-1(b)(1)(iii) and Reg. § 1.501(c)(3)-1(b)(1)(v) state that an organization must, to establish its ex emption, submit a detailed statement of its proposed activities with and as a part of its application for exemption.

Form 1023 (Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code) is 26 pages.

IRS issues new form, instructions, and revenue procedure. IRS has published the new shorter application form, instructions, and a revenue procedure, all of which are intended to help small charities apply for Code Sec. 501(c)(3) tax-exempt status more easily.

Form 1023-EZ itself. The form is three pages and contains the following parts: Part I, Identification of Applicant (various contact information); Part II, Organizational Structure (type of entity, questions about the organization’s organizing documents); Part III, Your Specific Activities (the entity’s activities); Part IV, Foundation Classification (whether the organization is a private foundation); Part V, Reinstatement After Automatic Revocation (checkboxes for organizations seeking reinstatement); Part VI, Signature.

How to file. Form 1023-EZ can only be filed electronically by going to or (enter the term “Form 1023-EZ” in the search box).

User fee. A user fee of $400 is required to process the application. This fee must be paid when the organization files its application. In future years, the user fee will be set forth in a successor revenue procedure to Rev Proc 2014-8.

Eligibility to file Form 1023-EZ. U.S. organizations with both assets valued at $250,000 or less and annual gross receipts of $50,000 or less may submit Form 1023-EZ unless the organization is designated under “The following organizations are not eligible,” below.

To determine if an organization is eligible to file Form 1023-EZ, it must complete the Form 1023-EZ Eligibility Worksheet that is part of the form’s instructions. An organization that answers “Yes” to any of the worksheet questions is not eligible to apply for exemption under Code Sec. 501(c)(3) using Form 1023-EZ.


The following organizations are not eligible organizations and must use Form 1023 to apply for recognition of exemption under Code Sec. 501(c)(3):

(1) Organizations with projected annual gross receipts of more than $50,000 in either the current tax year or the next two years.

(2) Organizations with annual gross receipts that have exceeded $50,000 in any of the past three years.

(3) Organizations with total assets, the fair market value of which is in excess of $250,000. For purposes of this eligibility requirement, a good faith estimate of the fair market value of the organization’s assets is sufficient.

(4) Organizations formed under the laws of a foreign country. (U.S. territories and possessions are not considered foreign countries.)

(5) Organizations that do not have a mailing address in the U.S. (territories and possessions are considered the U.S. for this purpose).

(6) Organizations that are successors to, or controlled by, an entity suspended under Code Sec. 501(p) (suspension of tax-exempt status of terrorist organizations).

(7) Organizations that are not corporations, unincorporated associations, or trusts.

(8) Organizations that are successors to a for-profit entity.

(9) 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).

(10) Churches or conventions or associations of churches described in Code Sec. 170(b)(1)(A)(i).

(11) Schools, colleges, or universities described in Code Sec. 170(b)(1)(A)(ii).

(12) Hospitals or medical research organizations described in Code Sec. 170(b)(1)(A)(iii) or Code Sec. 501(r)(2)(A)(i), and cooperative hospital service organizations described in Code Sec. 501(e).

(13) Cooperative service organizations of operating educational organizations described in Code Sec. 501(f)).

(14) Qualified charitable risk pools described in Code Sec. 501(n).

(15) Supporting organizations described in Code Sec. 509(a)(3).

(16) 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.

(17) Organizations that invest, or intend to invest, 5% or more of their total assets in securities or funds that are not publicly traded.

(18) 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 Code Sec. 501(c)(3) organizations.

(19) Organizations that sell, or intend to sell, carbon credits or carbon offsets.

(20) Health Maintenance Organizations (HMOs).

(21) 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 IRB 652).

(22) Organizations that maintain, or intend to maintain, one or more donor advised funds.

(23 Organizations that are organized and operated exclusively for testing for public safety and that are requesting a foundation classification under Code Sec. 509(a)(4).

(24) Private operating foundations.

(25) Organizations that are applying for retroactive reinstatement of exemption under sections 5 or 6 of Rev Proc 2014-11, 2014-3 IRB 411, after being automatically revoked.

(26) Organizations that are identified or designated as terrorist organizations within the meaning of Code Sec. 501(p)(2).

Related revenue procedures. Rev Proc 2014-40 also explains its effect on certain other revenue procedures. A brief description of each, and the effect that Rev Proc 2014-40 has on it, follows.


  • Rev Proc 2014-9, 2014-2 IRB 281, sets forth procedures for issuing determination letters and rulings on the exempt status of organizations under Code Sec. 501 and Code Sec. 521. Those procedures do not apply to determination letters issued under Rev Proc 2014-40 except to the extent specifically noted in Rev Proc 2014-40.
  • Rev Proc 2014-10, 2014-2 IRB 293, sets forth procedures for issuing rulings and determination letters on private foundation status under Code Sec. 509(a). Rev Proc 2014-40 amplifies Rev Proc 2014-10 by providing that the private foundation status of an organization may be determined when an eligible organization submits a Form 1023-EZ.
  • Rev Proc 2014-8, 2014-1 IRB 242, sets forth user fees for requests for a determination letter. Rev Proc 2014-40 supplements Rev Proc 2014-8 by establishing the user fee for submitting a Form 1023-EZ.
  • Rev Proc 2014-4, 2014-1 IRB 125, sets forth procedures regarding IRS’s provision of guidance to taxpayers on issues under the jurisdiction of the Commissioner, Tax Exempt and Government Entities Division. Rev Proc 2014-40 amplifies Rev Proc 2014-4 by providing that EO Determinations may also issue determination letters on initial qualification for exempt status of organizations described in Code Sec. 501(c)(3) that applied using Form 1023-EZ, in accordance with Rev Proc 2014-40.
  • Rev Proc 2014-5, 2014-1 IRB 169, sets forth procedures regarding the issuance of technical advice in exempt organizations matters. Rev Proc 2014-40 amplifies Rev Proc 2014-5 by providing that technical advice may also be sought and issued in the circumstances described in Rev Proc 2014-40.
  • Rev Proc 2014-11, 2014-3 IRB 411, sets forth procedures for reinstating the tax-exempt status of organizations that have had their tax-exempt status automatically revoked under Code Sec. 6033(j)(1). Rev Proc 2014-40 amplifies Rev Proc 2014-11 by providing that eligible organizations may apply for reinstatement under Rev Proc 2014-11 by submitting a Form 1023-EZ instead of a Form 1023.

Effective date. Rev Proc 2014-40 is effective July 1, 2014.

RIA observation: The form and its instructions contain no effective date rules.

References: For application for tax-exempt status, see FTC 2d/FIN ¶ T-10450 et seq.; United States Tax Reporter ¶ 5014.01 ; TaxDesk ¶ 670,502 ; TG ¶ 20802 .

{ There are no comments yet, add one below. }

Leave a Comment