New Rules for Tax Exemptions

In July, the Internal Revenue Service introduced the new Form 1023-EZ. The new form streamlines the application for recognition of tax exemptions. This redesign has caused some criticism from many large charity groups, while other groups have commended the agency for introducing the program. The IRS agency hopes that the new process and smaller application will reduce the backlog on applications.

Every year the IRS receives around 60,000 applications for tax-exemptions status. In the old form, agencies had to fill out nine pages that consisted of many schedules and they had to provide three or four years worth of financial data. The new form only consists of three pages. It can be used by most organizations applying for tax-exempt status with $50,000 in annual gross receipts or less, and assets of $250,000 or less.

The concern surrounding the new form comes from the National Council of Nonprofits. They claim that tax-exempt status should not be granted lightly. The new form lacks details. It asks for no financial data, in the documents.

The IRS claims that the change to the paperwork allows charities to speed up the applications process and get back to work that is more important. The process helps cut back the process time for many smaller nonprofits. Larger, more complicated nonprofits will still be required to fill out the longer Form 1023. Currently the wait time for nonprofit status is nine to fifteen months.

The IRS is not taking the granting of tax-exempt status lightly. They are still processing applications. The additional resources that are freed up to process the more complicated applications.