IRS finalizes regulations that provide for streamlined small exempt organization application process

Since 1969, IRC §508 has required an organization seeking tax-exempt status under section 501(c)(3) to submit a properly completed and executed Form 1023, “Application for Recognition of Exemption Under 501(c)(3).

 On July 2, 2014, final and temporary regulations 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 501(c)(3) The detailed procedures are described in Rev. Proc. 2017-5, 2017-1 IRB 230, and in the instructions for Form 1023-EZ.

Eligibility Requirements:

An organization is an eligible organization if the organization meets all of the following criteria:

• 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.

 Because the proposed regulations contemplate that guidance published in the Internal Revenue Bulletin may prescribe the information required of Form 1023-EZ filers, including regarding their proposed activities, the Department of the Treasury (Treasury Department) and the IRS have concluded that the proposed regulations are sufficiently flexible to allow such a revision to the Form 1023-EZ at a future date, as resources permit. Accordingly, this Treasury decision adopts as final regulations, without substantive change.