The issuance of a new, streamlined Form 1023-EZ has caused a major shift in the exemption application world of the IRS. The IRS reported last week that it has received 20,103 such forms, or approximately half of all applications for recognition of exemption under Internal Revenue Code section 501(c)(3) since the IRS introduced the Form 1023-EZ. The IRS also reported that using streamlined procedures based on the Form 1023-EZ – that is, resolving open issues by asking applicants to attest to certain facts as opposed to requesting documents or narrative statements – it has reduced the backlog of all applications that had been pending for more than 270 days by 91 percent (from 54,564 in April 2014 to 4,791 in September 2014). The GAO previously also reported that the IRS closed 117,000 cases in fiscal year 2014, more than double the closure rate for the previous fiscal year. Not everyone is happy with the new form – see previous posts reporting concerns expressed by the National Association of State Charity Officials and the National Taxpayer Advocate, plus having a shortened form was not part of the recommendations promulgated by the IRS Advisory Committee on Tax Exempt and Government Entities when it looked at the application process.
Related Guidance: Revenue Procedure 2015-5 (relating to the Form 1023-EZ), Revenue Procedure 2015-9 (relating to the processing of exemption applications generally).
UPDATE: New memo dated March 12, 2015 regarding the streamlined application process that replaces the previously linked to February 27, 2015 memo.
Lloyd Mayer
