Hunton Law

Legal Counsel for Nonprofit & Tax-Exempt Organizations

Legal Counsel for Nonprofits, Foundations & Social Enterprises

501(c)(3) Tax Exemption Application Updates

The IRS recently changed several rules and processes relating to the application for Section 501(c)(3) status (IRS Form 1023 and Form 1023-EZ). 

IRS Form 1023 was revised in December 2017.  The IRS cautions applicants to use the most recent versions of tax exemption applications and instructions to avoid processing delays.  The most significant revisions to the Form 1023:

  • Eliminated a question about the advance ruling process
  • Eliminated an outdated question about organizations applying for 501(c)(3) recognition more than 27 months after formation
  • Increased financial data reporting requirements for organizations older than one year

Good news!  The user fee for Form 1023 has been reduced from $850 to $600.  Instructions to Form 1023 indicate that user fees are subject to change, so always check the current user fees before submitting your application.

Processing times for Form 1023 continue to vary, although overall processing times have significantly decreased in the past several years.  Many applications are reviewed in as few as four weeks, while some applications are reviewed in six months.  Applications that require additional information will undergo a lengthier review period, often around six months or more.  An organization that has submitted Form 1023 to the IRS is permitted to solicit and receive contributions while its application is pending, provided that it discloses to funders that it has not yet obtained recognition of tax-exempt status. 

The IRS continues to accept Form 1023-EZ from small nonprofit organization applicants that meet the eligibility criteria.  Form 1023-EZ requires less information from applicants than Form 1023, yet Form 1023-EZ was revised recently to require additional information about the applicant’s mission, activities, annual gross receipts, total assets, and public charity classification.  The user fee for IRS Form 1023-EZ is $275. 

The IRS website is a great source for helpful articles, issue snapshots, podcasts, and videos for tax-exempt organizations and applicants, such as reporting requirements while Form 1023 is under review, filing deadlines for employers, and charitable deductions.