New 1023-EZ Now Available

The IRS announced yesterday the new Form 1023-EZ is available for filing. This form allows smaller nonprofits to apply for 501(c)(3) status online by completing a three page form versus the 26 pages contained in the full Form 1023. Most organizations with gross receipts of $50,000 or less and assets of $250,000 or less are eligible to use the short form.

There has been a lot of press recently concerning the extended wait time nonprofits are experiencing prior to receiving their approval of tax-exempt status. The 1023-EZ will allow for faster processing and free-up IRS resources in a push to reduce the backlog of applications, which is currently at more than 60,000.

Small nonprofits will be required to complete an eligibility checklist prior to completing the 1023-EZ. In addition, a $400 user fee is due upon submission of the form.

Tax Reform: Supporting Organizations and Donor Advised Funds

I recently attended a webinar, put on by the Council on Foundations, specific to the proposed legislation surrounding supporting organizations and donor advised funds. The overriding theme was the proposed legislation is driven from a desire to simplify the tax code. The moderator of the session, Sue Santa (Senior VP for Public Policy and Legal Affairs), explained that Washington has skepticism and an overall misunderstanding of the sector.

The proposed legislation would repeal Type II and Type III supporting organizations. The Council is concerned that the repeal would reduce the flexibility of organizations and the attractiveness to donors. The Council is working in collaboration with other organizations and members to gather data showing the value provided by Type II and Type III supporting organizations.

Currently donor advised funds have no payout requirement. The proposed legislation would require all contributions into an account, plus income generated on the account, to be paid out within 5 years or face a 20% excise tax on the amount not paid out. The Council on Foundations stated this signals a distrust of endowed funds and is a position against deferred gifts. The Council is working to educate Congress on the value of donor advised funds as a unique giving vehicle that benefits communities for years to come.

The Council will provide tools and resources on their website for organizations and individuals to use to educate those in your community about the value these types of giving alternatives offer. Tools will include press-releases, letters, issues papers and talking points.