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April 05, 2017 at 10:51 AM
More and more organizations that apply to the IRS for tax-exempt status are being granted 501(c)(3) designations following introduction of the simplified Form 1023-EZ application, according to The Chronicle of Philanthropy.
In fiscal 2016, ended Sept. 30, 79,545 charitable and religious groups received the designation out of 84,588 that applied, about a 94% approval rate, compared with an 82% rate in 2010 before the EZ form was introduced.
The number of approvals has doubled each since July 2014 when the three-page EZ form was rolled out, The Chronicle said.
The IRS created Form 1023-EZ to help clear a backlog of applications that had resulted in groups waiting 18 months for their requests to be processed.
Organizations seeking to use the form must attest that they have less than $250,000 in assets and do not expect their gross annual receipts to exceed $50,000 within the next three years. Larger applicants continue to fill out the 23-page Form 1023.
It does not always works out this way, however.
When The Chronicle examined the latest informational Form 990 filings last year, it found that of some 100,000 organizations that had filed the EZ form, 1,888 reported revenue exceeding $50,000 within three years, and 765 of those reported revenue of more than $100,000.
In addition, 193 organizations claimed assets of more than $250,000, including 30 with assets in excess of $1 million.
The longer Form 1023 requires nonprofits to provide details about such things as their mission, organizational structure, employee compensation and fundraising activities.
The Chronicle noted that once a charity is established using Form 1023-EZ, no federal requirement says that it later must provide all of the additional documentation required by the long form, no matter how large it grows.
