On July 1, 2014, the IRS released a final version of the Form 1023-EZ, a simplified application for tax-exempt status that may be used by smaller organizations. This three-page form drastically reduces the burden on smaller charities by permitting them to attest that they meet the organizational and operational tests for tax-exempt status.
The Form 1023-EZ must be filed electronically on the website www.Pay.gov, and carries with it a reduced user fee of $400 (which also must be paid electronically on that website). Unlike with the Form 1023, an organization is not required to provide any of its organizational documents to the IRS. Also, the Form 1023-EZ does not require a narrative description of an organization's activities, nor does it require budgetary information as part of the application. There is a streamlined approval process for an organization that files a Form 1023-EZ, which means that organization may receive its determination letter within a few weeks.
In order to use the Form 1023-EZ, an organization must be "eligible" -- meaning it must qualify after completing the eligibility worksheet. An organization that does not qualify on the eligibility worksheet must file a full Form 1023 in order to apply for tax-exempt status. Even if an organization is eligible to file the simplified form, it may decide to file the full Form 1023 in any event, in order to provide additional information to the IRS for consideration in making a determination of tax-exempt status, such as detailed budgetary information or a description of potential future activities.
The IRS has promised to shift its attention to the "back end" for entities that have opted to file the Form 1023-EZ, and has suggested it will engage in more audits of such entities once the entities are operational. It is yet to be seen, however, whether the IRS will be able to divert the resources that will be necessary, especially with the likely large increase in applications for tax-exempt status now that the Form 1023-EZ is available.