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Simplified IRS Tax Exemption Application Appears To Be A Success

As we shared with you last year, in July of 2014 the IRS adopted a new form–Form 1023-EZ–for applicants seeking tax-exempt status. Form 1023-EZ drastically simplifies and streamlines the application process for certain small non-profits and religious organizations applying for federal tax exemption, reducing the application from 26 pages to 3. The purpose of introducing the new form was to drastically reduce the backlog the IRS was facing, which had approached nearly 75,000 applications.

Overall, it appears the new streamlined application process has been a success. It appears that many organizations are taking advantage of the simplified Form 1023-EZ. Since July 1, 2014, approximately 55-56% of the tax exemption applications submitted to the IRS have been submitted on the new Form 1023-EZ. It also appears the simplified process has helped reduce both the number of backlogged applications and the time it takes the IRS to review the applications. In December 2013, the average age of pending applications was more than one year. As of November 2014, that timeframe had been reduced to around 150 days. Applicants who have submitted Form 1023-EZ applications also have generally received determination letters within 60 days of their submission. Further, according to Howard Friedman at the Religion Clause blog (citing a February 27 report from BNA Daily Report for Executives), in the last six months the IRS has approved 18,169 of the 20,123 application for tax-exempt status it received.

Dalton & Tomich attorneys are experienced in representing non-profit organizations at all stages of operation, including the initial application for tax-exempt status. If you represent an organization that is seeking tax-exempt status and you would like more information about IRS Form 1023-EZ, do not hesitate to contact us to discuss the streamlined application process and how it may benefit your organization. More detailed information from the IRS regarding Form 1023-EZ and the streamlined application procedure is available here.

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