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By Diane Freda
April 23 — A much simpler form for smaller charities to apply for tax-exempt status with the Internal Revenue Service will be released in mid- to late summer, says Sunita Lough, IRS commissioner of tax exempt and government entities.
The overriding goal is to help charities get up and running more quickly and avoid the paperwork that has sometimes delayed approval of their filings for up to a year.
A new streamlined process for the Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, will also allow the IRS to concentrate more on compliance for Section 501(c)(3) organizations at the back end, Lough said during a media telephone call April 23.
“The goal was to come up with new procedures for approving applications that will be more efficient, without introducing major risk into the system,” Lough said.
Rather than placing extensive resources on reviewing the applications when the applicant is only telling the IRS what it plans to do, Lough said it makes more sense to review the activities once they are operational.
There will be a robust compliance process at the back end, whether it be through compliance checks or full examinations, she said.
Some practitioners have said the new streamlined form doesn't give the IRS all the information it needs, but Lough said it will. In addition, detailed instructions yet to come will direct the less experienced applicants through every line of the form.
The Treasury Department earlier submitted the form to the Office of Management and Budget for approval, and Treasury's draft and instructions have been circulating for several days. However, the IRS released its updated version of the draft form April 23, with changes only to Part V to accommodate organizations that are seeking reinstatement after automatic revocation for failing to file a Form 990 with the IRS for three years.
Practitioners have until April 30 to comment on the IRS form, although Lough said even after the form is implemented, comments will be welcome. The IRS isn't required to seek comments on the EZ version because, technically, it isn't a new form, but one in the Form 1023 series, she said.
Lough also said while not all organizations will be allowed to use the abbreviated form—for instance, as it stands now, churches aren't allowed to use it—that could change in the future. The instructions will note which organizations may use it.
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