The IRS Form 1023-EZ based streamlined process for seeking 501(c)(3) status is designed exclusively for certain, small nonprofit organizations (see details below).
It is best suited for those starting a nonprofit with a clearly defined charitable purpose (that isn’t on the exclusion list below!) and that expects to get most of its income from a combination of donations and program related activities.
Some organizations, although they technically qualify for the streamlined process, should consider filing a traditional long-form IRS application instead. This is particularly true for nonprofits that envision grant funding and/or corporate giving being an essential part of their income stream. Institutional donors analyze prospective recipient charities with great care, including the charity’s original IRS filing, which is public record. Nonprofits filing Form 1023-EZ will not have the level of information available in the public domain as one choosing the longer path.
If institutional giving and/or grants are not a critical component of your plan, the streamlined process might be right for you!
Not all startup nonprofit organizations qualify to use Form 1023-EZ. The IRS has established strict limitations as to both the size and purpose of nonprofits that can use this streamlined process. While many new organizations will qualify for this faster path, many will not.
Specifically, applicant organizations must satisfy the IRS definition of small. That means they must:
- Anticipate less than $50,000 in annual gross receipts each year for the first 3 years, and
- Have already had less than $50,000 in annual gross receipts for all 3 prior years (if any), and
- Have total assets valued at under $250,000
Nonprofit organizations with foreign origins may not qualify to use Form 1023-EZ.
Specifically, applicant organizations cannot:
The business structure of the nonprofit and the history of any predecessor organizations can impact eligibility, as well.
Applicants cannot be:
Form 1023-EZ eligibility is dependent upon purpose. The organizational types below are usually required to supply the IRS with more information regarding their activity than is required by the streamlined process.
These purpose exclusions include:
While it may seem like an overwhelming list of exclusions, the fact is that a significant number of applicant organizations qualify to use this IRS streamlined process (Form 1023-EZ). To find out if your proposed organization qualifies, follow the link below to take our self-evaluation quiz.