Who Is Eligible to File Form 1023-EZ?

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!

Basic Eligibility Limitations

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

Foreign Ties

Nonprofit organizations with foreign origins may not qualify to use Form 1023-EZ.

Specifically, applicant organizations cannot:

Be organized under the laws of a foreign country, or
Have a primary mailing address in a foreign country

Structure and History

The business structure of the nonprofit and the history of any predecessor organizations can impact eligibility, as well.

Applicants cannot be:

Organized as an LLC
A successor to or controlled by any organization which has had its own tax-exempt status revoked because of terrorism activity or connections
A successor to a for-profit entity
An organization that had 501(c)(3) status revoked for any reason (other than failure to file Form 990 for 3 consecutive years)
An organization that had 501(c)(3) status revoked FOR failure to file Form 990 for 3 consecutive years that is seeking retroactive reinstatement
Seeking status as a private operating foundation

Purpose and Activity

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:

Organizations investing more than 5% of assets in non-publicly traded securities
Nonprofits exclusively purposed to test consumer products for public safety
Accountable Care Organizations
Health Maintenance Organizations
Credit counseling purposes (including budgeting, personal finance, financial literacy, mortgage foreclosure assistance, etc.)
Supporting organizations under section 509(a)(3) (formed to support another specific 501(c)(3))
Charitable risk pools
Cooperative service organizations
Cooperative hospital service organizations
Hospitals and medical research organizations
Schools, colleges, and universities
Churches and church associations
Organizations maintaining one or more donor advised funds

Purpose and Activity

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.