How to apply for tax-exempt status

Just like there are multiple 501c classifications, there are numerous IRS applications for those types. IRS form 1024 applies for most tax-exempt varieties other than 501c3. The 1024 application requires a $600 filing fee (plus an additional $50 notice fee for 501c4 organizations due within 60 days of incorporation).

IRS form 1023 is used for 501c3 organizations and is the most commonly used tax-exempt application. To keep things confusing, the IRS has two versions of form 1023 depending on a few particular criteria. There isIRS form 1023 EZ and form 1023, or what we refer to as 1023 Long.

1023 EZ vs. 1023 Long

The 1023 EZ form is three pages, and the complete 1023 application is 40 (we call it 1023 Long). 1023 EZ has a smaller $275 filing fee than the 1023 long’s $600 cost.

While the smaller filing fee is often attractive to new nonprofit organizations on tight budgets, many organizations do not qualify for the 1023 EZ form. To be eligible for the shorter 1023 EZ, an organization must meet the following criteria:

  • Projected annual revenue will not exceed $50,000 in the next three years.
  • If currently operational, actual annual receipts cannot exceed $50,000 in the past three years.
  • Total assets belonging to the organization do not exceed $250,000.
  • The organization is not based in a foreign country, a Limited Liability Company (LLC), church, school, hospital, medical facility, or a for-profit entity’s successor.
  • The organization is not a private foundation or exist solely to support another nonprofit.
  • The organization does not devote a substantial portion of its activities to credit counseling, budgeting, personal finance, financial literacy, mortgage foreclosure assistance, or other consumer credit arenas.
  • The organization does not maintain one or more donor-advised funds. This is an uncommon form of fundraising where a fund or account is owned and controlled by the organization. Still, specific donors have, or expect to have, advisory privileges on the distribution of investments.
  • The organization will not provide compensation for directors serving an employee role.
  • The organization was incorporated or began operations less than 27 months after applying for tax-exempt status.

BryteBridge specialists consult with our clients, listening to the organization’s goals and determining the proper 1023 application to fill out. Once decided, your specialist will complete the necessary application, including writing a program narrative, determining a three-year projected budget, and filling out any required schedules for 1023 Long.

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