Filing Form 1023-EZ: Eligibility and How to Apply
This guide provides a clear framework for small nonprofits to confirm their fit for the streamlined Form 1023-EZ and prepare for a successful submission.
Form 1023-EZ is a streamlined application for smaller organizations to request federal tax-exempt status under Internal Revenue Code Section 501(c)(3). It allows certain organizations to obtain the benefits of 501(c)(3) status, such as exemption from federal income tax and the ability to receive tax-deductible charitable contributions. The form is intended for organizations with limited financial activity and specific organizational structures.
Determining Your Eligibility
An organization’s eligibility to use Form 1023-EZ hinges on financial and organizational tests set by the IRS. The primary financial requirement relates to gross receipts. An organization must project that its annual gross receipts will not exceed $50,000 in any of the next three years, and its annual gross receipts over the last three years must not have surpassed this $50,000 threshold.
Beyond revenue, there is a limit on the value of an organization’s assets. The total fair market value of all assets held by the nonprofit must not be more than $250,000. This includes cash, investments, buildings, and equipment.
Certain types of organizations are automatically disqualified from using Form 1023-EZ, regardless of their financial size. Ineligible entities include:
- Churches, schools, colleges, hospitals, and medical research organizations
- Organizations formed as Limited Liability Companies (LLCs)
- Foreign organizations or certain supporting organizations
Other disqualifications apply based on an organization’s history or activities. Successors to for-profit entities are barred, as are organizations that have previously been denied tax exemption or had their 501(c)(3) status revoked for reasons other than failing to file Form 990 for three consecutive years. Organizations with activities involving digital assets or federally illegal controlled substances are also ineligible.
The Form 1023-EZ Eligibility Worksheet
Before an organization can begin the application, it must complete the Form 1023-EZ Eligibility Worksheet. This worksheet, found within the official IRS instructions for the form, is a mandatory checklist designed to confirm qualification. It consists of a series of questions that methodically walk a potential applicant through the various financial, structural, and operational requirements, requiring a “Yes” or “No” answer.
The worksheet’s questions cover the financial, structural, and purpose-based requirements detailed in the previous section. It also addresses more nuanced situations, such as whether the organization intends to operate as a credit counseling agency or maintains donor-advised funds.
Successfully navigating the worksheet is straightforward; the organization must be able to answer “No” to every single question. If an applicant must answer “Yes” to any of the items on the worksheet, the organization is not eligible to use the streamlined form. In such cases, the organization is required to file the more comprehensive Form 1023 to apply for tax-exempt status.
Information Required for Form 1023-EZ
A foundational requirement is the organization’s Employer Identification Number (EIN). This nine-digit number is assigned by the IRS and must be obtained before the application can be submitted; an organization cannot use a Social Security Number in its place. The legal name of the organization, as it appears on its formation documents, and its official mailing address are also required.
An organization must have its organizing documents prepared, though they are not submitted with the form itself. These documents, such as articles of incorporation for a corporation or articles of association for an unincorporated association, define the entity’s legal structure and purpose. The date of incorporation or formation is a specific detail that will be requested on the form. The applicant must attest, under penalty of perjury, that these documents contain the specific language required by the IRS for 501(c)(3) status.
A clear and concise description of the organization’s mission and planned activities is another piece of required information. This purpose statement must align with one of the exempt purposes recognized under Section 501(c)(3), such as charitable, educational, or scientific activities. The form will also require the names, titles, and mailing addresses for all officers, directors, and trustees.
The Submission Process
The Form 1023-EZ must be filed online through the Pay.gov portal, as the IRS does not accept paper versions of this specific form. This requires the applicant to create an account on the Pay.gov website to access and complete the application.
The process involves locating the Form 1023-EZ on the portal, entering all the previously gathered information into the digital fields, and paying the required user fee. The fee, which is subject to change, must be paid via an electronic method, such as a credit card or direct bank account debit, at the time of submission. The user fee for Form 1023-EZ is $275, compared to the $600 fee for the standard Form 1023.
The IRS will then review the application. If the application is approved, the IRS will issue a determination letter, which is the official document granting 501(c)(3) tax-exempt status. The processing time for a Form 1023-EZ is generally much shorter than for the long-form application, with many organizations receiving their determination letter within a few months.