Nonprofit Alert: IRS Revises Form 1023

Application for Recognition of Exemption under Section 501(c)(3) as Part of the Electronic Filing Requirement

As part of an ongoing effort to improve service, efficiency and quality for tax-exempt organizations, the IRS has made revisions to Form 1023 (Rev Jan 2020).  Beginning January 31, 2020, the revised Form 1023 must be filed electronically, and the required user fee must be paid through a bank account or debit/credit card online at Pay.gov.

However, the IRS has provided a 90-day grace period in which the paper version of the Form 1023 (Rev 12-2017) will remain viable.  The 90-day grace period begins on the effective date of the guidance, which is expected to be February 18, 2020.

An overview of the e-filing mechanics and the revised electronic Form 1023 can be found here.

The revised electronic Form 1023 does contain variances from the paper filed Form 1023:

1. The electronic form must be completed through the IRS website, and a single PDF should be uploaded at the end of the form.  The PDF attachment should not exceed 15MB.
2. The PDF attachment should include the organizing documents and amendments; Form 2848, if applicable; and any supplemental information that either did not fit or was not included in the response section.
3. The electronic form now requires the organization to enter the National Taxonomy of Exempt Entities (NTEE) code that best describes the organization.
4. The electronic form asks additional questions about the organization’s foreign activities and request information related to the organization’s compliance with the Office of Foreign Assets Control.
5. The electronic form requires the signature of an officer, director or trustee.  The individual signing the revised Form 1023 must be listed as an officer, director or trustee within the first 5 entries of Part I, line 9.

The online Form 1023 should streamline the IRS exemption review process and increase the efficiency and quality of their work.  However, the new electronic process may be more cumbersome for the organization and the tax professionals assisting them.

If you have any questions, please contact VonLehman tax expert, Bryan Pautsch, at bpautsch@vlcpa.com or 800.887.0437.