Understanding the Form 1023

Understanding the Form 1023

Forming a nonprofit organization (with 501c3 tax exemption) is a worthy pursuit that might even make the world a better place, but it is important to understand that the process can be legally complex and challenging. A first step is to file the IRS Form 1023, which can feel overwhelming for a person unfamiliar with this tax document. If you are starting a nonprofit organization, consider visiting with the experienced nonprofit attorney Jennifer V. Abelaj at the Jennifer V. Abelaj Law Firm (212-328-9568) in New York. Jennifer V. Abelaj is an experienced nonprofit law attorney who can help you create, structure, and launch the successful nonprofit business of your dreams. 

Form 1023 or 1023EZ

The Form 1023 is a complicated document that exceeds 60 pages (including instructions). Some applicants for tax-free status, however, are eligible to file the Form 1023-EZ, which allows a more streamlined process. The Internal Revenue Service provides highly specific eligibility requirements for filing the EZ version of Form 1023. You must be able to answer no to a variety of important questions that include the following in order to proceed with the Form 1023-EZ:

• Do you expect the organization’s gross receipts to exceed $50,000 in any of the next 3 years?
• Have the organization’s gross receipts exceeded $50,000 in any of the past 3 years?
• Does the fair market value of the organization’s total assets exceed $250,000?
• Was the organization formed under another country’s laws?
• Is the organization’s mailing address in a foreign country?
• Is the organization controlled by or is the organization a successor to an entity that was suspended of tax-exempt status as a result of being identified as a terrorist organization?
• Is the organization structured as any kind of entity other than a corporation, an unincorporated association, or a trust?  
• Is the organization formed as an entity that is for profit?
• Is the organization a successor of an entity that is for profit?
• Has the organization been previously revoked or is it a successor to a previously revoked organization (other than revocation for failure to file a Form 990-series for three years running)?
• Is the organization currently (or was it previously) recognized as being tax exempt under any other section of IRC 501(a)? 
• Is the organization a church that is recognized under the IRS’s understanding of the term?
• Is the organization a school, university, or college as defined by the IRS?
• Is the organization engaged in medical research or is it a hospital as defined by the IRS?
• Is the organization an agricultural research organization as defined by the IRS? 

Correctly filing the correct IRS form is paramount, and Jennifer V. Abelaj at the Jennifer V. Abelaj Law Firm (212-328-9568) in New York is a dedicated nonprofit law attorney who has the experience and legal understanding to help you master your Form 1023 – in pursuit of tax-exempt status for your organization. 

If You Do Not Qualify to File Form 1023-EZ 

If you do not qualify to file Form 1023-EZ, you will need to move forward with the lengthier standard form. The difference between the two include the following requirements for the standard Form 1023:

• You will need to provide a written narrative that describes your organization in detail.
• You will need to provide a detailed description of your organization’s activities.
• You will need to provide more detailed information about your organization’s board of directors.
• You will need to provide more detailed information about your organization’s current, past, and projected financials.

There are also more specific requirements related to your organization’s overall structure that will need to be addressed in the standard Form 1023. 

Preparing to File Form 1023

In order to file Form 1023 with the IRS, you will need to engage in a range of preliminary activities that include (as applicable) obtaining a federal employer identification number (EIN), incorporating your organization, drafting your bylaws, and making financial projections. You will also need to include each of the following (as applicable) in your application packet:

• Your Form 1023 checklist
• Your application, which includes Form 1023 and Schedules A through H (as applicable)
• Accurate financial statements (or well-considered projections)
• Your organization’s organizing document (your Articles of Incorporation for example)
• All the amendments to your organization’s organizing document (provided in chronological order)
• A Power of Attorney and Declaration of Representative (as applicable)
• Tax Information Authorization (as applicable)
• Your organization’s bylaws – or other rules of operation – and any amendments thereto
• All other applicable attachments, including financial information, printed materials and publications, necessary explanations, and anything else that applies

It is important to mark each or your packet’s inclusions with your organization’s name and EIN. 

The Application Process

Applying for tax-exempt status with the Form 1023 is a lengthy process (the IRS estimates that it takes about 100 hours) but failing to do so properly can protract the process further – or can void your application entirely. Working closely with an experienced nonprofit law attorney from the outset is the surest means of expediting the process and helping to ensure that you are successful in your endeavor. Once the IRS makes its decisions regarding your organization’s exemption status, it will inform you with in a Determination Letter.

Discuss Your Organization’s Tax-Exempt Status with an Experienced New York Nonprofit Law Attorney Today

Starting a nonprofit organization can prove exceptionally rewarding, but obtaining tax-exempt status is a challenging process. Forming a tax-exempt organization hinges on your ability to meet the federal government’s requirements and on your ability to successfully file the IRS Form 1023, which is a complicated and lengthy endeavor. Jennifer V. Abelaj at the Jennifer V. Abelaj Law Firm is an accomplished New York nonprofit law attorney who has a wealth of experience successfully supporting clients like you in their quests to create socially aware nonprofit organizations that promote the better good. Your efforts toward this end are admirable and important, and we are here to help you achieve your goals. For more information about what we can do for you, please do not hesitate to reach out by contacting or calling us at 212-328-9568 today.