IRS Lowers Fee for Applying as Tax-Exempt Charity

The Internal Revenue Service has lowered the user fee for charities applying for tax-exempt status.

On July 1, the IRS decreased the user fee for processing Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, from $400 to $275.

In May, the IRS released Revenue Procedure 2016-32 about its plan to reduce the user fee for filing Form 1023-EZ. The IRS introduced the form in 2014 to streamline the process for small organizations to apply for tax-exempt status under Section 501(c)3 of the Tax Code. The IRS wanted to reduce a months-long backlog of applications from approximately 60,000 organizations that ask for tax-exempt status each year (see Easy or Too EZ: New Rules for Tax Exemptions). Organizations with annual gross receipts of $50,000 or less and assets of $250,000 or less can use the three-page form.

Charities need to submit the fee through www.pay.gov when filing a 1023-EZ application. They can pay the fee directly from a bank account or via credit or debit card.

The IRS also released regulations last week on how groups should register as tax-exempt organizations under Section 501(c)4 of the Tax Code (see IRS Issues Rules for Registering 501(c)4 Organizations). The IRS is still dealing with fallout from revelations in 2013 that it had given extra scrutiny to political groups applying for tax-exempt status under that section of the Tax Code, which is supposed to apply to social welfare organizations. The then-director of the IRS’s Exempt Organizations unit, Lois Lerner, admitted the agency used terms such as “Tea Party” to sort through the applications. She and other top IRS officials were forced to step down.