When applying for tax-exempt status under Section 501(c)(3) of the Internal Revenue Code, nonprofits must file IRS Form 1023. However, not all nonprofits need to file the same version of this form. There are two primary options: Form 1023EZ, a simplified application, and Form 1023 Full, a more detailed version. Choosing the right one for your organization is crucial and depends on various factors, including your nonprofit’s size, complexity, and long-term goals.
At Instant Nonprofit, we offer tailored services based on your needs:
Express Launch Package (Form 1023EZ)
Enterprise Launch Package (Form 1023 Full)
Here’s a breakdown of both and guidance on which is appropriate for your organization.
What is Form 1023EZ? (Express Launch Package)
Form 1023EZ is a streamlined version of the standard application for 501(c)(3) status. It’s intended for smaller, less complex organizations, making the process faster and easier. The IRS introduced the 1023EZ in 2014 to help newer, smaller nonprofits avoid the cumbersome full-form application.
Eligibility for Form 1023EZ:
To qualify for the 1023EZ, your organization must meet specific requirements, including:
Gross Receipts: Projected to be less than $50,000 annually for the next three years.
Total Assets: Must be valued at less than $250,000.
Organization Type: The nonprofit cannot be a private foundation, church, school, hospital, or nonprofit supporting these types of organizations.
Domestic Status: The organization must be based in the United States and not directly involved in foreign operations.
Benefits of Form 1023EZ:
Faster Approval: The IRS generally processes Form 1023EZ applications in 2-4 months, compared to the longer timeline for Form 1023 Full.
Simplified Application: The form is only 3 pages long, compared to the 26 pages of the full version.
Lower Filing Fee: The IRS filing fee for Form 1023EZ is $275, making it more affordable for smaller startups.
When to Use the Express Launch Package (Form 1023EZ):
The Express Launch Package is ideal for nonprofits that:
Have modest financial projections and fewer assets.
Want a fast, simple path to tax-exempt status.
Plan to operate primarily at a local or regional level without complex funding sources.
Examples: Community-based organizations, small educational programs, local arts groups, or grassroots initiatives with simple budgets.
What is Form 1023 Full? (Enterprise Launch Package)
Form 1023 Full is the comprehensive application used by larger or more complex organizations. This form provides a thorough overview of the nonprofit’s mission, governance, and financial structure. The IRS requires more detail to assess the organization’s eligibility for tax-exempt status.
Eligibility for Form 1023 Full:
Nonprofits that do not qualify for the streamlined 1023EZ must file the Form 1023 Full. These include:
Projected Gross Receipts: More than $50,000 annually.
Total Assets: Exceeding $250,000.
Complex Operations: Organizations involved in foreign activities, lobbying, or those with intricate financial structures.
Specific Types: Private foundations, churches, schools, hospitals, or organizations that offer significant foreign assistance.
Benefits of Form 1023 Full:
Comprehensive Application: The detailed information in Form 1023 Full provides clarity and assurance to the IRS, which can be beneficial for more complex organizations.
Long-Term Planning: Larger nonprofits that expect to grow or have complex missions often need the thoroughness of the full form to support long-term stability.
Higher Filing Fee: The IRS filing fee is $600 for Form 1023 Full, reflecting the more detailed review process.
When to Use the Enterprise Launch Package (Form 1023 Full):
The Enterprise Launch Package is best suited for organizations that:
Have larger budgets, more assets, or complex funding streams.
Anticipate growth, expansion, or significant donations from corporations or foundations.
Plan to engage in foreign operations, lobbying, or complex governance structures.
Examples: National advocacy organizations, all private foundations, churches, charter schools, large arts organizations, or nonprofits with substantial planned giving programs.
Which Package is Right for Your Nonprofit?
Choosing between the Express Launch Package (Form 1023EZ) and Enterprise Launch Package (Form 1023 Full) depends on your organization’s current size, goals, and complexity. Here’s a simple guide:
Choose the Express Launch Package (Form 1023EZ) if you are a smaller organization with modest financial projections, no complex funding sources, and a local or regional focus.
Choose the Enterprise Launch Package (Form 1023 Full) if you anticipate growth, have significant funding streams or assets, or plan to engage in more complex activities.
If you’re unsure which option is best for your nonprofit, Instant Nonprofit can guide you through the decision-making process to ensure you’re on the right path to tax-exempt status.
Conclusion
At Instant Nonprofit, our Success Team is dedicated to guiding you through the tax-exemption application process with confidence. Before submitting your Form 1023EZ or Form 1023 Full, our experts thoroughly review your organization's information, mission, and structure. Based on this analysis, we make a personalized recommendation on which form to file, ensuring it aligns with IRS requirements. Our goal is to help you avoid common pitfalls, streamline the process, and maximize your chances of fast approval by the IRS.
With our guidance, you can be confident that your application is accurate and fully compliant.