• Applying for Tax-Exempt Status: The New 'Interactive' Application
  • December 9, 2013 | Author: Jennifer M. Pagnillo
  • Law Firm: Day Pitney LLP - Greenwich Office
  • On September 27, the Internal Revenue Service published a new "interactive" Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. The new interactive guide first asks prerequisite questions to ensure an organization has all of the required information to apply for tax-exempt status. Depending on how an organization answers the prerequisite questions, additional IRS forms will be generated for the organization to complete. For example, if an organization answers "yes" to the question "Have you authorized, or do you plan to authorize, an individual to represent your organization or obtain copies of documents on your behalf?" then Form 2848, Power of Attorney, will be available for the organization to download. Only after an organization has correctly answered the threshold questions can it proceed to the completion of the interactive Form 1023.

    Although the interactive Form 1023 remains substantively unchanged from the current Form 1023, this new interactive form contains help buttons and pop-up boxes with examples, explanations, definitions and links to relevant IRS publications. In addition, the financial pages of the interactive form will auto-calculate totals and automatically direct an organization to any required supplemental information pages based on how it answered particular questions.

    The interactive Form 1023 also provides a link to the IRS's "Top Ten Tips to shorten the application process":

    10. Provide all required information on the principal officers and board of directors.
    9. Ensure a director, trustee, principal officer or other authorized individual signs the Form 1023.
    8. Don't forget to submit a copy of adopted bylaws, code of regulations or any other document that sets out the organization's rules of operation, but only if adopted.
    7. Include all of the necessary financial data.
    6. Include the month the organization's annual accounting period ends.
    5. Attach all required schedules.
    4. Complete all required pages.
    3. Provide enough information about the organization's exempt activities to show us how it will achieve the exempt purpose.
    2. Attach a complete copy of the organizing document and all amendments.
    1. Include the correct User Fee.

    Although the interactive Form 1023 can be completed online, it still must be printed and mailed to the IRS for filing, with all required attachments.

    The IRS expects use of the interactive Form 1023 will reduce processing time, because its auto-calculating and self-populating properties will reduce the number of errors that otherwise might occur in the preparation of the form.