Home > Uncategorized > Business Law Update: It Will Be a Merry Christmas For Some Startup Non-Profits.

Business Law Update: It Will Be a Merry Christmas For Some Startup Non-Profits.

Christmas has come early for some small non-profits seeking federal tax exemption under the 1023-EZ Application Process.

Back in September I posted on the Federal Government’s new process for a potentially quicker and more cost-effective way for small startup non-profits to gain 501(c)(3) Exemption. You can see that article here

As a recap, The IRS  came out this year with its IRS 1023-EZ form which would allow certain startup non-profits to apply for tax exemption online.

This is a much quicker process than filling out the lengthy traditional 1023 application, and submitting all of the required supporting documents.

You can review the instructions to the 1023 EZ form by going to the follow link.

In fact, before you complete the application you are required to review the instructions and go through the checklist.

The Application requires you to attest that you have gone through the checklist (although you don’t need to submit the checklist with your application).

Completing the checklist ensures that your non-profit is not automatically ruled out before you begin the application.

A few requirements before you can submit your application are:

1. Application is only good for 501(c)3 Exemption – if your business is claiming non-profit exemption under any other subsection, it has to go through the traditional 1023 application.

2. Your entity cannot be an LLC.

3. Your entity cannot be a successor to a for-profit entity.

3. Your entity does not expect to raise revenue of more than $50,000 each year for the first 3 years.

Assuming you pass this checklist, you need to have set up (but do not submit to the IRS) all of the traditional legal documents that are required under Michigan law (articles of incorporation, bylaws, board of director information, etc..)

After these steps have been completed, the application itself can be completed rather quickly.

The Big Question:

The big question among lawyers and non-profits has been – will this process turn out to be quicker than the traditional application?

Will non-profits receive their determination letters from the IRS any sooner as a result of filing the 1023-EZ?

I’m here to report to you, based upon my experience: “yes”

I had some skepticism, but can report that within a few weeks of completing the application process, a client of mine recently received its determination letter of recognition for tax exempt status from the IRS. Congratulations Grace’s Table! What a worthy cause. Grace’s Table is a ministry to teen mothers in Grand Rapids. It’s mission statement, in part:

is a resting place, an anchor, and a firm foundation for teen mothers and their kiddos. It represents safety and stability in the midst of uncertainty. Each week, the families are welcome to come share a meal with us Around the Table. Both simplicity and complexity exist in our time together during which we welcome Jesus to be a part…

What a fantastic Christmas gift for Grace’s Table and other startup non-profits who have applied through the 1023-EZ Application process.

They will be able to tell their donors that their year end gifts will be tax deductible.

Questions? Comments?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

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  1. December 27, 2014 at 9:50 am

    Jeshua – Great update – could be very good news for many who seek to begin a small non-profit organization. We at SCORE find you update useful and unless you mind will share it on our Kalamazoo.SCORE.org web presence. Happy Holidays.

    • December 27, 2014 at 12:18 pm

      Thank you, Tom. I don’t mind at all. Have a great holiday!

  1. January 6, 2015 at 10:02 am

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