IRS

Ask a Nonprofit Specialist - Applying for 501c3 status with new 1023-EZ form

posted by
Anne Byrne,
Professional-in-Residence,
ASU Lodestar Center

 

 Question: I am starting a nonprofit organization and need to apply for 501c3 status.  Can I fill out the new 1023-EZ form?  

The Internal Revenue Service recently released Form 1023-EZ, the streamlined application for recognition of exemption of 501c3 status. This form is significantly shorter and easier to complete than the regular application, which is a welcome change for aspiring small nonprofit organizations. In order to utilize the streamlined applications, organizations must meet eligibility requirements and complete the Form 1023-EZ Eligibility Worksheet. There are 21 questions on the worksheet and an affirmative answer to any of the questions makes your organization ineligible to utilize the streamlined application.

Organizations with Budgets and Previous Expenses Less than $50,000 per year
The streamlined application is intended for small organizations, so only those with projected budgets of less than $50,000 per year are eligible. If the organization has been operating already, gross receipts from each of the last three years also must be less than $50,000 per year and total assets cannot exceed $250,000.

Research Friday: Really, Your Tax Exemption has been Revoked?

posted by
Mark Hager, Ph.D.
,

Associate Professor,

ASU School of Community
Resources & Development

Welcome to Research Friday! As part of a continuing weekly series, each Friday we invite a nonprofit expert from our academic faculty to highlight a research report or study and discuss how it can inform and improve day-to-day nonprofit practice. We welcome your comments and feedback.

Long overdue, the IRS finally pulled the trigger. Yesterday, they published the list of organizations that have lost their exemption from paying income tax due to failure to file required reports in 2007, 2008, and 2009. The list includes 4,025 with an Arizona address, including two-thirds (2,708) with the coveted charitable exemption.

This is great news. You wouldn't know it from reading most of the hand-wringing, though. The IRS has been slow to move, making sure that they had gone well out of their way to inform these organizations of their obligations and then warn them of impending doom. The ones that did not get the message are either working under a rock, willfully noncompliant, or closed up without telling the authorities. The result is that the chaff is blown away, leaving behind a much cleaner picture of the nonprofit sector. Arizona doesn't have 15,000 federally-recognized charities — it now has closer to 12,000.

The news no doubt sent many board members scurrying to their organizations to find out if they are on the list. For the most part, if you think to ask, you probably aren't on the list. Most of them are very small. The National Center for Charitable Statistics notes that 90 percent of these organizations have never filed any kind of return. Mostly they're clubs, and they come and go. In this economy, we shouldn't be surprised that a big chunk of these tiny organizations reliant on donations have simply disappeared. And, for what its worth, Arizona organizations are getting new charitable exemptions all the time, more than 800 of them in 2010 alone. Out with the old, in with the new.

Research Friday: "Really, How Many Nonprofits Are There?"

posted by
Mark Hager, Ph.D.
,

Associate Professor,

ASU School of Community
Resources & Development

Welcome to Research Friday! As part of a continuing weekly series, each Friday we invite a nonprofit expert from our academic faculty to highlight a research report or study and discuss how it can inform and improve day-to-day nonprofit practice. We welcome your comments and feedback.

Really, how many nonprofits are there?

Oy, such an easy question to ask. This is one of those common questions that doesn't have an easy answer. Part of the problem is that so many organizations fall under the umbrella of "nonprofit," which is a big stew of everything that isn't a government agency or registered as a business. This term includes informal and unincorporated associations that operate almost entirely off the regulatory radar screen. "Nonprofit" includes member-serving organizations, as well as the public-serving ones that we usually associate with the term. Some organizations are only known in their neighborhoods, some make themselves known only to the state, and some only keep up their federal paperwork. Often the best we can do is count within various categories and hope the number we come up with is close to how many nonprofits there actually are.

In Arizona, unincorporated associations sometimes register with the Corporation Commission or successfully apply for federal charitable exemptions. However, if they do not register with these bodies, and they do not have any employees, we won't easily know about them. They are the "dark matter" of the nonprofit universe — probably numerous, but almost always missing from our count-'em-up descriptions of nonprofit activity.

Research Friday: "Executive Compensation"

postedby
Stephanie La Loggia, M.A.

Manager of Knowledge Resources
ASU Lodestar Center

Welcome to Research Friday! As part of a continuing weekly series, each Friday we invite a nonprofit expert from our academic faculty to highlight a research report or study and discuss how it can inform and improve day-to-day nonprofit practice. We welcome your comments and feedback.

Oh, the high-wire balancing act of nonprofit CEO compensation. Pay your CEO too little, and you won’t attract a skilled leader. Pay too much, and you’ll raise the eyebrows (or ire) of donors, clients, volunteers, and anyone else who looks up your 990 in one keystroke. And should a nonprofit really go over the top with CEO pay, the IRS will come knocking at the door.

What’s an impact-driven nonprofit organization to do? Two things come to mind. First, consult the research and data available on nonprofit CEO compensation. Comparable compensation data helps recruitment and hiring, and protects against excessive compensation claims. For nonprofits in Maricopa and Pima counties, the latest issue of Nonprofit Research Abridged details CEO compensation across budget size and type.

Lost Your Tax-Exemption? What Next —

posted by Pat Lewis,
Senior Professional
in Residence
ASU Lodestar Center

The IRS has begun to revoke the tax-exempt status for those nonprofit organizations that have not filed some form of a 990 (information report) for three years. Guidestar estimates that 350,000 to 400,000 nonprofits are in danger of losing their exemptions. A large number of these organizations are smaller nonprofits that previously were not required to file an annual return because their gross revenues were $25,000 or less.[1] If your organization has not filed any of the 990 forms for three years it is likely you will soon receive a revocation notice.


How will I know if my organization has lost its tax-exempt status?
You will receive a notice from the IRS in the form of a letter, Notice CP120A.[2] A copy of this notice is posted on the IRS website and a list of organizations that have had their nonprofit status revoked.[3]

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