Requests for Tax-Exempt Status Must Now Be Filed Electronically

(Parker Tax Publishing February 2020)

The IRS announced that it has revised Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, to allow electronic filing. In addition, the electronic submission process is now the exclusive means of submitting a completed Form 1023, except for submissions eligible for transition relief. Rev. Proc. 2020-8.

In Rev. Proc. 2020-8, the IRS announced that it has revised and updated Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, and provided for it to be electronically submitted at www.pay.gov. The electronic submission process for Form 1023 replaces the paper submission process for Form 1023 after January 31, 2020, subject to transition relief described below. Rev. Proc. 2020-8 modifies Rev. Proc. 2020-5 to set forth procedures for issuing determination letters in response to electronically submitted Form 1023 applications. User fees for applications for recognition of exemption on Form 1023 or Form 1023-EZ must be paid through www.pay.gov. Unless otherwise modified by Rev. Proc. 2020-8, the provisions of Rev. Proc. 2020-5 continue to apply.

Rev. Proc. 2020-8 also provides procedures for expedited handling requests. Except for a request on the electronically submitted Form 1023, the request for expedited handling must be made in writing, preferably in a separate letter sent with, or soon after filing, the request for the determination letter. If the request is not made in a separate letter, then the letter in which the determination letter request is made should say, at the top of the first page: "Expedited Handling Is Requested. See page ___ of this letter." In the case of the electronically submitted Form 1023, a request for expedited handling must be indicated on the form and a supporting written statement must be submitted as an attachment with the completed application.

Under transition relief specified in Rev. Proc. 2020-8, the IRS will accept for processing a completed paper Form 1023 accompanied by the correct user fee, as described in Rev. Proc. 2020-5, without applying the modifications in Rev. Proc. 2020-8, if the submission of the Form 1023 is postmarked on or before April 30, 2020.

Observation: The IRS expects the electronic Form 1023 benefits to mirror those realized when Form 1023-EZ went online in 2014. IRS statistics show the 1023-EZ improved application processing time for both the Form 1023 and 1023-EZ while maintaining similar approval and rejection rates between the two forms.

For a discussion of the procedures involved in applying for tax-exempt status, see Parker Tax ¶60,590.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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