Form 1023-EZ, Streamlined Application for Recognition of Exemption under Section 501(c)(3) of the Internal Revenue Code, is a shortened version of Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. Any organization can file Form 1023 to apply for recognition of exemption from federal income tax under IRC 501(c)(3), but only certain organizations are eligible to file Form 1023-EZ.

Rev. Proc. 2024-5 (updated annually) includes:

Organizations are required to complete the eligibility worksheet before submitting the Form 1023-EZ application and must attest they’re eligible to file Form 1023-EZ. Form 1023-EZ instructions contain the Form 1023-EZ Eligibility Worksheet.

EO Determinations is responsible for processing Form 1023-EZ.

The IRS won’t accept a Form 1023-EZ that isn’t completed per Rev. Proc. 2024-5 (updated annually). Non-acceptance of Form 1023-EZ is referred to as a "rejection" in this manual.

These procedures apply to tax examiners and EO Determinations specialists, except as specifically noted.

Rev. Proc. 2024-5 (updated annually) sets forth procedures for issuing determination letters on issues under the jurisdiction of the Director, EO Rulings and Agreements. It explains the procedures for issuing determination letters on exempt status in response to applications for recognition of exemption from federal income tax under Section 501 or 521 (other than those subject to Rev. Proc. 2024-4, updated annually), private foundation status, and other determinations related to exempt organizations. Rev. Proc. 2024-5 also provides guidance on the exhaustion of administrative remedies for purposes of declaratory judgment under IRC 7428 and guidance on applicable user fees for requesting determination letters.

The Director of EO Determinations (EOD) Rulings and Agreements (R&A) is responsible for program administration and oversight.

Program managers oversee administration of the program.

Front line managers manage and review work of front line EOD R&A employees.

EOD R&A employees, which include revenue agents and tax examiners, review applications and are responsible for issuing determination letters on exempt status, private foundation status, and other determinations related to exempt organizations.

EOD R&A closing employees process the closed cases and mail the closing letters.

Adjustments Unit employees process user fee payments and refunds.

Exempt Organizations Determinations Quality Assurance (EODQA) reviews determination cases to ensure:

Commonly used abbreviations include:

Use the date of formation, Form 1023-EZ Part II, and IDRS research (BMFOLO, BMFOLI, and BMFOLT) to determine the effective date of exemption.

Determine the effective date of exemption as follows:

An organization can use Form 1023-EZ to request retroactive reinstatement under Section 4 of Rev. Proc. 2014-11 . The organization meets the requirements of Section 4 if:

Process the application using "no gap" procedures if the organization:

If the organization is in Status 97, determine the effective date of exemption as follows:

If the organization is in Status 97, then make sure they are correctly listed in TEOS. If an organization’s revocation is not on TEOS, send an encrypted email to the *TE/GE-EO-Correspondence Unit with the following information:

An organization that was automatically revoked more than once isn't eligible for reinstatement under Rev. Proc. 2014-11, Section 4, but may be reinstated under the procedures in other sections.

TEOS isn’t systemically updated to reflect multiple automatic revocations. To manually update TEOS, send an encrypted email to the *TE/GE-EO-Correspondence Unit with:

Import the email into the MEDS Non-Disclosable folder.

Reject a Form 1023-EZ for the following reasons:

When rejecting a Form 1023-EZ:

Prepare Letter 1049, Form 1023-EZ Rejection. If there is more than one rejection reason, include all the reasons in the rejection letter.

When updating MEDS for a rejection closure (03):

An organization may withdraw Form 1023-EZ only if an authorized individual requests it in writing before EO Determinations issues a determination letter (see IRM 7.20.2.5.7, Withdrawals).

If the organization withdraws its application in writing, prepare Letter 2244, Withdrawal of Exemption Determination Request, with a closing code of 04. Don’t enter NAICS/NTEE codes. Generally, the user fee is not refunded. See Rev. Proc. 2024-5, updated annually.

If the organization withdraws its application because it’s already exempt under that subsection, prepare Letter 5239, No Determination Issued per Rev Proc. or Organization Already Exempt, close using closing code 12 (Other), and initiate a user fee refund.

When closing a case as a withdrawal:

If IDRS research shows that an organization was erroneously revoked, do the following:

To request specialist involvement, send an encrypted email to *TE/GE-EO-Determinations Questions with the organization’s name, EIN, and issue. Put the issue in the subject line. Document the CCR and import a copy of the email into the MEDS Non-Disclosable folder. You must request specialist involvement for:

Prior to requesting specialist involvement, complete all steps listed in IRM 7.20.9.4, General Case Processing. If the application has more than one issue requiring specialist involvement, send one email listing all issues.

Don’t request specialist involvement if rejecting the application.

If the specialist notifies the tax examiner that the case has been accepted to be reviewed by a specialist, in MEDS select the Agent Referral Case Category and update the case to the EO Determinations unassigned inventory (Status 71).

In addition to the case assignment and processing procedures outlined in this IRM and IRM 7.20.2, Determination Letter Processing of Exempt Organizations, review IDRS, EDS, MEDS, and conduct internet research as needed to address the identified referral issue(s) in the case.

If the reviewed information shows the organization is ineligible to file Form 1023-EZ (for example, state website shows LLC or organization’s website shows it is a hospital, etc.), reject the application (see IRM 7.20.9.4.3, Rejections).

For tax examiner referral cases, send Letter 1312, Request for Additional Information, as needed to address the identified referral issue(s) in the case.

For pre-determination cases, send Letter 1312, Request for Additional Information, to request the organizing document (if unable to print from the state website or secure from prior application), a more detailed description of activities, financial information, and details regarding specific activities indicated in Part III of Form 1023-EZ. Ask additional questions, as needed. Follow the procedures and requirements for requesting additional information in IRM 7.20.2 except as specifically noted here, as well as in IRM 7.20.9.4.7.1, Received Response to Information Request, and IRM 7.20.9.4.7.2, No Response to Information Request.
 

Prepare the appropriate determination letter following the procedures in IRM 7.22.4, Modified EO-EP Determination System (MEDS) User Manual, including the appropriate selective paragraphs.

When preparing the closing letter:

Input closing information (see Form 1023-EZ EDS Closing Worksheet and Document 6379, Information Systems Codes FY 2024 Quick Reference for EO Employees, updated annually).

Follow procedures to have a TC 590 input, if needed.

Complete a case survey for all predetermination review and tax examiner referral cases.

For cases subject to mandatory review, in MEDS, click on Case Information and then File. Select Mandatory Review. From the drop-down menu, select the correct mandatory review type.

Submit the case to your manager for review.

Managers will review cases in Status 74PC using current case processing timeframes outlined in IRM 7.20.2.5.8, Managerial Review and Return of Cases, and IRM 7.20.9.3, Time Frames.

The manager will check the manager approval box on the MEDS EO Closing Data tab.

After the manager reviews and approves the case closing in MEDS, the case will be assigned within five days to a case closing employee.

The case closing employee will complete the necessary case closing actions (see IRM 7.21.5.5, Case Closing), including:

If a subordinate is leaving a group ruling, prepare Form 2363-A according to the procedures in IRM 7.20.4.7, Subordinates Leaving a Group Ruling for Individual Exemption.

The Adjustments Unit queries MEDS closed cases for Form 2363-A, Request for IDRS Input for BMF/EO Entity Change, and Form 14268, User Fee Refund, and forward the forms to be processed. Once the forms have been forwarded, the Case Categories *Form 2363-A Request Processed and *User Fee Refund Request Processed will be added in MEDS.

See the following for additional case closing information/assistance: