Expediting the IRS Form 1023 Application for Nonprofits 501c3
How Does Expediting the IRS Form 1023 Work?
In general, Form 1023 applications are processed in the order received by the IRS. Sometimes, however, the IRS will work a case outside the regular order. For expedited processing to be granted, however, there must be a compelling reason to process the case ahead of others. Compelling reasons for expediting the Form 1023 include the following:
- A pending grant, where failure to secure the grant will have an adverse impact on the organization’s ability to continue operating.
- A newly created organization providing disaster relief to victims of emergencies.
- IRS errors have caused undue delays in issuing a determination letter.
For a pending grant, the following specific information would help support a request for expedited form 1023 processing:
- The name of the person or organization committed to giving the grant or asset,
- The amount of the grant or the value of the asset,
- The date the grant will be forfeited or permanently redirected to another organization,
- The impact on the organization’s operations if it does not receive the grant/asset, and
- The signature of a principal officer or authorized representative.
A request for expedited form 1023 processing must be made in writing and must fully explain the compelling reason. Granting expedited processing is at the discretion of the IRS.
Here’s a sample Form 1023 Expedite Letter that I’ve put together for you:
Form 1023 Application for Exemption Expedite Letter
Dear the good folks of the IRS:
We are writing to request an expedited processing of our Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code.
Although [NONPROFITS ORGANIZATION NAME] is a new entity, we have generated considerable interest from potential donors. However, these donors are reluctant to make contributions before our receipt of our certificate of exemption under §501(c)(3).
One particular donor, [DONOR NAME], has committed to providing the [NONPROFITS ORGANIZATION NAME] with a donation that will allow our program to begin operations and will help sustain fundraising efforts for several months. Without this initial donation, our organization may not have adequate funding to begin our charitable efforts. We have asked [DONOR NAME] to provide written confirmation of their donation commitment and have attached their notification to this letter. We hope this documentation will help provide you with enough reasonable cause to make a beneficial decision for the [NONPROFITS ORGANIZATION NAME].
Based on the information discussed above, we respectfully request an expedited processing of our Form 1023. If there are any questions or if additional information is needed, please contact us at (xxx) xxx-xxxx.
[YOUR REGISTERED AGENT’S NAME AND DATE]
Those who qualify for Form 1023 expedited service:
Disaster Relief – Example #1
Applicant was formed to help victims of an earthquake find temporary housing. Applicant applies for tax-exempt status within a few weeks or months from the date the disaster occurred. The applicant plans to hold a major fund raiser and a popular rock band volunteered its services for the concert. Income from this event is expected to be a significant source of the organization’s annual revenues and plans are to disburse the majority of these funds to find temporary housing for victims of the earthquake. Therefore, the request is approved.
Pending Grant – Example #2
Applicant anticipates gross receipts totaling $100,000 in its first year to carry out its purpose of feeding the homeless in a community. Shortly after the organization applies for tax-exempt status, it is promised a one-time $50,000 grant from the ABC Foundation. The grant is contingent on the applicant organization being recognized as exempt under section 501(c)(3) by a specified date. The expedite request is approved because a significant portion of the organization’s annual income is contingent on the pending grant, and the funds will be lost if exemption is not granted by the specified date.
Pending Grant – Example #3
Organization submits an application for exemption and indicates it plans to operate a drug and alcohol treatment center for teens. The previous center closed years earlier and there is no other substance abuse center within the area. A named member of the community promises to donate a specific amount that will cover the cost of building the center, if the applicant organization can provide proof of exemption under section 501(c)(3) by a specified date. Because the organization cannot open the treatment center without funding for the building, the expedite request is approved.
Those who do NOT qualify for Form 1023 expedited service:
A nonprofit organization was formed to secure housing for the homeless and educate individuals regarding the dangers of hurricanes. Its operations are conducted in several states in the South. The organization’s application is pending review when a major hurricane, affecting states other than those in which the applicant operates, hits. The organization requests expedite treatment and indicates it is providing disaster relief. Because it conducts no activity in states impacted by the hurricane, the expedite request is not approved.
Example # 2
A nonprofit organization whose purpose is to provide housing for low-income individuals submits an application for exemption . The organization must provide proof of 501(c)(3) exemption to the Department of Housing and Urban Development before it can receive funds. The applicant does not qualify for expedited treatment because it does not have a commitment for grant funds by a specified date.
Example # 3
A nonprofit organization plans to raise $50,0000 annually and make distributions to fire victims in a community. When it applies for exemption, it has a commitment from a specific business to donate $500 to get the organization started if the organization can provide proof of its 501(c)(3) status by a specific date. The request to expedite processing is not approved because the grant is insignificant compared to the organization’s annual revenue, and will not have a major impact on the organization’s ability to operate.
- Nonprofit Articles of Incorporation,
- Nonprofit Bylaws,
- Nonprofit Conflict of Interest Policy,
- Conflict of Interest Policy Acknowledgment,
- Form 1023 Attachment with all the answers,
- Form 1023 Expedite Letter template,
- and Donor Contribution Form
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