Form 1023 Application for 501(c)(3) Tax Exempt Status: Anticipating Compliance Challenges

Tying Financial Information to Proposed Activities, Required Disclosures, Streamlined Application

Recording of a 110-minute CPE webinar with Q&A


Conducted on Thursday, November 8, 2018

Recorded event now available

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Program Materials

This webinar will provide tax advisers and nonprofit personnel with a practical guide to the challenges of completing Form 1023, Application for Recognition of Exemption Under Section 501(c)(3). The panel will identify the most vexing compliance challenges, outline both financial and narrative requirements, and discuss the risks of using the streamlined process for applying for exempt status.

Description

Completing IRS Form 1023, Application for Recognition of Exemption Under Section 501(c)(3), presents some problematic compliance issues for advisers to nonprofits. The Form contains 27 pages, 11 parts and various schedules, and compiling the detailed financial data required can be time-consuming. Further, the Service’s efforts to simplify the process have been plagued by errors, with an almost 50% error rate in Form 1023-EZ application acceptance, leading to subsequent corrective action by the organization.

In addition to the financial data required over multiple years, tax advisers also must determine which organizations to describe in Part V—and how much of a narrative given about each. How much information should advisers give about non-fixed payments, officer/director compensation, member benefits, etc.? How long should fundraising revenue be projected?

Return preparers will benefit from a drill-down on the material requirements of different components of Form 1023 and how to respond to the thorniest compliance challenges to anticipate with each.

Listen as our panel of experienced advisers provides a practical guide to dealing with the most onerous aspects of Form 1023 preparation.

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Outline

  1. Drill-down on Form 1023 and its 11 parts
    1. E.g, Part IV (narrative description of your activities)
    2. Part V (compensation)
    3. Part VI (members and other individuals and organizations receiving benefits)
    4. Part VII (specific activities)
    5. Part IX (financial data)
  2. Issues to anticipate with the eight schedules that depend on type of applicant
  3. Compliance issues confronting preparers, and possible alternatives
  4. IRS efforts to correct and improved the streamlined application process

Benefits

The panel will review these and other problematic aspects of Form 1023:

  • How (and in how much detail) should the specific organizational activities be reported, particularly to fit within tax-exempt parameters and especially if fee or other earned revenues are involved?
  • What financial data is requested on Form 1023, and how can it help or hurt the application?
  • What attention should be given to corporate governance and related best practices, for Form 1023 purposes and future effectiveness?
  • What should be supplied in answering questions about relationships with other parties and close connections with other organizations?
  • How should intellectual property owned by insiders and fundraising strategies be disclosed?
  • What meets the standards for disclosing compensation, non-fixed benefits, member benefits and other data, in light of “public benefit” requirement?
  • What are other key compliance areas for anticipating IRS scrutiny?

Faculty

McLaughlin, Shirley
Shirley McLaughlin

Atty
Adler & Colvin

Ms. McLaughlin specializes in formation and tax-exempt status, public charities, private foundations, grantmaking and...  |  Read More

Wagenmaker, Sally
Sally R. Wagenmaker

Attorney
Wagenmaker & Oberly

Ms. Wagenmaker provides legal counsel in corporate, tax, employment, and real estate matters for nonprofits operating...  |  Read More

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