Florida Philanthropic Network has contacted key members of Florida’s congressional delegation to express concerns about a proposed Form 1023-EZ from the IRS and to request an opportunity for input from the nonprofit and foundation communities, while also expressing our general support for efforts to simplify tax forms and streamline the application process.
The Form 1023 is filed at the start of a new nonprofit organization. FPN agrees that the existing Form 1023 is cumbersome and is in need of some improvement, so we understand the good intentions of the IRS to simplify the form and manage a backlog of applications by developing a streamlined application process for smaller organizations. But we are concerned that the 1023-EZ’s two-page checklist could increase opportunity for fraud and exacerbate the proliferation of ill-prepared nonprofits.
For example, the current Form 1023 application process requires an applicant to submit its organizing documents, but the Form 1023-EZ just requires the applicant to check off boxes to indicate that its organizing documents contain various critical provisions. While this change will certainly speed up the application process, it also eliminates key evidence that the IRS uses today to perform its appropriate due diligence.
FPN is also troubled that the IRS has failed to seek broad public input on the new form. It is our understanding that the Form 1023-EZ has been shared at conferences for attorneys and CPAs unequally across the country. It is because of their concerns that information about the Form 1023-EZ is now circulating through the nonprofit and foundation community. We believe the IRS should slow down and restart a public and transparent conversation about improvements to the current Form 1023.
Representatives of groups representing both the nation’s nonprofits and states’ charity regulators have voiced deep concerns about the proposed Form 1023-EZ.
The National Association of State Charity Officials has warned the IRS that the Form 1023-EZ “will increase opportunity for fraud and heighten the burden on state regulators.”
Tim Delaney, President & CEO of the National Council of Nonprofits (NCN), the largest network of charitable nonprofits in the country, wrote in The Hill’s Congress Blog that the new form and process would “all but eliminate the current due diligence undertaken by the IRS.” In NCN’s comments submitted to the IRS, the organization cautioned that the proposed form and approval process “go too far, too fast.”
FPN supports efforts to decrease the opportunity for fraud in the sector, in part because it helps ensure a positive environment for philanthropy. Donors need to be confident that their contributions are being used as intended, or we risk seeing reductions in giving. This is a key reason why we want to ensure that any revisions to the Form 1023 are done with significant and meaningful input from the nonprofit and foundation communities, to ensure that we adequately balance the need for streamlining the nonprofit application process with the need to ensure appropriate accountability for the nonprofit sector.
– David Biemesderfer, President & CEO, Florida Philanthropic Network