Who's minding the store on nonprofits?

The NTA report criticized the 1023-EZ’s “checkbox approach” that asks applicants to attest that they qualify for a tax exemption rather than having to demonstrate that they meet the requirements. That leaves it up to the IRS to decide after the fact if approval wasn’t warranted. Some 37 percent shouldn’t have qualified even though they IRS said they did, according to an NTA analysis of more than 400 organizations that received approval that year.

“You’re flooding the nonprofit sector with thousands of groups that shouldn’t be nonprofit to begin with,” said Rick Cohen, chief communications officer and chief operating officer for the National Council of Nonprofits.

Owens said the 1023-EZ effectively amounts to a registration system.

Withering public trust hampers nonprofits, which are already experiencing declines in donations, Cohen said. His group supports truncating Form 1023, just not to the extent that the 1023-EZ shortened the process.

“We need a good, strong screen before an organization gets its tax exemption,” Cohen said. “Tax exemption is a privilege, not a right. You’ve got to earn it.”