Streamlined Nonprofit Application Needs Fixing, IRS Told

A form used to streamline the approval process for obtaining tax-exempt status should be recreated because it has failed to ensure that the IRS grants exempt status to only eligible organizations, the National Council of Nonprofits said in a letter Monday.

The Internal Revenue Service's Form 1023-EZ, which is used by organizations with receipts and assets below a certain threshold to apply for exempt recognition, does not prevent ineligible organizations from obtaining tax-exemption, the nonprofit group said in the letter. The agency should replace the filing and come up with a suitable replacement to make sure that only those organizations that qualify under Internal Revenue Code Section 501(c)(3) receive exemption, the letter said.