IRS loosens charity rules

IRS loosens charity rules

A recent shift in IRS rules makes it easier for organizations to file as non-profits. According to the new “streamlined” application for recognition of exemption (not for profit status), applicants can now pay only $250 app fee, down from $400.

The IRS says they are offering the new EZ form because it can cut average processing time from 192 days down to 13 days. That’s quite an improvement! The change comes as the IRS attempts to address complaints filed, mostly by politically-based non-profit groups. By the numbers, the IRS approved up to 95 percent of all 1023-EZ applications.

Now, if you are a prospective non-profit, this is music to your ears. The hurdles between a good idea and the ability to actually tell people – legally – you’re a legitimate nonprofit entity have been prohibitive. If you’ve ever had to say “We applied, and we’re waiting” over and over and over again, you know exactly how that feels. Like you’re doing the work, but somehow not quite good enough.

But, there’s another side to this story. If you’re an existing non-profit, you read this news and have nightmare visions of hordes of new copycat groups entering your sector … and by “entering” we mean “inundating”.

Current 501c3 holders believe the IRS may have overcorrected in its attempts to appease groups who felt held out of the political process by the lengthy application process. But is that fear legitimate or misplaced? Turns out, a little bit of both.

On one hand, there could very well be a large influx of new organizations in certain sectors, and that could indeed muddy the waters. That being said, only a small number of total nonprofits actually engage in public fundraising. How many? About 8 percent. Yes, 8 percent. That’s a large number total, but not a large percentage. So, at a second glance maybe the water isn’t quite so muddy.

But that doesn’t mean you can assume invulnerability. You still need to have a message and a presence that stands out above the rest. Regardless of which side of the “fundraising or not” equation you fall, your organization needs to have a definitive brand and a well-established conversation with your donors, beneficiaries, and staff at every level. This is a marathon AND a sprint. Your PR team needs to make an impact now while also building for the long haul.

David Milberg is a financial analyst from New York City.

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