Amid congressional hearings and charges of covering up the targeting of conservative groups, the IRS is attempting to maximize its man-hours, launching a new streamlined application process which will forgo screening of around 80% of the organizations seeking tax-exempt status and allow them to focus more on larger charities.
The changes in the process will fast-track the creation of small charities and eliminate application review intended to catch fraud and misuse of the tax-exempt status. Beginning July 1, tax-code compliant organizations that declare on a streamlined three-page form an income of less than $50,000 and total assets of less than $250,000 will be allowed to automatically accept tax-deductible donations.
Previously, these same organizations would have had to fill out a cumbersome 26-page form along with detailed descriptions of their goals and activities and a number of supporting documents.
Embattled IRS commissioner John Koskinen told TIME that the streamlined process would result in “efficiencies” allowing for faster processing of small organizations and quicker, more thorough review of bigger nonprofits. Currently the IRS is experiencing a backlog of 66,000 applications, forcing many organizations to wait for years to attain tax-exempt status. Koskinen said the process would reduce the agency’s application load by 40 to 50,000 a year.
The dramatically simplified exemption process has some worried about the increased opportunity for fraud and smaller organizations’ ability to compete with 501(c)(4)s, who are not allowed tax-exempt donations.
“It’s easier to get tax-exempt status under 1023-EZ than it is to get a library card,” said Council of Nonprofits president and CEO Tim Delaney. The fast-tracking of applications, he said, will allow dishonest organizations “to operate in the name of the charity, and the IRS will never be the wiser because they’re not looking at the underlying documentation.”



