A Nonprofit EZ Button – Good or Bad?

You know that feeling – you’ve been at something for a while, but change and even progress can make you feel like you’ve been thrown a curve ball.  Like switching from a flip phone to a smart phone – I knew how to use a cell, but holy cow this new phone has me sending email, surfing the web and more!  Well, that’s how things are for me right now at KNN.  We’ve been around for over 13 years, but many things are new to us since we applied for our tax-exempt status in the fall of 2012.

While receiving our tax-exempt status has created extra work and a few transition pains, the good news is that these experiences will help KNN better serve our members across Kentucky.  We’ll have “been there, done that” with nearly all aspects of starting a nonprofit and have broadened our scope of expertise.

One of the tasks involved in our transition to an independent 501 (c) 3 was filing the IRS Form 1023 in the fall of 2012.  This is a tedious form.  Some things were a pain, others – while still a pain, were good for forcing us to think though some structural issues that would later be very important.  There is currently a debate right now about the IRS’ proposal for a Form 1023 EZ.  Lots of folks have applauded this effort – after all, what’s not to love about anything called “EZ”?  But honestly, I’m not convinced the IRS’s plans are the right move for the sector.  Two recent articles – one from Tim Delaney of the National Council of Nonprofits and one from Michael Wyland featured in the Nonprofit Quarterly raise some valid concerns about why this proposal is not in the best interest of our sector.

One of my colleagues said the proposal shouldn’t move forward because “I had to fill out that awful Form 1023, so others should too.”  My 9 year-old makes similar arguments to me about a variety of things she doesn’t think her 6 year-old brother should get to do – and you guessed it, that argument doesn’t work for me.  But I do agree that there is reason for concern here.  While I do think that the Form 1023 should be improved, I don’t think the proposed EZ will do much to increase the public’s confidence in our sector.  At KNN, we get lots of calls from folks interested in starting a nonprofit.  Some of these calls are from thoughtful folks who are interested in improving our communities and understand (or want to understand) the public trust required to start and operate a nonprofit organization.  Other folks . . .  let’s just say, there are times that I’m very glad the complications and thought required for the current Form 1023 actually does discourage some folks from applying.

Let us hear from you – what do you think?  Is the IRS’ proposed Form 1023 EZ good for our sector — or not?

Danielle Clore

Executive Director