Are you planning to start a non-profit organization and looking to obtain your tax-exempt recognition as soon as possible? If you’ve submitted Form 1023 or are preparing to do so, you might consider requesting expedited processing.
Unsurprisingly, the IRS has not been immune to the recent churn within the federal government workforce. Over the past year, wait times for processing Form 1023 have been anywhere from 7.5 to 9 months. The IRS’s website states that applicants who submitted their applications after September 25, 2024, have not yet been assigned reviewers. This wait may increase in the coming months. Thus, you might wonder—are there faster options available?
The IRS offers an option for organizations with a compelling reason to request faster, expedited processing. The IRS guidelines include the following examples of compelling reasons to approve expedited processing.
- If the organization has a pending grant, not receiving it could adversely impact its ability to operate.
- If the organization is newly established and offers disaster relief to victims of emergencies.
- If delays in issuing a determination letter are caused by errors made by the IRS.
If your organization qualifies under one of those reasons, consider applying for expedited processing. To achieve this, we suggest closely following the IRS’s requirements. Your organization must submit a letter to the IRS outlining the compelling reason(s) for the expedited processing request. As you prepare your request, we recommend considering and framing it with the following in mind. What reasons justify your organization receiving its determination letter sooner than other organizations waiting in the processing queue for months? The IRS must understand why your organization must receive its determination letter quickly.
Suppose your organization has a donor willing to give a vital grant. Still, the grant depends on the organization’s formal confirmation of its tax-exempt status by a specific deadline. In that case, you can ask the donor if they are willing to send a letter to the IRS on behalf of the organization. If the donor agrees to write a letter, they should include the following information:
- The committed donor’s name (the person or the organization)
- The amount of the donation (or value of the asset being donated)
- The date the donation will be forfeited or permanently redirected to another organization.
In your organization’s letter to the IRS, it is important to explain the potential harm to the organization and/or its charitable class if there is a delay in receiving the IRS determination letter. For example, consider the following.
Your organization is submitting an application to the IRS for tax exemption and plans to operate a drug and alcohol treatment center for teens. The previous center closed years ago, and no other similar center exists in the area. A donor has pledged a specific amount that will cover the center’s construction costs if your organization can provide proof of its tax-exempt status by a specific date. Your organization cannot open the treatment center without funding for the building.
In this scenario, if your organization submitted an expedited request to the IRS, your letter should emphasize the impact of the donation on the organization. For example, without donations, your organization could not open a center. You might consider highlighting how long your organization would take to raise the same amount the donor is pledging and how many people your organization could assist if the center opened sooner with the donor’s contribution. Then, ask the donor to write a letter to the IRS on the organization’s behalf, providing the information listed above, which would accompany the expedited request.
Even if your facts may not be as urgent or compelling as this example, conveying how a long delay will significantly hinder your ability to execute critical programming with real-world consequences might still make submitting an expedited review request worthwhile.
Given the staffing uncertainty at the IRS and throughout all federal agencies, predicting what will happen in the coming months is nearly impossible. If your situation fits the IRS’s stated criteria for expedited processing, it may be worth submitting an expedited review request, especially if you provide essential services to your community. And remember, if you have questions or need assistance, be sure to consult with legal counsel.
The views expressed in this article reflect Perlman & Perlman’s experience with expedited processing. While we have not heard of specific changes, it is uncertain if staffing reductions and changes in the administration’s priorities will impact on the IRS’s review of expedited processing requests.
