Changes to Jan. 2020 Revision of Instructions for Form 1023, Schedule E, Line 2 and Line 2a

 

With the release of Rev. Proc. 2021-5, the text in the January 2020 revision of the Instructions for Form 1023, Schedule E, line 2 and line 2a is being revised. The revised text is below.

Line 2. Generally, if you didn't file Form 1023 within 27 months of formation, the effective date of your exempt status will be the date you filed Form 1023 (submission date). We may grant requests for an earlier effective date when there's evidence to establish you acted reasonably and in good faith, and the grant of relief won't prejudice the interest of the government.

Select the appropriate box to indicate whether you accept the submission date as the effective date of your exemption status or whether you are requesting an earlier effective date.

Caution: Do not check the box to request an effective date earlier than the submission date if you are an organization that is not required to apply for recognition of exemption in order to be tax-exempt. These organizations are not eligible to make these requests. See Rev. Proc. 2021-5 (updated annually). However, you may be exempt prior to the effective date that the IRS recognizes your exempt status because you may be considered tax exempt under section 501(c)(3) without filing Form 1023. See Organizations not required to obtain recognition of exemption, earlier.

Line 2a. If you are an organization that is required to apply for exempt status, you may be eligible for consideration for relief from the requirement that you file Form 1023 within 27 months of formation if you can establish that you acted reasonably and in good faith, and that granting an extension won't prejudice the interests of the government. Describe in detail your reasons for filing late, how you discovered your failure to file, any reliance on professional advice or advice from the IRS, and any other information you believe will support your request for relief. Also, you may want to provide a comparison of (1) what your aggregate tax liability would be if you had filed this application within the 27-month period with (2) what your aggregate liability would be if you were exempt as of your formation date.

We may consider the following factors.

You failed to file your application for exempt status because of intervening events beyond your control.

You exercised reasonable diligence, but you weren't aware of the application filing requirements. (The complexity of your filing and experience in these matters may be taken into consideration.)

You reasonably relied on written advice from us.

You reasonably relied on the advice of a qualified tax professional who failed to file or advise you to file Form 1023.

You filed the required Form 990 series returns consistent with your requested status.