501(c)(3) is a corporation organized exclusively for charitable, religious, educational and scientific purposes, including for such purposes, the making of distributions to organizations that qualify as an exempt organization under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code.
Benefits of the 501c3 EZ
Faster processing time and less expensive; however, the organization’s budget will be capped or “limited” to $50,000, which can close doors for future grant opportunities. Example of EZ applicants include: Youth League Organizations, Youth Services, Food Pantries/ Soup Kitchens, Arts & Culture.
To qualify for the 501c3EZ, you must meet the following criteria.
- Only organizations with revenue and/or expense of less than $50K per year are eligible.
- Not all types of organizations can qualify for the EZ application. If you plan to set-up a church or faith-based organization, hospitals, schools, housing providers, and foundations are some organizations that cannot qualify for EZ.
Drawbacks of the 501c3 EZ
- If the organization exceeds the $50,000 revenue (donation) or expense limit, within the first three years, it risks the possibility of being taxed on the exceeded amount or be responsible in paying fees to the government or trigger an audit event, which can result in higher expenses
- If you plan or even hope to exceed $50,000 in donations in the next three years, then you may wish to consider the 501c3 standard process. It may save you headaches in the future. To learn more about the pros and cons of the 501c3EZ, click here.