The U.S. Internal Revenue Service (IRS) usually handles applications for 501(c)(3) tax-exempt status in the order in which organizations submit them. If the IRS itself makes an internal error that unduly delays a determination of 501(c)(3) status, it usually agrees to expedite the application.
In some cases, however, the IRS handles everything normally, but an organization needs legal permission to receive tax-deductible donations quickly. For a "compelling reason"—usually an emergency of some type—the IRS can exercise its discretion to consider a written request for expedited review.
How to File a Request
If your organization needs expedited service, follow the appropriate procedure and ask the IRS to speed up the process.
- Complete and submit an Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code (Form 1023) to apply for 501(c)(3) tax-exempt recognition for your organization.
- Compose a written statement that describes the compelling reason for expedited review of the application. For a pending grant, help the reviewer by naming the party committed to transferring the funds or assets, the value of the grant, the deadline for either accepting or forfeiting it, and the consequences of forfeiting it to your organization and its work.
- Have a principal officer or that person's authorized representative sign the statement.
- Send the written request to the IRS. You can find the instructions and the information on where to send your request for an expedited exemption decision on the IRS website.
Why the IRS Might Say No
The IRS can use its discretion to decline to expedite an application and has turned down expedite requests in the past because:
- The entity seeking expedited handling describes no specific plans to work in the area it points to in its written statement as an urgent disaster relief need.
- The entity claims a pending grant offer but fails to show that the other party has committed grant funds to it by a specified deadline.
- The entity does have a pending grant offer that times out on a specific date, but the grant is insignificant in relation to the entity's annual revenue and has only a minor impact on its operations.
Why the IRS Might Say Yes
The IRS offers examples of situations in which it agreed to put applications on the fast track:
- In one exemplary situation, the IRS expedited approval for an emergency relief fund quickly formed to aid earthquake victims in Haiti.
- In another example of an application that received expedited handling, a homeless shelter required tax-exempt status to receive a grant that would pay for half of its annual expenses.
- In another successful application, a proposed addiction clinic would only be able to open and operate with the help of a donation that required 501(c)(3) status, so the IRS approved the request to expedite tax exemption.
You may have further questions about speeding up the review of your application for 501(c)(3) status. If so, you may refer to the IRS website. It explains the process for expedited review in detail.
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