BlueSKy

You are here

Must charity file new Form 1023 for significant change of mission?

Your Legal Questions Answered

Must charity file new Form 1023 for significant change of mission?

The Executive Director of a 501(c)(3) nonprofit dealing with state history wants to change the name and charitable mission of the organization to deal with women’s issues.  That seems such a dramatic change that merely filing amended and restarted articles of incorporation with the IRS would not be sufficient to continue 501(c)(3) status.  Would she need to file a new Form 1023 application for recognition of exemption?

No.  The instructions to the Form 990 annual tax information return specifically say that significant changes to the governing documents, including a change in purpose, have to be noted in Part VI, Question 6 and described on Schedule O, the essential schedule for explaining out of the ordinary answers to questions.  The instructions specifically say, however, that it is not necessary to file a copy of the amended and restated articles unless they include a change of name.  In that case you must file a copy and proof of filing with the state.   

The IRS doesn’t want to see copies of other amendments to the articles or bylaws, but wants a description of what they accomplish.  It does not issue letters confirming that the new purposes are still within the scope of 501(c)(3), probably because it is so easy to meet the organizational test of saying the organization’s purpose is exclusively charitable in some way.  The IRS could investigate if it felt the new purpose wasn’t charitable, but, from the organization’s point of view, the IRS is on notice of the change.

You may have much more scrutiny at the state level.  Some states require notice to the Attorney General and perhaps even court approval for changes in purpose.  An Attorney General could argue that the money previously raised by the organization is dedicated to history and that the organization would have to raise new funds for its new purpose.  Not all states have that type of concern, but some might.

Tuesday, January 15, 2019

Comments

I signed as president of the organization I founded 10 years ago on the Form 1023 application for federal charitable tax exemption. I am no longer part of the organization and it now faces the risk of losing its state exemption for failure to file proper state reports, even though the IRS filings are current. Since the 1023 is a public document, I need to know if the organization should replace the original form with one signed by a current official. I do not want my name to be involved in case something inappropriate happens.

A domestic non-profit educational organization 501(c)(3) that is looking to (1) expand its activities abroad and (2) copywrite some of its intellectual property created over the years. On its initial form 1023 (that was incorporated in 2010) neither of these two activities were inteneded. Question: Does the organization need to amend its initial 1023 form or simply provide new information on the annual form 990? Or is there another way to report these changes? 

The Instructions to the Form 990 say that basically the only way to let the IRS know that you have undertaken new activities is to answer the question of the Form 990.  —Don Kramer

Add new comment

Sign-up for our weekly Q&A; get a free report on electioneering