This article was originally published in the February 2014 edition of GuideStar.
Question:
If we alter our mission a bit, what steps do we need to take to update the relevant agencies (e.g., state agencies, IRS, etc.)?
Answer:
A change to a nonprofit organization's mission likely will require notice to the organization's state of incorporation and the Internal Revenue Service ("IRS").
Most nonprofit organizations are incorporated as nonprofit corporations in a particular state. The document filed with the state in order to obtain corporate status generally is called the articles of incorporation or certificate of incorporation (depending on the nomenclature used in the particular state's law). An organization's mission is very often set forth in its articles of incorporation, and perhaps in its bylaws as well. As the organization's articles of incorporation is a document that is on file with the state, any amendment (even a very minor one) to any portion of the document also needs to be filed with the state. Note that most states set forth certain minimum approval thresholds and processes that organizations must meet in order to formally approve amendments to articles of incorporation.
Once amendments are approved, an articles of amendment (following the form required by the state) should be submitted to the applicable state office. State officials are known to scrutinize closely these filings and will reject them if there is not technical compliance with all legal requirements; as such, it is often advisable that counsel be consulted before undergoing the amendment process.
If the organization's mission statement also is contained in its bylaws, it also will need to amend that document so that it is consistent with the articles of incorporation. An organization's bylaws is generally viewed as an internal set of regulations; revisions to this document generally do not need to be reported to the organization's state of incorporation.
Further, if an organization changes its mission statement, particularly if that change entails amending the articles of incorporation or bylaws, the organization will need to report that change to the Internal Revenue Service as part of its annual Form 990 filing. Specifically, Part VI, Line 4, of the Form asks whether an organization has made any significant changes to its organizing or enabling document or bylaws and, if so, to report that change as part of its Form 990 filing. In the instructions to the Form 990 on this question, it lists examples of changes which should be viewed as "significant." One of the examples is "changes to the organization's exempt purposes or mission."
It should be noted that smaller organizations—those that are only required to submit the Form 990-N postcard filing with the IRS—are not obligated to notify the IRS of amendments to their articles of incorporation or bylaws.
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George Constantine co-chairs Venable's Regulatory Practice Group.
This discussion is provided for informational purposes only and is not intended to serve as legal advice.