The coronavirus crisis is causing many nonprofit organizations to raise questions about strategic management positions and related compliance issues. Questions on these two issues below are common. Through online discussions, I found that many advisers are not aware of these specific details. This post includes a short discussion and a link for more information.
Change in entity type
The change in an nonprofit’s legal format (for example, going from association to LLC with all other things remaining constant) requires a new EIN but not necessarily a new determination letter. The reference is https://www.irs.gov/pub/irs-drop/rp-18-15.pdf .
Change in mission or activities
‘Mission creep’ or a shift in focus of a 501(c)(3)’s activities over time or due to changing constituent needs (for example, adjusting to a pandemic crisis) into other formats of 501(c) activities (for example, going from being primarily an educational organization to primarily advocating for clients dealing with government agency paperwork) does not necessarily require a new determination letter. Risk of disqualification is managed when the modified activities are reported on the annual Form 990. The IRS web page that addresses the second point is https://www.irs.gov/charities-non-profits/exempt-organizations-material-changes .
Leave a Reply