Learning The Laws Behind How A Nonprofit Can Change Their Mission Statement

Can a Nonprofit Change Its Mission Statement?

The founding directors of a nonprofit organization are motivated by their passion for a cause, so it stands to reason that they put a lot of heart and soul into their mission statements. Nonprofits attract members or donors of nonprofits because the mission statement inspires them and they want to support it.

Over time, a nonprofit organization’s programs and activities may shift away from the direction of the original mission. When a nonprofit’s work shifts too far away from its stated purpose, it may alert the IRS to revisit the nonprofit’s registration and make a determination as to whether the work of the organization still qualifies under the law as tax-exempt.

Nonprofit organizations also need to keep their donors apprised of any changes in their missions because it’s important for donors to know that their money is going toward the programs and activities that they intended to support.

Nonprofit organizations can change their mission statements without disrupting their nonprofit status as long as their new missions still qualify under the description for a tax-exempt status under section 501(c)(3) of the tax code and they notify the IRS, their donors and their members.

How to Know If You Should Change Your Mission Statement

State and federal governments provide numerous social services for people who need a little assistance, but it’s impossible for them to fill every need. Nonprofit organizations fill the needs gaps in communities where governments leave off.

One test for nonprofit organizations is for board members to ask themselves if the problem their organization attempted to solve still exists. For example, if a nonprofit’s mission was to serve veterans from World War I, their mission would now be outdated since it is now all but certain that all veterans from that war have passed on. Depending on the organization’s desires and resources, the board could decide to revise their mission by changing it, expanding it or limiting it.

Changing, Expanding or Limiting the Mission Statement

What the organization could do is to expand their mission to serve veterans who served in other wars. Board members could also limit their mission to serve veterans from just one war. They could also change it to a related purpose, like serving the families of veterans.

Keeping the Mission Statement Aligned With Tax-Exempt Purposes

Once the board completes the new mission statement, they need to assess whether it meets the criteria for a tax-exempt entity. The 501(c)(3) tax code states tax-exempt purposes as follows:

“The exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.  The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.”

As long as the organization still meets the criteria for continuing on as a nonprofit organization, the board should vote to approve the new mission statement. The next step would be to make any necessary amendments to the bylaws and the Articles of Incorporation.

Making Changes to the Bylaws and Articles of Incorporation

The rules for how to change the bylaws should be written into the existing bylaws. In changing the bylaws, it’s important to ensure that the rights of all board members are protected. This is why it’s common practice to give notice to the board members of the date of a board meeting where they will be discussing or voting on potential amendments to the bylaws. Unless the bylaws state otherwise, bylaws can be amended by a two-thirds vote. Boards should record the results of the vote in the minutes.

How to Properly Notify the IRS

It’s not necessary to notify the IRS right away when a nonprofit amends its bylaws. Boards need to file Form 990 annually at tax time. It’s acceptable to wait until the normal filing period to notify the IRS of any changes.

If the IRS has any questions or concerns, they’ll send out a notice.

How to Properly Notify Donors and Grant-makers

Board directors need to take special care in handling matters of grants and donations when the board is in the process of making changes to the mission, bylaws and Articles of Incorporation. Timing can be of the utmost importance.

The charitable trust doctrine states that charitable organizations must use donations for the express purpose that they were received at the time of the donation. If a charitable organization accepts a donation and then substantially changes its mission, they should contact the donor with an explanation. It’s proper for the organization to offer to return the funds if the donor objects to the new mission or requests the nonprofit to return the donation.

Consistently Project the Mission on All Print and Online Publications

A change in the mission signals a change in how the organization promotes itself. The board or communications committee should look at all public announcements of the mission and make sure they change to consistently match the newly formed mission statement.

Boards can inform their members, donors and others by making a public announcement on their website and in their newsletter. They should also make the announcement in letters to donors and grant-makers. Larger nonprofit organizations may choose to issue a formal press release.

Moving Forward After Changing the Mission Statement

One of the main responsibilities of board directors is to provide organizational oversight. After making a change to the mission statement, the board will need to monitor their programs and activities and ensure that they are in keeping with the new mission.

As with anything new, there are sure to be a few bumps in the beginning. It’s vital that board members communicate clearly as they work through any learning curves and address new problems as they arise.

Boards should also be open to the possibility of revising the mission again if things aren’t working as they expected.