If an NPC's original organizing documents - articles of
incorporation, bylaws and application for tax exempt status (IRS Form 1023) - discuss both research and education, the IRS considered both of these
activities in determining whether the foundation qualified for
recognition as a tax exempt organization. NPCs that decide to
support education activities as well as research, and have mentioned
both of these in their organizing documents, need not take any action to
inform the IRS of the expanded range of activities.
However, if the organizing documents mention only research, discuss
with a nonprofit accountant the most suitable means of informing the IRS of a
change in the NPC's activities. Generally, the sample notice
provided below is adequate if the new activity is an insignificant change in the
foundation's activities. The letter that follows the sample notice is more
suitable for a significant change. Because this is a judgment call, it
is a good idea to consult an accountant with nonprofit expertise.
Please note: Because the NPC remains a a medical research organization operated in
conjunction with a hospital, it is unlikely that the IRS will change the
NPCs designated reason for non-private foundation status
regardless of which notification mechanism is used.
Sample Notice – Use for an Insignificant Change in Activity
Name of Foundation
EIN 00-0000000
Date
Form 990, Part VI, Line 76 (or Form 990 EZ, Part V, Line 33)
In accordance with the IRS instructions for Line 76 of the return,
the following information is provided regarding a new activity begun in
2000:
In November 1999, Congress passed P.L.106-107. Section 204 (attached)
authorizes foundations established by Department of Veterans Affairs
medical centers to accept donations and make expenditures in support of
both research and education activities conducted at the affiliated VA
medical center. Until passage of P.L.106-107, foundations established
under this authority (Title 38 USC 7361-7368) were allowed to support
only research. The new authority allows the foundations to support VA's
research and education missions.
After careful consideration, on (date) the board of directors of the
(name of foundation) approved a motion to begin supporting both research
and education at the (name of VA medical center) effective immediately.
As required by the statute, in coordination with the Education Committee
of the medical center, the (foundation) has established a review and
approval process for proposed education activities and met other
conditions of the new statute.
Letter Notifying Key IRS District Director of New
Activity
Use for a Significant Change of Activity
On Foundation Letterhead
Date
Key District Director
Obtain IRS district address from accountant
Re: Notification of New Activity
Dear Sir or Madam:
The (name of foundation) was organized in (date) for the purpose of
accepting donations and making expenditures in support of research at
the (name) Department of Veterans Affairs medical center. On (date),
(name of foundation) received notification from the IRS of its
recognition of (name of foundation)'s tax exempt status as a 501(c )(3)
organization.
In November 1999, Congress passed P.L.106-107. Section 204 (attached)
authorizes foundations established by Department of Veterans Affairs
medical centers to accept donations and make expenditures in support of
both research and education activities conducted at the affiliated VA
medical center. Until passage of P.L.106-107, foundations established
under this authority (Title 38 USC 7361-7368) were allowed to support
only research. The new authority allows the foundations to support VA's
research and education missions.
After careful consideration, on (date) the board of directors of the
(name of foundation) approved a motion to begin supporting both research
and education at the (name of VA medical center) effective immediately.
As required by the statute, in coordination with the Education Committee
of the medical center, the (foundation) has established a review and
approval process for proposed education activities and met other
conditions of the new statute.
Based on the above information, (name of foundation) requests an
updated determination letter that indicates operation of the foundation
is in accordance with its exempt function. If additional information is
needed to rule on this request, please contact (name and phone number of
executive director).
Sincerely,
VETERANS MILLENNIUM HEALTH CARE AND BENEFITS ACT
SEC. 204. AUTHORITY TO ACCEPT FUNDS FOR EDUCATION AND TRAINING.
(a) ESTABLISHMENT OF NONPROFIT CORPORATIONS AT MEDICAL CENTERS-
Section 7361(a) is amended--
(1) by inserting 'and education' after 'research'; and
(2) by adding at the end the following: 'Such a corporation may be
established to facilitate either research or education or both research
and education.'
(b) PURPOSE OF CORPORATIONS- Section 7362 is amended--
(1) in the first sentence--
(A) by inserting '(a)' before 'Any corporation'; and
(B) by inserting 'and education and training as described in sections
7302, 7471, 8154, and 1701(6)(B) of this title' after 'of this title';
(2) in the second sentence--
(A) by inserting 'or education' after 'research'; and
(B) by striking 'that purpose' and inserting 'these purposes'; and
(3) by adding at the end the following new subsection:
'(b) For purposes of this section, the term 'education and training'
means the following:
(1) In the case of employees of the Veterans Health Administration,
such term means work-related instruction or other learning experiences
to--
'(A) improve performance of current duties;
'(B) assist employees in maintaining or gaining specialized
proficiencies; and
'(C) expand understanding of advances and changes in patient care,
technology, and health care administration.
Such term includes (in the case of such employees) education and
training conducted as part of a residency or other program designed to
prepare an individual for an occupation or profession.
'(2) In the case of veterans under the care of the Veterans Health
Administration, such term means instruction or other learning
experiences related to improving and maintaining the health of veterans to patients and to the families
and guardians of patients.'.
(c) BOARD OF DIRECTORS- Section 7363(a) is amended--
(1) in subsection (a)(1), by striking all after 'medical center, and'
and inserting 'as appropriate, the assistant chief of staff for research
for the medical center and the assistant chief of staff for education for the medical center, or, in
the case of a facility at which such positions do not exist, those
officials who are responsible for carrying out the responsibilities of the medical center director,
chief of staff, and, as appropriate, the assistant chief of staff for
research and the assistant chief of staff for education; and';
(2) in subsection (a)(2), by inserting 'or education, as appropriate'
after 'research'; and
(3) in subsection (c), by inserting 'or education' after 'research'.
(d) APPROVAL OF EXPENDITURES- Section 7364 is amended by adding at
the end the following new subsection:
'(c)(1) A corporation established under this subchapter may not spend
funds for an education activity unless the activity is approved in
accordance with procedures
