Certified Public Accountants

November 24, 1999
Cathy Putnam
Biomedical Research Institute of New Mexico
2100 Ridgecrest Dr. SE, Bldg. T-12A (151)
Albuquerque, NM 87108

Dear Cathy:

This is a letter to follow-up our discussions with regards to reporting changes in an exempt organization's activities to the Internal Revenue Service. Any significant modification or change in an exempt organization's activities may have a direct bearing, on the continued exemption of an organization. For this reason, an organization is required to report significant changes to the activities it conducts in the furtherance of its exempt function. There is no clear guidance in determining when an organization's activities have changed or evolved enough to require IRS notification.

There are two methods of notifying the IRS of such changes. The method used depends partially on how an organization's activities were defined in its original application for recognition of its exempt status. One method is a letter to the key district director and the other is with the filing of the annual Form 990 in which the organization attaches a statement to the Form 990 outlining the changes in its activities. The method used depends on whether the change is significant. Relatively insignificant changes should be reported on a statement attached to the Form 990 and significant changes should be outlined in a letter to the key district director so that an updated determination letter can be issued. This letter should be sent before the new activity begins.

I believe it would be best for me to review BRINM's original application to determine the best method of reporting the additional educational Activities that may be undertaken. Although the bylaws outline educational activities, the application is much more extensive in inquiring about the organization's activities, and. if the educational activities were not outlined in the application, we would need to use one of the methods discussed above in notifying the IRS of these additional activities.

You had also asked about properly completing for Form 1023 application for new organizations. Specifically, you asked which box should be checked as to the type of organization. This will depend on the bylaws of the new organizations and on how and why they were established. It would be best for this to be evaluated on a case by case basis.

I hope this helps. If you have any other questions, please feel free to call.

Sincerely,

Kim McNulty
Senior Manager