Tax Exemptions for Charitable Single-Member Limited Liability Companies

This summer, the IRS issued long-awaited guidance on the deductibility of charitable contributions made to a single-member limited liability company (SMLLC) that is wholly-owned by a charitable organization exempt from federal income tax as a organization described in Section 501(c)(3). Previously, in a 2001 private letter ruling, the IRS confirmed that a SMLLC wholly-owned by a U.S. charity did not need to submit a separate application for recognition of federal income tax exemption, but declined to rule on whether contributions made to the SMLLC would be deductible under Section 170 as charitable contributions. An article in the IRS Continuing Professional Education Text for the fiscal year 2001 stated that [g]uidance on this issue will be forthcoming in the near future. Notice 2012-52 provides this guidance. In Notice 2012-52, the IRS ruled that a contribution to a domestic SMLLC that is wholly owned by a U.S. charity would be treated as a deductible charitable contribution, assuming all the requirements of Section 170 are met. This article discusses the requirements for federal income tax exemption of a SMLLC and the deductibility of contributions made to the SMLLC as well as the availability of Texas state tax exemptions for the SMLLC.

Tax Exemptions for Charitable Single-Member Limited Liability Companies Academic Article