The IRS announced in
Notice 2012-52 (Notice) that a contribution to a
domestic single-member limited liability company that is wholly owned and
controlled by a U.S. charity and disregarded for federal tax purposes is
deductible because the IRS will treat the gift as being made to a branch or
division of the charity. The charity will be treated as the recipient of the
gift for the purposes of meeting the substantiation and disclosure requirements.
Court Decisions Highlight Need for Compliance with Substantiation Rules to Claim
Income Tax Charitable Deduction). The charity is also encouraged to disclose
in the gift receipt or other statement that the LLC is wholly owned by the
charity and treated as a disregarded entity.
Before this Notice, taxpayers had no definitive guidance as to whether a
charitable contribution to a disregarded LLC owned by a charity would entitle
the donor to a federal income tax charitable deduction. Resolution of this issue
offers benefits to charities that prefer not to hold title to certain types of
property, such as real estate, but instead wish to hold such property through a
single-member LLC. Now charities will be able to direct their donors to make
such contributions directly to the LLC without uncertainty over the
deductibility of the donor’s contribution.
The Notice is effective for charitable contributions made on or after July
31, 2012, but taxpayers may also rely on the Notice for taxable years for which
the statute of limitations for a refund or credit has not expired.
McGuireWoods LLP Nonprofit and Tax-Exempt Organizations Group
The lawyers in our
tax-exempt organizations group provide advice and guidance on a variety of
legal issues to enable charities and other nonprofits to operate more
efficiently and effectively in the increasingly complicated, regulated, and
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