IRS Notice 2012-52 resolves the uncertainty that formerly
existed regarding the deductibility of contributions to limited
liability companies of which a public charity is the sole member.
The notice makes clear that a contribution to a limited liability
company wholly owned and controlled by a public charity is treated
as a charitable contribution to a branch or division of the member
charity.
Even though a single-member limited liability company is generally
considered a "disregarded entity" for tax purposes and
thus it makes sense that a contribution to such an entity would be
treated as having been made to the member charity, this notice
provides welcome confirmation of that analysis.
Accordingly, a public charity may now rely on this notice to
accept contributions of particular assets (such as real estate)
through a limited liability company in order to insulate itself and
its other assets from any liability that could be associated with
outright ownership of the asset.
The notice goes on to provide that the member charity will be
responsible for the disclosure and substantiation requirements in
connection with the contribution to its wholly owned limited
liability company. As the "donee" of such a contribution,
the member charity is required to issue the contemporaneous
acknowledgment (required for contributions in excess of $250) and
to disclose whether any goods or services were provided in exchange
for the contribution.
The notice is effective for contributions made after July 31 but
may be relied on for earlier tax years if the period of limitation
on refund or credit has not yet expired.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
