In Notice 2012-52, the IRS explained that contributions to disregarded single-member limited liability companies (SMLLCs) wholly owned and controlled by a U.S. charity (as defined in Sec. 170(c)(2)) will be treated as if made directly to the U.S charity.
This rule applies for purposes of the substantiation requirements under Sec. 170(f) and the disclosure requirements for quid pro quo contributions under Sec. 6115. In addition, the percentage limitations on contributions under Sec. 170(b) apply as if the contribution was made directly to the U.S. charity.
To lessen inquiries by the IRS, the IRS recommends the charity disclose, in the acknowledgment or other statement, that the SMLLC is wholly owned by the U.S. charity and treated by the U.S. charity as a disregarded entity.
The IRS’s notice clarifies an area of uncertainty favorably for U.S. charities that, for liability or other reasons, would prefer to hold gifts of property, especially real property, in separate entities. Before the notice was issued, the IRS’s position was unclear because, as the notice states, for some tax purposes, an SMLLC is disregarded (tax and information reporting), but for other purposes (employment and certain excise taxes), it is not. (See “Finals Regs. Clarify Excise, Employment Tax Treatment of Disregarded Entities,” Oct. 25, 2011.)
The notice is effective for contributions made on or after July 31, 2012, but taxpayers can apply it to tax years beginning before July 31, 2012, for which the limitation period under Sec. 6511 has not expired.