The IRS has released three information letters of interest to tax-exempt organizations. The first addresses the procedure for an exempt organization to change its activities; the second addresses the tax treatment of limited liability companies (“LLCs”); and the third addresses extinguishable conservation easements.

Reporting Changes in Activities

In Information Letter 2013-0004, the IRS responded to a question about procedures for declaring changes in an organization’s activities. The letter explains that any changes should be reported on the organization’s annual information return. Rev. Proc. 2012-4 sets out the areas on which the IRS will provide a determination letter on the effect of changes in an organization’s activities. If the organization’s request falls into one of these categories, the organization may request a private letter ruling to protect itself against possible retroactive revocation. The letter does not address how an organization that files a Form 990-N, which does not provide for such a narrative description, would report such changes.

Single Member LLCs

In Information Letter 2013-0006, the IRS explained the treatment of a single-member LLC owned by a section 501(a) organization and disregarded for federal tax purposes. The letter explains that the LLC receives the benefits of its owner’s tax-exempt status and is thus not required to pay federal tax or file a federal tax or information return, with the exception of employment returns. The letter also describes LLCs’ treatment with regard to employer identification numbers, transactions that might affect exempt status, organizational documents, and election to be treated as separate from the owner.

Conservation Easements

In Information Letter 2013-0014, the IRS responded to the question of whether “an easement can be a qualified conservation contribution if the easement deed simply allows for extinguishment under applicable State law upon subsequent, unexpected changes in the conditions surrounding the property that make impractical or impossible the continued use of the property for conservation purposes.” The letter explains that a qualified conservation contribution must be donated exclusively for conservation purposes. A contribution is not exclusively for conservation purposes if it does not protect the conservation purpose in perpetuity. The letter cites the section 170 regulations as providing that “a conservation purpose may be treated as protected in perpetuity if, upon a subsequent change in conditions that makes impossible or impractical the continued use of the subject property for conservations purposes, the easement is extinguished by judicial proceeding and all of the donee’s proceeds from a subsequent sale, exchange, or involuntary conversion of the property are used by the donee in a manner consistent with the conservation purposes of the original contribution.”