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. (SeeRecent 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.