The IRS provided guidance (Notice 2012-52, 2012-35 I.R.B. 1) regarding the deductibility of contributions to domestic single-member limited liability companies (LLCs) that are wholly owned by organizations described in Section 170(c)(2) and considered disregarded entities under Reg. Sec. 301.7701-2(c)(2)(i).
In general, Sec. 170(a) allows as a deduction any "charitable contribution" as defined in Section 170(c): a contribution or gift to or for the use of certain entities listed in Section 170(c)(1)-(5). Specifically, Section 170(c)(2) allows a charitable contribution to certain charitable corporations, trusts or community chests, funds or foundations that meet the requirements set forth in the subsection. The IRS recognizes that many of these entities may and do own disregarded entities to carry on their charitable purposes. The notice addresses the treatment of charitable contributions directly to these disregarded entities.
The notice provides that if all other requirements of Section 170 are met, the IRS will treat a contribution to a domestic single-member LLC as a charitable contribution to a branch or division of the parent charity. The parent charity is the donee organization for purposes of the substantiation and disclosure required by Section 170(f) and Section 6115. The notice further states that to avoid unnecessary inquiries by the IRS, the LLC should disclose, in the acknowledgment or other statement to the donor making the contribution, that the LLC is wholly owned by the parent charity and treated by the parent charity as a disregarded entity. Finally, the notice provides that the percentage limitations of Section 170(b) apply as though the gift had been made to the parent charity.
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