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IRS Sets Forth Simplified Standards For 501(c)(3) Status for LLCs

IRS Sets Forth Simplified Standards For 501(c)(3) Status for LLCs

IRS Sets Forth Simplified Standards For 501(c)(3) Status for LLCs

New Notice simplifies criteria and asks for comments on state law issues

The Internal Revenue Service has issued a new Notice setting forth simplified standards for limited liability companies seeking recognition of charitable tax-exempt status under section 501(c)(3) of the Tax Code.  (Notice 2021-56) It calls for comments by February 6, 2022 and raises numerous questions about harmonizing the federal requirements with restrictive state laws.

Limited liability companies have become increasingly attractive for charitable organizations in recent years, particularly for single member LLCs that are “disregarded entities” for federal tax purposes and are deemed to have the 501(c)(3) exempt status of their sole member.  

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