CHAPTER THIRTY-TWO

Tax-Exempt Organizations: Other Operations and Restructuring

§ 32.7 SINGLE-MEMBER LIMITED LIABILITY COMPANIES

p. 1035, note 146. Insert following existing text:

Uses of SMLLCs in the exempt organizations context are illustrated by two other developments: The IRS stated that a private foundation may make a grant directly to a SMLLC and treat that transfer as a qualifying distribution (IRC § 4942) where the sole member of the LLC is a U.S. public charity (INFO-2010-0052) and that a donor may make a deductible charitable contribution directly to a SMLLC in like circumstances (Notice 2012-52, 2012-35 I.R.B. 317).

§ 32.10 CONVERSION FROM NONEXEMPT TO EXEMPT STATUS

(b) Federal Tax Law

p. 1045. Insert following existing text:

The IRS is hostile to these types of conversions, adhering to a nearly immutable policy that tax exemption as a charitable organization is not available where the entity is a successor to a for-profit business. For example, an entity whose principal functions are healing services for individuals and animals was denied recognition of exemption as a charitable organization, with the IRS ruling that the intent of the proprietors of the activities to obtain contributions and grants is a form of private inurement.209.1 Often, the IRS will also rule that exemption is unavailable because ...

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