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Irwin Law
Irwin Law, Attorney
Category: Business Law
Satisfied Customers: 6849
Experience:  30+ yrs. representing small business, real estate, probate
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We have established - in 2009 - a small family 501(c)(3)

Customer Question

We have established - in 2009 - a small family 501(c)(3) corporate foundation largely based on my savings. The Board of the private foundation now intends to solicit funds from the public but through a subsidiary, non-profit LLC (in which the private foundation will be the sole exempt member) under its own management team and a more appealing name. The charitable purpose will be the same. We intend to activate the LLC's solicitation activities shortly.
It is my understanding that the subsidiary LLC will enjoy fully the tax-exempt benefits and status of the parent foundation and may issue tax deduction receipts under its own name. In addition, it is my understanding that the subsidiary need not acquire a separate EIN but will simply provide a combined tax return with the parent organization.
Given all that the question is a technical one: how do I register or let the IRS know (other than through the tax filing at the end of the year) of the existence of the LLC and its solicitation of tax-deductible donations (under its own name but using the parent foundation's exemption). Is there a form or process by which the IRS can be notified?
Submitted: 1 year ago.
Category: Business Law
Expert:  Irwin Law replied 1 year ago.

I don't know where you obtained your "understanding" of what a subsidiary LLC can do,but it does not sound right. It should be checked out carefully with verified authorities (which I am not, although I have served as legal counsel on several foundation boards). This information deals with subsidiary LLCs, but not specifically with fundraising activities in their own name. http://www.taxexemptsolutions.com/irs-takes-a-hard-line-on-private-benefit-and-private-inurement-rules/ ALSO SEE: http://www.taxexemptsolutions.com/why-and-how-should-a-nonprofit-create-a-subsidiary/ (This is not a recommendation or endorsement of that particular writer). I suggest obtaining a written legal opinion from an established tax authority on that subject and perhaps from the IRS itself before acting on it.

Customer: replied 1 year ago.
Please refer to: http://www.ballardspahr.com/alertspublications/legalalerts/2012-08-03-gifts-to-charitable-organizations-single-member-llcs-now-deductible.aspx
Expert:  Irwin Law replied 1 year ago.

I did, and thanks for sending the update article. Unfortunately, I still can't tell you if there is a special form of notice to file with the IRS.

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