501(c)(3) organizations frequently create single member limited liability companies to hold assets, some as subsidiaries to protect against risk. However, until now, the IRS would not state whether donations to these single member LLCs were deductible as charitable contributions. As of today, that has all changed.
The IRS just released a notice that donations to wholly owned LLC subsidiaries of nonprofits will be treated as charitable contributions to the charity as long as certain conditions are met.
To qualify, the LLC must be: (1) single member, (2) created or organized in the US, (3) wholly owned and controlled by a US charity, and (4) treated as a disregarded entity (meaning that all taxes pass through the LLC to the charity). The US charity is the donee for purposes of providing an acknowledgment to the donor. The IRS encourages the charity to disclose in the acknowledgment that the LLC is wholly owned by the charity and treated by the US charity as a disregarded entity.
This is great news for nonprofits with LLC subsidiaries because donations can now go directly to the LLC without concern for whether it will be treated as a charitable contribution.