TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, February 19, 2014

The Use of Disregarded LLCs by Charities

Alyson Outenreath (Texas Tech), "Uncharitable" Policy for Charities: Use of Disregarded LLCs by I.R.C. Section 501(c)(3) Organizations Is a Trap for the Unwary in Certain States, 54 S. Tex. L. Rev. 685 (2013):

This article will (i) explain how the imposition of the Texas Franchise Tax on Section 501(c)(3) Charities with subsidiary LLC structures in place arises; (ii) discuss why there is no compelling reason for the Comptroller to continue with its policy of taxing Section 501(c)(3) Charities that choose to operate in structures using wholly owned LLCs; (iii) discuss the ramifications of the Comptroller's policy; and (iv) set forth proposed solutions to remedy this potentially costly problem for Texas charities.

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