"Uncharitable” Policy for Charities: Use of Disregarded LLCs by I.R.C. § 501(c)(3) Organizations is a Trap for the Unwary in Certain States

Date

2013

Authors

Outenreath, Alyson

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Abstract

This article explains how the imposition of the Texas Franchise Tax on Section 501(c)(3) Charities with subsidiary LLC structures in place arises. The article also discusses 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, discusses the ramifications of the Comptroller’s policy, and sets forth proposed solutions to remedy this potentially costly problem for Texas charities.

Description

Keywords

Disregarded LLC, I.R.C. 501(c)(3), Texas Franchise Tax, Texas Business Organizations Code, tax law, business entities, Section 501(c)(3), LLC, Section 501(c)(3) Charity

Citation

Alyson Outenreath, “Uncharitable” Policy for Charities: Use of Disregarded LLCs by I.R.C. § 501(c)(3) Organizations is a Trap for the Unwary in Certain States, 54 S. Tex. L. Rev. 685 (2012-2013).