A 501(c)(2) organization can not be a trust.
The statute as it stands does not specify the relationship between the organization receiving the income of the 501(c)(2) organization, and that organization itself.
A 501(c)(2) may be a parent organization to another 501(c)(2).
- Limitation of liability from potential damage suits
- Enhancement of ability to borrow
- Limitations imposed in gifts and bequests to exempt organizations that effectively require such gifts to be kept in separate entities
- Clarity of title
- Accounting simplification
- Limitations imposed by various state laws on organizations that would be recognized as exempt under the federal revenue laws.
The legislative history surrounding the original enactment of the provision makes no specific reference to the purpose it was intended to serve. The general observation is made, however, that organizations accorded exemption in the 1916 Act were difficult to secure returns from, and that the Treasury collected little or no revenue from them.
Congress enacted 501(c)(25) because of the dissatisfaction of investment practitioners with the limits created by 501(c)(2).
Uses and permissible activities
IRC 501(c)(2) organizations provide a means for unrelated IRC 401(a) pension trusts to collectively hold title to property. The titleholding company may be ideal for organizations seeking a tax-exempt haven for their headquarters building.