501(c)(2): Difference between revisions
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{{tnr}}'''501(c)(2)''' organizations "hold title to property on behalf of another exempt entity" and are "generally controlled by a parent tax-exempt organization."<ref>[https://www.wagenmakerlaw.com/blog/section-501c2-tax-exempt-title-holding-corporations-good-bad-and-other-options ''Wagenmaker & Oberly'', "Section 501(c)(2) Tax-Exempt Title Holding Corporations: The Good, the Bad, and Other Options," August 13, 2014]</ref> 501(c)(2) organizations must turn over income thus collected to an organization which itself is exempt under section [[IRS code, section 501|501(a)]]. A 501(c)(2) organization cannot be an ordinary trust.<ref name=doc>[http://www.irs.gov/pub/irs-tege/eotopicc86.pdf '' | {{tnr}}'''501(c)(2)''' organizations "hold title to property on behalf of another exempt entity" and are "generally controlled by a parent tax-exempt organization."<ref>[https://www.wagenmakerlaw.com/blog/section-501c2-tax-exempt-title-holding-corporations-good-bad-and-other-options ''Wagenmaker & Oberly'', "Section 501(c)(2) Tax-Exempt Title Holding Corporations: The Good, the Bad, and Other Options," August 13, 2014]</ref> 501(c)(2) organizations must turn over income thus collected to an organization which itself is exempt under section [[IRS code, section 501|501(a)]]. A 501(c)(2) organization cannot be an ordinary trust.<ref name=doc>[http://www.irs.gov/pub/irs-tege/eotopicc86.pdf ''Internal Revenue Service'', "1986 EO CPE Text - 501(c)(2)," accessed October 8, 2014]</ref><ref name=irs>[https://www.irs.gov/pub/irs-tege/atg_single_parent_title_hldg_corp.pdf ''Internal Revenue Service'', "Audit Technique Guide – Single Parent Title-Holding Corporations Exempt Under IRC Section 501(c)(2)," accessed September 30, 2025]</ref> | ||
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A 501(c)(2) may be a parent organization to another 501(c)(2).<ref name=title/>--> | A 501(c)(2) may be a parent organization to another 501(c)(2).<ref name=title/>--> | ||
==Purpose== | ==Purpose== | ||
As of September 30, 2025, there were several advantages to 501(c)(2) status, such as:<ref name=doc/><ref name=docu>[http://www.irs.gov/pub/irs-tege/eotopicf89.pdf '' | As of September 30, 2025, there were several advantages to 501(c)(2) status, such as:<ref name=doc/><ref name=docu>[http://www.irs.gov/pub/irs-tege/eotopicf89.pdf ''Internal Revenue Service'', "CPE for FY 1989: Update on Title-Holding Organizations," accessed October 8, 2014]</ref> | ||
*limitation of liability from potential damage suits; | *limitation of liability from potential damage suits; | ||
*enhancement of ability to borrow; | *enhancement of ability to borrow; | ||
Revision as of 01:41, 1 October 2025
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501(c)(2) organizations "hold title to property on behalf of another exempt entity" and are "generally controlled by a parent tax-exempt organization."[1] 501(c)(2) organizations must turn over income thus collected to an organization which itself is exempt under section 501(a). A 501(c)(2) organization cannot be an ordinary trust.[2][3]
Purpose
As of September 30, 2025, there were several advantages to 501(c)(2) status, such as:[2][4]
- 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; and
- limitations imposed by various state laws on organizations that would be recognized as exempt under the federal revenue laws.
History
According to the Internal Revenue Service, "The legislative history surrounding the original enactment of the provision makes no specific reference to the provision or 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."[2]
See also
Footnotes
- ↑ Wagenmaker & Oberly, "Section 501(c)(2) Tax-Exempt Title Holding Corporations: The Good, the Bad, and Other Options," August 13, 2014
- ↑ 2.0 2.1 2.2 Internal Revenue Service, "1986 EO CPE Text - 501(c)(2)," accessed October 8, 2014
- ↑ Internal Revenue Service, "Audit Technique Guide – Single Parent Title-Holding Corporations Exempt Under IRC Section 501(c)(2)," accessed September 30, 2025
- ↑ Internal Revenue Service, "CPE for FY 1989: Update on Title-Holding Organizations," accessed October 8, 2014
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