501(c)(2): Difference between revisions
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<!--Congress enacted 501(c)(25) because of the dissatisfaction of investment practitioners with the limits created by 501(c)(2).<ref name=docu/>--> | <!--Congress enacted 501(c)(25) because of the dissatisfaction of investment practitioners with the limits created by 501(c)(2).<ref name=docu/>--> | ||
==Uses and permissible activities== | <!--==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.<ref name=doc/> The titleholding company | IRC 501(c)(2) organizations provide a means for unrelated IRC 401(a) pension trusts to collectively hold title to property.<ref name=doc/> The titleholding company can enable organizations to have tax-exemptions for their headquarters building.<ref name=doc/> | ||
The rental of real property and other types of investments are permissible, including stocks and bonds.<ref name=doc/><ref name=docu/> | The rental of real property and other types of investments are permissible, including stocks and bonds.<ref name=doc/><ref name=docu/>--> | ||
==See also== | ==See also== | ||
Revision as of 01:40, 1 October 2025
| Civil Liberties Policy |
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| Nonprofit regulation |
| This page is part of the Privacy Policy Project |
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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 IRS, "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
- ↑ IRS, "CPE for FY 1989: Update on Title-Holding Organizations," accessed October 8, 2014
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