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Abstract: 

On January 12, Jodi Schwartz, acting on behalf of the Tax Section of the New York State Bar Association, filed with the IRS a detailed report on the tax deductibility, under §170 and related provisions, of contributions made to a disregarded entity subsidiary of a tax-exempt organization eligible to receive tax-deductible contributions. The failure of the IRS to either confirm or deny the deductibility of such contributions has frustrated charitable planning on such issues. The theory underlying the disregarded entity concept appears to leave little room for doubt that such a contribution is to be treated as a contribution to the parent. However, where the disregarded entity is a foreign organization, it creates a direct conflict with the portion of IRC §170(c)(2) that defines it as a charitable contribution for purposes of that section as including only an entity “created or organized in the United States.” Similar problems arise where the disregarded entity itself is not a qualified charity. In 2001, the IRS announced its intention to address this issue, but no announcement has been forthcoming since then. The New York State Bar Association Tax Section submission urges the IRS to recognize the deductibility of contributions to such disregarded entities and provides a lengthy and detailed technical analysis of the applicable law. For the convenience of readers,we have reproduced here the Introduction and the “Summary Conclusions and Recommendations” portions of the report, and the concluding portion, entitled “Possible IRS Guidance.”

Keywords: IRC §170(c)(2); Reg. § 301.7701-1(a)(1)

Affiliations:  .