The IRS recently issued Notice 2021-56, which sets forth standards that a limited liability company (LLC) must satisfy to be recognized as tax-exempt under Section 501(c)(3). The Notice also requests comments from the public by 6 February 2022 on specific issues relating to tax-exempt status for LLCs.
Action item: The Notice does not affect the status of organizations already recognized as tax-exempt under Section 501(c)(3) and is not intended to alter the substantive criteria the IRS will use to evaluate a new application for an LLC’s tax exemption. Nor does the Notice address LLC eligibility for tax-exempt status for state income tax purposes. However, LLCs that apply for recognition of tax-exempt status for federal income tax purposes should review IRS criteria described in the Notice in light of applicable state LLC laws so that its application satisfies the criteria.