In order to limit IRS inquiries into the charitable receipts issued by an SMLLC, the IRS is encouraging charities to disclose that the SMLLC is wholly owned by its parent charitable organization and is treated by such organization as a disregarded entity in the receipt or another statement.

The Notice provides that it is effective for contributions made on or after July 31, 2012, but that it can be relied on by donors for taxable years for which the statute of limitations for refund or credit are still open.

While the Notice addresses U.S. federal income tax issues for an SMLLC, state and local tax issues may still remain. For example, states may treat an SMLLC as ineligible to obtain property tax exemption for its real property or ineligible to purchase property free of sales tax. State positions vary widely and may be subject to change.