The Law of Tax-Exempt Organizations, 10th Edition 2014 Cumulative Supplement

CHAPTER TWENTY-EIGHT

Tax-Exempt Organizations and Exempt Subsidiaries

§ 28.1 Subsidiaries Basics

§ 28.3 Tax-Exempt Subsidiaries of Charitable Organizations

§ 28.5 Contributions and Other Payments

§ 28.1 SUBSIDIARIES BASICS

p. 873. Insert as first complete paragraph, before heading:

The parent-subsidiary relationship, where both entities are tax-exempt, is established in a variety of ways. A common approach is use of overlapping boards of directors, such as where the board of the parent entity selects the board (or at least a majority of it) of the subsidiary entity, ex officio positions are used in comprising a subsidiary's board, or there is a combination of these approaches.^16.1 Another way to structure the relationship is to cause the subsidiary to be a membership entity, with the parent entity the sole member; the member is empowered to select the board of the subsidiary.^16.2 A third approach, by far the least likely of the choices, is to create the subsidiary in a state that provides for stock-based nonprofit corporations, with the parent entity being the sole stockholder. The rules as to attribution of the activities of the subsidiary organization to the parent organization are applicable in this context.^16.3

§ 28.3 TAX-EXEMPT SUBSIDIARIES OF CHARITABLE ORGANIZATIONS

p. 881, n. 79. Delete 22 and insert 23.

p. 881, n. 80. Insert following existing text:

Subsequently, however, the IRS ruled that a public charity may form and control a tax-exempt social welfare organization, ...