Limited Liability Companies and Qualification for the Welfare Exemption
Effective January 1, 2005, a Limited Liability Company (LLC) may qualify for the welfare exemption under section 214 of the Revenue and Taxation Code and Property Tax Rule 136, Limited Liability Companies as Qualifying Organizations for the Welfare Exemption.
Rule 136 clarifies that only LLC's owned by members that are qualifying organizations that satisfy all the requirements for the welfare exemption under section 214 may qualify for the exemption. The requirements for the welfare exemption for limited liability companies are as follows:
- Qualifying organizations that can be owners/members of the LLC include nonprofit tax-exempt entities qualified for exemption under section 501(c)(3) of the Internal Revenue Code or under section 23701d of the Revenue and Taxation Code and that qualifies for exemption under section 214, and government entities exempt from taxation under section 3 of Article XIII of the California Constitution.
- An LLC must be wholly owned by one or more nonprofit tax-exempt organizations (as described above) or jointly owned by a government entity and a nonprofit tax-exempt organization.
- Both the LLC and its property must satisfy the same welfare exemption eligibility requirements as other legal entities and their properties.
The following provides information on pertinent areas relating to Limited Liability Companies:
- Filing Requirements for Limited Liability Companies for Organizational Clearance Certificate
- Articles of Organization Language Requirements
- LTA No. 2004/85, Limited Liability Companies as Qualifying Organizations for the Welfare Exemption
- LTA No. 2005/019, Welfare Exemption Organizational Clearance Certificate Form Revision Limited Liability Companies as Qualifying Organizations
- Property Tax Rule 136, Limited Liability Companies as Qualifying Organizations for the Welfare Exemption
Filing Requirements for Limited Liability Companies for Organizational Clearance Certificate
The Limited Liability Company must file a claim for an Organizational Clearance Certificate and supporting documentation, including the following:
- Articles of Organization, and any corresponding certified amendments or restatements
- Operating Agreement
- List of members/owners, and Organizational Clearance Certificate number for each member
- Financial Statements
- Federal or state letter of exemption from income tax (if the LLC itself does not have a tax-exempt letter from the Franchise Tax Board or Internal Revenue Service, the LLC may use the tax-exempt letters of its members to qualify.