501(c)(2)

501(c)(2) organizations exist for the sole purpose of holding title to property and is
therefore not an operating organization. These are "title holding companies."[1] It need not Civil
be a nonprofit corporation,[1] but it must turn over income thus collected to an organization Liberties
which itself is exempt under section 501(a).[2] It cannot accept contributions.[3]
A 501(c)(2) organization can not be a trust.[4]
Policy

Nonprofit
Parent organization regulation
The statute as it stands does not specify the relationship between the organization receiving This page is
the income of the 501(c)(2) organization, and that organization itself.[1] part of the
A 501(c)(2) may be a parent organization to another 501(c)(2).[1] Privacy
Policy Project

Purpose
There are several advantages to 501(c)(2) status, such as:[2][4]
State nonprofit
Limitation of liability from potential damage suits
regulation
Enhancement of ability to borrow
information
Limitations imposed in gifts and bequests to exempt organizations that effectively
Nonprofit
require such gifts to be kept in separate entities
regulation in the
Clarity of title
states
Accounting simplification
Nonprofit
Limitations imposed by various state laws on organizations that would be recognized
organization
as exempt under the federal revenue laws.
IRS code,
section 501

History
The legislative history surrounding the original enactment of the provision makes no specific reference to the
purpose it was intended to serve. The general observation is made, however, that organizations accorded
exemption in the 1916 Act were difficult to secure returns from and that the U.S. Department of the Treasury
collected little or no revenue from them.[2]
Congress enacted 501(c)(25) because of the dissatisfaction of investment practitioners with the limits created
by 501(c)(2).[4]

Uses and permissible activities

IRC 501(c)(2) organizations provide a means for unrelated IRC 401(a) pension trusts to collectively hold title to
property.[2] The titleholding company may be ideal for organizations seeking a tax-exempt haven for their
headquarters building.[2]
The rental of real property and other types of investments are permissible, including stocks and bonds.[2][4]

See also
IRS code, section 501
501(c)

External links
IRS - Exempt Organizations Continuing Professional Education Technical Instruction Program

Footnotes
1. IRS, "CPE for FY 2001: Title Holding Companies," accessed October 8, 2014
2. IRS, "1986 EO CPE Text - 501(c)(2)," accessed October 8, 2014
3. guidestar.org, "Internal Revenue Service Subsection Codes for Tax-Exempt Organizations," accessed
October 8, 2014
4. IRS, "CPE for FY 1989: Update on Title-Holding Organizations," accessed October 8, 2014
 Ballotpedia features 290,042 encyclopedic articles written and curated by our professional staff of editors,
writers, and researchers. Click here to contact our editorial staff, and click here to report an error. Click here
to contact us for media inquiries, and please donate here to support our continued expansion.