In Tenn., a Plan to Give L3Cs Tax Exemptions

 

February 2, 2013; Source: Dyersburg State Gazette

Occasionally, nuggets of information of importance to the nonprofit sector pop up in the unlikeliest places. Here’s one: At a recent “legislative coffee” briefing in Dyersburg, Tenn., State Rep. Bill Sanderson discussed the bills he plans to introduce in the upcoming legislative session. On his docket is a bill to give tax exemptions for low-profit limited liability corporations, otherwise known as L3Cs. 

The newspaper report of the bill was simply a one-line mention with no further explanation from the legislator. But this is what should have been expected of entities that are pitching themselves as able to be better than charities in fulfilling charitable purposes—and to make a profit while doing it.

Are other states contemplating tax exemptions for L3Cs? On what basis? And how will granting tax exemptions to L3Cs based on their corporate form affect state and local consideration of the tax-exempt status of 501(c)(3) charities? If for-profits such as L3Cs or B corporations are able to obtain tax exemptions as for-profits doing charitable activities, does that reduce the argument for the special tax treatment of nonprofits? —Rick Cohen