Welcome to NoToL3C.org, the web’s only portal devoted exclusively to information, articles & blog posts for visitors seeking or wanting to contribute to a critical perspective of the organized drive to create L3C corporations.
In New York State, as well as many other states across the country, legislative advocacy is taking place to legally recognize low-profit limited liability companies, or L3C’s. These exotic legal contrivances or “hybrids” are supposed to carry out charitable or socially responsible purposes while intentionally not making too much money. Some states have already passed laws recognizing the L3C contraption. This means that they can already operate in any state in the nation, yet the advocates are still pushing for legislation in additional states.
If this all sounds odd to you, it does so because it is odd. You may be asking why we need to spend taxpayer dollars for new laws in order to allow a for-profit venture to do something good. The answer is that we don’t.
Indeed, sole proprietors or LLCs right now can engage in a commercial enterprise that is socially responsible and deliberately limit their profit? Charitable 501c3 organizations are free to engage in mission- related activities that generate revenue as long as it does not do so for private inurement interests.
Charities are also allowed to engage in activities that generate unrelated business income or own a for-profit business - provided they pay taxes on the net income. And, LLC corporations can currently be structured to receive Program Related Investments (PRIs) from foundations, which is the primary design feature of and the real motivation behind the drive to create L3C’s.
Charities are also allowed to engage in activities that generate unrelated business income or own a for-profit business - provided they pay taxes on the net income. And, LLC corporations can currently be structured to receive Program Related Investments (PRIs) from foundations, which is the primary design feature of and the real motivation behind the drive to create L3C’s.
The goodness of the individual entrepreneur’s heart aside, this is really about a business model where entrepreneurs and investors gain greater leveraged access to (or perhaps “raid”) charitable assets through Program Related Investments (PRI’s) while minimizing their own financial risks by shifting those risks to charitable sources and avoiding the accountability and transparency that the public has demanded of charities.
Why keep do the advocates keep pushing state-by-state legislation you may ask. It is because such recognition fosters the “legitimacy” of these entities and may help in securing an expedited private letter ruling from the IRS.
The truth of the matter is that the L3C advocacy movement is one of smoke and mirrors. NoToL3C.org is an effort to cut through the propaganda that is being distributed and the blurriness that is being created. Quite frankly, we are not interested in duplicating or repeating the information and opinions that the well-organized L3C movement has created, so if you are looking for that information, there are plenty of other sources elsewhere for you to go.
