Cemetery's donation of church property is a charitable activity

Plain-English summary

A tax-exempt mutual cemetery company owned a historic church building and its approximately five-acre site. After restoring the church and preserving the site, the cemetery planned to donate both to a section 501(c)(3) foundation formed to own, preserve, and maintain them and conduct related educational programs. The IRS ruled that the donation furthered a charitable purpose and therefore was a permissible charitable activity for the cemetery under Treasury Regulation section 1.501(c)(13)-1(a). The ruling did not decide whether the cemetery itself qualified under section 501(c)(13).

Ruling snapshot

• Question: Is the cemetery company's proposed transfer of the historic church building and site to the charitable foundation a charitable activity under Treasury Regulation section 1.501(c)(13)-1(a)?
• Outcome: Yes, because contributing the property to a section 501(c)(3) organization furthered a charitable purpose.
• Key authorities: IRC §§ 501(a), 501(c)(3), and 501(c)(13); Treas. Reg. § 1.501(c)(13)-1(a); Rev. Rul. 67-149

Full text (IRS public release)

Internal Revenue Service                   Department of the Treasury
                                           Washington, DC 20224

Number: 201605019
Release Date: 1/29/2016

Index Number: 501.13-00

                                           Person To Contact:
                                                        , ID No.
                                           Telephone Number:

                                           Refer Reply To:
                                           CC:TEGE:EOEG:EO2
                                           PLR-T-103423-15
                                           Date:
                                           October 16, 2015

M  =

Dear                  :

We are responding to a request for a ruling dated September 23, 2014, supplemented
by a letter dated January 23, 2015, submitted by your authorized representative. You
are requesting a ruling regarding your interactions with M (the “Foundation”.)

FACTS:

You are recognized as exempt from federal income taxation under § 501(a) of the
Internal Revenue Code as an organization described in § 501(c)(13). You were formed
to maintain a historic cemetery for the benefit of your members, the owners of burial
sites in the cemetery.

You own and maintain property which includes the historic cemetery, adjacent land, a
historic church building, and approximately five acres on which the church building sits
(the “Church Site”). You have engaged in multiple projects in the last ten years to
preserve and restore the cemetery, the church building and the Church Site. Several
years ago, you began a careful restoration of the church building and preservation of
the grasses that grow on the Church Site.

The Foundation is recognized as exempt from federal income taxation under § 501(a)
as an organization described in § 501(c)(3). It was formed to own, preserve, and
maintain the church building and the Church Site and conduct related educational
programs.

You represent that you plan to donate the church building and Church Site to the
Foundation.

PLR-T-103423-15

RULING REQUESTED:

     Whether the proposed transfer of a church building and the site on which it sits to
     the Foundation is a charitable activity within the meaning of Treas. Reg.
     1.501(c)(13)-1(a)?

LAW:

Section 501(a) provides that organizations described in subsection (c) or (d) or section
401(a) shall be exempt from taxation under subtitle A of the Internal Revenue Code
unless such exemption is denied under section 502 or 503.

Section 501(c)(3) provides for the exemption from federal income tax of organizations
which are organized and operated exclusively for charitable purposes and no part of the
net earnings of which inures to the benefit of any private shareholder or individual.

Section 501(c)(13) describes cemetery companies owned and operated exclusively for
the benefit of their members or which are not operated for profit; and any corporation
chartered solely for the purpose of the disposal of bodies by burial or cremation which is
not permitted by its charter to engage in any business not necessarily incident to that
purpose and no part of the earnings of which inures to the benefit of any private
shareholder or individual.

Treas. Reg. 1.501(c)(13)-1(a) provides that a nonprofit cemetery company may be
entitled to exemption if it is owned by and operated exclusively for the benefit of its lot
owners who hold such lots for bona fide burial purposes and not for the purpose of
resale. A mutual cemetery company which also engages in charitable activities, such
as the burial of paupers, will be regarded as operating in conformity with this standard.

Rev. Rul. 67-149, 1967-1 C.B. 133, concerns an organization formed for the purpose of
providing financial assistance to several different types of organizations which are
exempt under § 501(c)(3). It carries on no operations other than to receive
contributions and incidental investment income and to make distributions of income to
such exempt organizations at periodic intervals. The ruling indicates that a § 501(c)(3)
organization may further its exempt purposes by giving assets to another § 501(c)(3)
organization.

ANALYSIS:

As stated in the regulations, a mutual cemetery company may engage in charitable
activities, such as the burial of paupers. You plan to contribute the church and Church
Site to the Foundation. Based on your representations, the contribution to the
Foundation, a § 501(c)(3) organization, furthers a charitable purpose. See Rev. Rul.
67-149.

PLR-T-103423-15

Based on the facts and representations submitted, we conclude that:

     This transaction, as represented, is a charitable activity within the meaning of
     Treas. Reg. 1.501(c)(13)-1(a).

The ruling contained in this letter is based upon information and representations
submitted by or on behalf of                                      . accompanied by a
penalty of perjury statement executed by an individual with authority to bind
                                            . and upon the understanding that there will be no material
changes in the facts. This office has not verified any of the material submitted in support
of the request for a ruling, and such material is subject to verification on examination.

No ruling is granted as to whether                                      . qualifies as an
organization described in section 501(c)(13).

This ruling does not address the applicability of any section of the Code or Regulations
to the facts submitted other than with respect to the sections specifically described, and,
except as expressly provided in this letter, no opinion is expressed or implied
concerning the federal income tax consequences of any aspects of any transaction or
item of income set forth above.

Because it could help resolve questions concerning federal income tax status, this ruling
should be kept in                                      permanent records.

A copy of this letter must be attached to any tax return to which it is relevant.
Alternatively, if                                      . files its return electronically, this
requirement may be satisfied by attaching a statement to the return that provides the
date and control number of this letter.

This ruling will be made available for public inspection under section 6110 after certain
deletions of identifying information are made. For details, see the enclosed Notice 437,
Notice of Intention to Disclose. A copy of this ruling, showing the deletions that we
intend to make on the version that will be made available to the public, is attached to the
Notice 437. If                                      . disagrees with our proposed
deletions, it should follow the instructions in the Notice 437.

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to                                      authorized representative.

This letter is directed only to                                      . Section 6110(k)(3)
provides that it may not be used or cited as precedent by anyone else.

PLR-T-103423-15

For any questions about this letter, please contact the person whose name and
telephone number are shown in the heading.

                                           Sincerely,

                                           ______________________
                                           Casey Lothamer
                                           Branch Chief, Branch 2
                                           Tax Exempt & Government Entities

Enclosures:
   Notice 437
   Copy of redacted ruling