NEIL ROBERTSON, EXECUTOR OF THE WILL OF NORA HAND, PETITIONER V. UNITED STATES OF AMERICA No. 87-1800 In The Supreme Court of the United States October Term, 1988 On Petition For A Writ of Certiorari To The United States Court Of Appeals For The Sixth Circuit MEMORANDUM FOR THE UNITED STATES IN OPPOSITION Petitioner contends that the estate is entitled to an estate tax deduction under Section 2055(a)(3) of the Internal Revenue Code /1/ for a transfer made in trust for the benefit of a nonprofit cemetery association. 1. Petitioner is the executor of the estate of Nora Hand, who died on February 25, 1979. The decedent made a sustantial bequest -- 53 acres of land in Cheatham County, Tennessee, $10,000 in cash, and one-half of the residue of her estate -- to three trustees to be held in trust for use in the operation of the N.P. Hagewood Cemetary, a one-half-acre public cemetery that had been in existence for more than 100 years. The will specified that the bequethed real property was "to be used in connection with (the Hagewood) cemetery only for graveyard or cemetary purposes for the general public" and that the cash bequest was to be used for "the upkeep, maintenance and improvement" of the cemetery. The will also directed the trustees to change the name of the cemetery to the "Hagewood-Hand Cemetary." On its federal estate tax return, the estate claimed a charitable contribution deduction for these bequests to the cemetery trustees. Subsequently, the trustees of the cemetary adopted a resolution to provide burial space to the general public at no charge so long as the income from a perpetual care fund was sufficient "to adequately maintain" the cemetery. See Pet. 3-4; C.A. App. 5-8, 16-22; Exhs. A, B. /2/ The Internal Revenue Service disallowed the deduction on the ground that nonprofit cemetery associations are not operated "exclusively for * * * charitable * * * purposes" within the meaning of Section 2055(a) of the Code, and it determined an estate tax deficiency of $21,145. Petitioner paid the disputed taxes, plus interest and additions to tax, and filed an administrative claim for refund, which was not granted. Petitioner then brought this refund suit in the United States District Court for the Middle District of Tennessee, maintaining that the bequest to the cemetery trustees was eligible for the charitable deduction. The district court granted the government's motion for summary judgment (Pet. App. 1b-3b). The court relied on Mellon Bank v. United States, 762 F.2d 283 (3d Cir. 1985), cert. denied, 475 U.S. 1032 (1986), which had rejected the same contention made by petitioner here. The Mellon Bank decision had explained that nonprofit cemetery companies had always been treated separately from other "charitable" orgainizations for federal tax purposes. Congress had specifically acted to extend the charitable income tax deduction to contributions made to cemetery companies, but it had not taken similar action with respect to the estate tax. See 762 F.2d at 285. The district court cited with approval the Third Circuit's conclusion that it would be "'implausible to construe Section 2055(a)(2) to cover a situation which required an amendment to an almost identical parallel provision in the income tax sections to reach that result'" (Pet. App. 3b (quoting 762 F.2d at 285)). Accordingly, while questioning the wisdom of the rule established by Congress, the district court concluded that "'it is not for us to amend the statutory language to provide for deductions for bequests to nonprofit cemetery associations when Congress had failed to do so'" (Pet. App. 3b (quoting 762 F.2d at 286)). The court of appeals affirmed "upon the opinion of the district court" (Pet. App. 1a). 2. Petitioner contends that a nonprofit, public cemetery is an organization operated exclusively for "charitable * * * purposes" within the meaning of Section 2055(a)(2) and (3) of the Code. As petitioner acknowledges (Pet. 5), this is a "settled issue." The courts of appeals have repeatedly held that the Code does not provide an estate tax deduction for contributions made to nonprofit cemetery companies because such companies do not fall under the umbrella of organizations generally described in Section 2055(a), and this Court has consistently declined to review challenges to those decisions. See, e.g., Mellon Bank v. United States, supra; First Nat'l Bank v. United States, 681 F.2d 534 (8th Cir. 1982), cert. denied, 459 U.S. 1104 (1983); Child v. United States, 540 F.2d 579, 581-582 (2d Cir. 1976), cert. denied, 429 U.S. 1092 1977). Congress has taken no action to change the relevant statutory provisions since certiorari was denied in these cases, even though the logic of the distinction drawn in the Code has been criticized as "anomalous" (see Mellon Bank v. United States, 475 U.S. at 1034 (O'Connor, J., dissenting from denial of certiorari)), nor has any court departed from this settled body of law. Accordingly, there is no more reason for this Court to grant certorari here than there was on the other occasions when the question was presented to it for review. The decision below is correct for reasons well stated by the court of appeals in Mellon Bank, 762 F.2d at 285-286. From their earliest days, the federal tax statutes have always distinguished between cemetery companies and other organizations generally classified as "charitable." In the words of the Board of Tax Appeals, "Congress has consistently and persistently placed charitable and religious institutions in one class and cemeteries not operated for gain in a distinct and separate class" (Craig v. Commissioner, 11 B.T.A. 193, 200 (1928)). See also Schuster v. Nichols, 20 F.2d 179, 181 (D. Mass. 1927). Thus, in the present Code, Section 501(c)(3) provides a tax exemption for "charitable" organizations, but tax-exempt status is conferred upon cemetery companies by a separate provision, Section 501(c)(13). Significantly, Congress addressed itself to this distinct treatment when it enacted the 1954 Code. At that time, in addition to the general provision permitting an income tax deduction for contributions to charitable organizations (I.R.C. Section 170(c)(2)(B)), Congress enacted a special provision (I.R.C. Section 170(c)(5)) establishing a deduction for contributions to nonprofit cemetery companies. The Senate Report explained that this amendment "extends the deduction for charitable contributions beyond those allowed under present law to contributions made to nonprofit cemetery and burial companies." S. Rep. 1622, 83d Cong., 2d Sess. 30 (1954)). Clearly, since Section 170(c)(2) does not confer upon a taxpayer an income tax deduction for contributions to cemetery companies, the "almost identical parallel provision" covering estate tax deductions, Section 2055, cannot plausibly be read to allow a deduction for a contribution to a cemetery company. Mellon Bank, 762 F.2d at 285. Because Congress, in contrast to its action with respect to the income tax, did not see fit to create an estate tax deduction for contributions to cemetery companies in 1954 or at any time thereafter, it "is not for (the courts) to amend the statutory language to provide for deductions for bequests to nonprofit cemetery associations when Congress has failed to do so" (id. at 286 (footnote omitted)). Petitioner argues that the intent of Congress when it enacted Section 170(c)(5) was much narrower than that ascribed to it by the court in Mellon Bank -- namely, that Congress acted only to extend the charitable deduction to a class of cemetery companies that clearly were not "charitable," such as family cemetery corporations, but that the enactment of Section 170(c)(5) is not inconsistent with the proposition that other, nonfamily, cemetery companies should be regarded as "charitable" organizations within the meaning of Section 170(c)(2)(B) and, hence, Section 2055. See Pet. 7-8 (quoting Mellon Bank, 475 U.S. at 1034 (O'Connor, J., dissenting from denial of certiorari)). But this hypothesis concerning Congress's intent in 1954 is not persuasive. The background of the congressional action was that deductions to cemetery companies consistently had been denied prior to 1954, not merely for contributions to family corporations, but for those to public cemeteries. The courts had held that such public cemetery companies were not "charitable" organizations within the meaning of the federal tax statutes. See, e.g., Gund's Estate v. Commissioner, 113 F.2d 61 (6th Cir. 1940), cert. denied, 311 U.S. 696 (1940); Wilber Nat'l Bank v. Commissioner, 17 B.T.A. 654 (1929); Craig v. Commissioner, supra. Congress did not take issue with the interpretation in 1954; it simply acted to change the results of those cases with respect to the income tax by enacting a special subsection to provide an income tax deduction for contributions to cemetery companies. It did not make an analogous change for the estate tax, and therefore, as every court of appeals that has considered the issue has concluded, the Code cannot reasonably be read to allow an estate tax deduction for a contribution made to a nonprofit cemetery company. It is therefore respectfully submitted that the petition for a writ of certiorari should be denied. CHARLES FRIED Solicitor General JULY 1988 4 /1/ Unless otherwise noted, all statutory references are to the Internal Revenue Code of 1954 (26 U.S.C.), as amended (the Code or I.R.C.). /2/ Petitioner recites that the cash bequest was $5,000, but the will provides for a $10,000 bequest.