April 18, 2002 | Read Time: 2 minutes
By Grant Williams
The Internal Revenue Service has ruled that a parish of the Roman Catholic Church may, in a fund-raising campaign, offer its members the right to use niches in its columbarium — a vault with spaces for urns containing cremated remains — because it will make clear what part of each solicited payment is the purchase price of the right to a niche and how much is a charitable gift.
In addition, the parish obtained similar approval to sell the right to use cenotaphs, which are monuments erected to honor people whose remains are elsewhere, in its columbarium, which is on church property.
While the parish’s case has unusual details, the IRS uses a rationale that has relevance to all charities that raise funds while selling something of value.
The parish told the government that it planned to allow church members to buy the right to use niches and cenotaphs at a price that significantly exceeds their fair market value. The parish said that it would use a written document to explain what the niches and cenotaphs were worth and how much of each payment would exceed that value and thus be a tax-deductible, charitable gift.
The IRS said that the parish’s plan was valid because it followed the logic of the service’s Revenue Ruling 67-246 for “dual character” payments. That ruling states that if payments solicited by a charity for a fund-raising campaign are designed to be partly a gift and partly the purchase price of privileges or benefits, the charity must follow procedures that make clear not only that a gift is being solicited, but also its amount.
The parish also obtained a ruling that it would not owe tax on the income from the sale of the rights to the niches and cenotaphs. Charities must pay income tax on businesses that are unrelated to their missions. “The parish church’s columbarium’s niches and cenotaphs will be used for decedents with respect to whom the Roman Catholic Church has conducted or expects to conduct a funeral ceremony (or ceremony in which Roman Catholic ordained clergy or those under vows preside or participate),” the IRS said. Congress intended that the law allow a church to operate and maintain a columbarium or cemetery without paying income tax as long as its efforts to honor the dead “are carried on in connection with” the church’s activities, the IRS concluded.
As is its custom, the service did not identify the organization involved in the ruling (Letter Ruling 200213021).
