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May 501(c)(3) contribute to 501(c)(13) cemetery?

May a 501(c)(3) charitable organization transfer items and funds to a 501(c)(13) cemetery organization?  

Section 501(c)(13) cemeteries occupy an unusual position within our tax-exempt system.  To qualify for (c)(13) status, the organization must be either a nonprofit mutual company where burial lots are owned by the members for burial purposes and not primarily for resale, or another nonprofit entity operated for burials or cremations without private inurement. Individuals who make contributions to a recognized (c)(13) cemetery are entitled to claim a charitable contribution deduction from their federal income taxes. But donors don’t get a deduction or exemption from estate or gift taxes for a gift to a (c)(13) cemetery.

Section 501(c)(3) charities may make a grant to a cemetery association if the use of the grant is restricted for charitable purposes, such as historical preservation or funds for “paupers” who can’t afford burials.  But 501(c)(3) charities are broadly divided between public charities and private foundations, and the rules are not the same for both.  A public charity can make a grant so long as it is restricted for charitable purposes.  A private foundation may also make a grant to a (c)(13) cemetery if it is restricted for charitable purposes, but since the cemetery is not a “public charity,” it would be a taxable expenditure for the private foundation to make the grant if it does not exercise “expenditure responsibility.”  Not every private foundation is willing to make expenditure responsibility grants because they are somewhat more difficult to do, and because foundation managers can face personal penalties if they do it wrong.  So the answer to your specific question is: Yes, but….

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