IRS: Nonprofit cemetery may own for profit pet cemetery.

In late December, the Internal Revenue Service (IRS) published a private letter ruling (PLR20015248) holding that, under the fact pattern described, a nonprofit association organized to operate a cemetery could own the stock of a for profit subsidiary operated as a pet cemetery and mortuary without jeopardizing its tax-exempt status. Each organization would have separate boards of directors and a majority of the pet cemetery’s board would be neither officers, directors nor employees of the nonprofit cemetery.

It was proposed that the parent cemetery would transfer a small piece of land (less than an acre) and $10,000 in return for all the subsidiary’s stock. Portions of the parent’s building will also be leased to the subsidiary at fair market value. The IRS states that a private letter ruling may be cited only by the taxpayer requesting it and may not be cited as precedent by others. However, these rulings are useful for determining the thinking of IRS on a given issue.