475 U.S. 1032 (1986)

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U.S. Supreme Court

MELLON BANK, N. A. v. UNITED STATES , 475 U.S. 1032 (1986)

475 U.S. 1032

MELLON BANK, N.A., et al.
No. 85-459

Supreme Court of the United States

February 24, 1986

On petition for writ of certiorari to the United States Court of Appeals for the Third Circuit.

The petition for writ of certiorari is denied.

Justice O'CONNOR, with whom Justice BLACKMUN and Justice POWELL join, dissenting.

The Internal Revenue Code allows a deduction from the taxable estate of bequests "to or for the use of any corporation organized and operated exclusively for . . . charitable . . . purposes." 26 U.S.C. 2055(a)(2). This petition presents the question whether a bequest to a nonprofit cemetery association qualifies for a deduction pursuant to this section.

A. Leon Davis died testate on December 6, 1976. His will provided that the residue of his estate was to be distributed to the Verona Cemetery in Oakmont, Pennsylvania. The cemetery was established by nearby residents in 1881 as a nonstock, nonprofit corporation for the purpose of providing burial space to any person regardless of religion or race. Davis' executors filed a federal

Page 475 U.S. 1032 , 1033

estate tax return, paid the tax, and then submitted a claim asserting a charitable deduction of $370,901.74, the total amount distributed to the cemetery. The Internal Revenue Service disallowed the deduction and denied the accompanying claim for a refund. After exhausting administrative remedies, the executors instituted the present refund action in Federal District Court. Concluding that Verona Cemetery was a " corporation organized and operated exclusively for . . . charitable . . . purposes," 590 F.Supp. 160, 162, n. 1 (WD Pa.1984), the District Court held that the bequest qualified for a deduction under 2055(a)(2). In reaching that conclusion, the court observed that the cemetery was exempt from federal income taxes, that the bequest had already been held exempt from Pennsylvania's inheritance tax and, more generally, that bequests to public nonprofit cemetery associations traditionally had been considered charitable under the common law of trusts.

A divided panel of the Court of Appeals for the Third Circuit reversed. 762 F.2d 283 (1985). It acknowledged the "anomaly" of treating nonprofit cemetery associations differently for federal estate and income tax purposes. It believed, however, that this asymmetry was compelled by the language and history of the relevant provisions of the Code. Employing language that closely parallels 2055(a)(2), 501(c)(3) exempts from federal income taxes "[c]orporations . . . organized and operated exclusively for . . . charitable . . . purposes." Since 1913, the Code has included a separate exemption for "[c]emetery companies owned and operated exclusively for the benefit of their members or which are not operated for profit." 26 U.S.C. 501(c)(13). In 1954, as part of the general revision of the Code, Congress enacted 170(c)(5), which permits deductions of contributions to any cemetery company that meets a standard virtually identical to that set out in 501(c)(13). After examining this history, the Court of Appeals concluded that nonprofit cemetery companies did not qualify as a "charitable" corporation under 2055(a)(2). Because Congress had thought it necessary to enact a special provision for cemeteries on the income tax side, the court reasoned, it must have believed that such entities were not within the general deduction for " charitable" contributions. 26 U.S.C. 170(c)(2)(B). Thus, the court concluded, the failure to adopt a parallel provision on the estate tax side foreclosed petitioners' contention that ceme- [475 U.S. 1032 , 1034]

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