Earlier this week, U.S. Representatives Drew Ferguson (R-GA-3) and Linda Sanchez (D-CA-38) introduced H.R. 5251, the Funeral and Cemetery Trust Modernization Act, which will benefit the deathcare industry by reinstating and expanding certain tax benefits for funeral and cemetery trusts. The bill has two specific provisions. First, it would correct an unintended consequence of the 2017 tax reform bill by very narrowly restoring the deduction for trust investment advisory fees for qualified funeral and cemetery trusts. The Tax Cuts and Jobs Act of 2017 suspended until 2026 the itemized deduction for miscellaneous expenses claimed by individuals and trusts. Currently, funeral and cemetery trusts cannot deduct investment advisory fees but can continue to deduct management fees.
Reinstating the deduction for investment advisory fees for funeral and cemetery trusts would enable the trusts to retain more income so funeral homes and cemeteries can meet their contractual obligations and protect consumers and taxpayers. The legislation also includes a second provision for the benefit of cemetery endowment care funds. In 1976, Congress, recognizing the need to be sensitive to the tax treatment of cemetery trusts, created Internal Revenue Code Section 642(I), which allows such trusts a $5 per gravesite distribution deduction for each gravesite purchased prior to the start of the taxable year for which care and maintenance are provided. The $5 distribution deduction was never indexed for inflation and the value is greatly diminished from what it was 45 years ago. In today’s dollars, it would be nearly five times higher.
The Funeral and Cemetery Trust Modernization Act would raise the value to $25 and index the gravesite distribution deduction for inflation so cemetery trusts can reclaim the full value of tax assistance Congress intended to provide them so many years ago.
The legislation will likely need to be attached to a larger tax bill to move forward. The ICCFA will continue working to raise awareness and support for the bill, including seeking companion legislation in the Senate. If the legislation is not enacted before the end of the 118th Congress, which concludes at the end of 2024, it will need to be reintroduced. Please reach out to your Representatives to urge them to cosponsor H.R. 5251. You can look up your congressional district and Representative by entering your zip code here. Most Representatives’ websites include a webform to submit email correspondence. You will find draft email correspondence to submit online here.