Rev. Rul. 67-446

Advice has been requested whether contributions and gifts made to a city for the purpose of enabling it to provide substitute railroad facilities to railroad companies under the circumstances described below are deductible for Federal income tax purposes.

The tracks of two railroad companies intersect in the central portion of the city where their freight and passenger stations are located. In recent years the increase in railroad traffic with the corresponding increase in switching operations has created problems for the city, such as, disruptions in the flow of vehicular traffic, both commercial and noncommercial, an increase in the number of serious crossing accidents, and an intensification of noise, dust, and air pollution; and has effected a condition of decline for the central shopping area of the city.

To alleviate the problems resulting from the presence of the railroad facilities, the city has agreed to furnish the companies substitute facilities located outside the city in consideration for removing their tracks and passenger and freight stations and relinquishing their right of way through the city. The city will solicit contributions and gifts from the general public, including the merchants and owners of property in the central shopping area, with which to purchase the substitute facilities.

Section 170(a) of the Internal Revenue Code of 1954 provides for the deduction, within certain limitations, of any charitable contribution (as defined in subsection (c)) payment of which is made within the taxable year.

Under section 170(c)(1) of the Code, the term charitable contribution is defined as including a contribution or gift to or for the use of a political subdivision of a State, but only if the contribution or gift is made for exclusively public purposes.

Although the merchants and owners of property in the central shopping area may receive some benefit from the removal of the railroad facilities from the city, such benefit, if any, is incidental in comparison to the benefits accruing to the public at large.

Accordingly, contributions and gifts to the city to be used to provide the railroad companies substitute facilities located outside the city in consideration for removing from the certral portion of the city their tracks and stations, and relinquishing their right of way through the city, are deductible by the donors as charitable contributions under section 170 of the Code, subject to the limitations described in that section.