Cemetery denied charitable status because it served private interests

Plain-English summary

An organization applied for Section 501(c)(3) status to operate and maintain a cemetery and sell burial plots. Its organizing document stated that cemetery operation was its purpose, and its only activity was maintaining the grounds through contractors. The IRS concluded that operating a cemetery was not itself a charitable purpose and that selling plots provided more than incidental benefits to private individuals. The organization was not advancing religion through traditional religious burial practices, which distinguished it from cemetery organizations that may qualify as religious charities. The IRS therefore found that it failed both the organizational and operational tests and denied exemption.

Ruling snapshot

• Question: Did operating and maintaining a nonreligious cemetery qualify as an exempt charitable purpose under Section 501(c)(3)?
• Outcome: Denied
• Key authorities: IRC § 501(c)(3); Treas. Reg. § 1.501(c)(3)-1; Rev. Rul. 65-6; Rev. Rul. 79-359

Full text (IRS public release)

Department of the Treasury
Internal Revenue Service
Tax Exempt and Government Entities
PO Box 2508
Cincinnati, OH 45201

Date:
07/25/2022

Employer ID number:

Person to contact:

Number: 202242015
Release Date: 10/21/2022

UIL: 501.00-00, 501.03-00, 501.03-30, 501.33-00

Dear

This letter is our final determination that you don't qualify for exemption from federal income tax under Internal
Revenue Code (IRC) Section 501(a) as an organization described in IRC Section 501(c)(3). Recently, we sent
you a proposed adverse determination in response to your application. The proposed adverse determination
explained the facts, law, and basis for our conclusion, and it gave you 30 days to file a protest. Because we
didn't receive a protest within the required 30 days, the proposed determination is now final.

Because you don't qualify as a tax-exempt organization under IRC Section 501(c)(3), donors generally can't
deduct contributions to you under IRC Section 170.

We may notify the appropriate state officials of our determination, as required by IRC Section 6104(c), by
sending them a copy of this final letter along with the proposed determination letter.

You must file the federal income tax forms for the tax years shown above within 30 days from the date of this
letter unless you request an extension of time to file. For further instructions, forms, and information, visit
www.irs.gov.

We'll make this final adverse determination letter and the proposed adverse determination letter available for
public inspection after deleting certain identifying information, as required by IRC Section 6110. Read the
enclosed Letter 437, Notice of Intention to Disclose - Rulings, and review the two attached letters that show our
proposed deletions. If you disagree with our proposed deletions, follow the instructions in the Letter 437 on how
to notify us. If you agree with our deletions, you don't need to take any further action.

If you have questions about this letter, you can call the contact person shown above. If you have questions
about your federal income tax status and responsibilities, call our customer service number at 800-829-1040
(TTY 800-829-4933 for deaf or hard of hearing) or customer service for businesses at 800-829-4933.

Letter 4038 (Rev. 11-2021)
Catalog Number 47632S

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Enclosures:

Letter 437

Redacted Letter 4034

Redacted Letter 4038

Letter 4038 (Rev. 11-2021)
Catalog Number 47632S

Department of the Treasury
Internal Revenue Service
PO Box 2508
Cincinnati, OH 45201

Date: 05/23/2022

Employer ID number:

Person to contact:

Name:
ID number:
Telephone:
Fax:

Legend:

b dollars = Amount

X = Date

Y = State

Z = County, State

UIL:

501.00-00

501.03-00

501.03-30

501.33-00

Dear

We considered your application for recognition of exemption from federal income tax under Internal Revenue
Code (IRC) Section 501(a). We determined that you don't qualify for exemption under IRC Section 501(c)(3).
This letter explains the reasons for our conclusion. Please keep it for your records.

Issues

Do you qualify for exemption under IRC Section 501(c)(3)? No, for the reasons stated below.

Facts

You submitted Form 1023-EZ, Streamline Application for Recognition of Exemption Under Section 501(c)(3)
of the Internal Revenue Code on X.

You attest that you were incorporated on X, in the state of Y. You attest that you have the necessary organizing
document, that your organizing document limits your purposes to one or more exempt purposes within the
meaning of the IRC Section 501(c)(3), that your organizing document does not expressly empower you to
engage in activities, other than insubstantial part, that are not in furtherance of one or more exempt purposes,
and that your organizing document contains the dissolution provision required under Section 501(c)(3).

You attest that you are organized and operated exclusively to further charitable purposes. You attest that you
have not and will not conduct prohibited activities under IRC Section 501(c)(3). Specifically, you attest you
will:

• Refrain from supporting or opposing candidates in political campaigns in any way

Letter 4034 (Rev. 01-2021)
Catalog Number 47628K

2

• Ensure that your net earnings do not inure in whole or in part to the benefit of private shareholders or
individuals

• Not further non-exempt purposes (such as purposes that benefit private interests) more than insubstantially

• Not be organized or operated for the primary purpose of conducting a trade or business that is not related to
your exempt purpose(s)

• Not devote more than an insubstantial part of your activities attempting to influence legislation or, if you made
a Section 501(h) election, not normally make expenditures in excess of expenditure limitations outlined in
Section 501(h)

• Not provide commercial-type insurance as a substantial part of your activities

You stated on the Form 1023-EZ that you are operating a burial cemetery located in Z. The adjacent land and
lots in said cemetery will be maintained and repaired and the proceeds from any donations or form sales of
burial lots will be used to maintain the cemetery. You selected the NTEE code Y50 which is for organizations
that maintain cemeteries or provide burial or funeral services.

Detailed information was subsequently requested. Article 8 of your Articles of Incorporation provides that your
purpose is "operating a burial cemetery located in Z. The adjacent land and lots in said cemetery will be
maintained and repaired. Proceeds from any donations or from sales of burial lots will be used to maintain the
cemetery."

Your sole activity is to operate and maintain a cemetery. Mowing and cleaning of the cemetery will be
performed by contractors. You sell plots for b dollars per lot.

You are mostly funded by donations, and you did not provide the expected income from lots sales. Your
expenses are mainly for contractors on mowing and maintenance of the cemetery.

Law

IRC Section 501(c)(3) provides for the recognition of exemption of organizations that are organized and
operated exclusively for religious, charitable, or other purposes as specified in the statute. No part of the net
earnings may inure to the benefit of any private shareholder or individual.

Treasury Regulation Section 1.501(c)(3)-1(a)(1) states that, in order to be exempt as an organization
described in IRC Section 501(c)(3), an organization must be both organized and operated exclusively for one
or more of the purposes specified in such section. If an organization fails to meet either the organizational test
or the operational test, it is not exempt.

Treas. Reg. Section 1.501(c)(3)-1(b)(1)(i) provides that an organization is organized exclusively for one or
more exempt purposes only if its articles of organization:

(a) Limit the purposes of such organization to one or more exempt purposes; and

(b) Do not expressly empower the organization to engage, otherwise than as an insubstantial part of
its activities, in activities that in themselves are not in furtherance of one or more exempt
purposes.

Treas. Reg. Section 1.501(c)(3)-1(c)(1) provides that an organization will be regarded as operated
exclusively for one or more exempt purposes only if it engages primarily in activities that accomplish one or
more of such

Letter 4034 (Rev. 01-2021)
Catalog Number 47628K

3

exempt purposes specified in IRC Section 501(c)(3). An organization will not be so regarded if more than an
insubstantial part of its activities is not in furtherance of an exempt purpose.

Treas. Reg. Section 1.501(c)(3)-1(d)(1)(ii) provides that an organization is not organized or operated
exclusively for one or more exempt purposes unless it serves a public rather than a private interest.

Revenue Ruling 65-6, 1965-1 C.B. 229, describes an organization owned, operated, and maintained a cemetery
in which only members of the X family, their descendants, and persons intermarried with descendants of the
family were entitled to be buried. The cemetery was supported by assessments and contributions of the family
members. The ruling held that the operation and maintenance a family cemetery is not organized for or operated
in furtherance of one or more of the purposes described in IRC Section 501(c)(3).

Rev. Rul. 69-175, 1969-1 C.B. 149, describes an organization which was formed by parents of pupils attending
a private school to provide bus transportation to and from the school for those children whose parents belong to
the organization. The organization did not qualify for exemption under IRC Section 501(c)(3) because it served
a private rather than public interest.

Rev. Rul. 79-359, 1979-2 C.B. 226, held that an organization whose purpose is to provide traditional burial
services that directly support and maintain basic tenets and beliefs of a religion regarding burial of its member
may qualify for exemption under IRC Section 501(c)(3). Through the provision of burial services to members
of a religion in compliance with the detailed requirements of religious laws, the organization is preserving and
perpetuating traditional religious customs and obligations. The organization is accomplishing a charitable
purpose by contributing to the advancement of religion.

In Passaic United Hebrew Burial Association. v. United States, 216 F.Supp. 500 (1963), the court held that a
synagogue that provides Hebrew funerals and burials for fees to members of the Jewish religion may qualify for
exemption under IRC Section 501(c)(3).

In Linwood Cemetery Association v. Commissioner, 87 T.C. 1314 (Tax 1986), the court held that cemetery
activities such as selling plots, markers, evergreens, crypts, vaults, and perpetual and special care services have
not been found to be of a charitable in nature. These cemetery activities are far beyond what is required to
protect public health and constitute a nonexempt set of activities that is substantial in nature which must destroy
the exemption under IRC Section 501(c)(3).

Application of law

IRC Section 501(c)(3) sets forth two main tests for qualification of exempt status. As stated in Treas. Reg.
Section 1.501(c)(3)-1(a)(1), an organization must be both organized and operated exclusively for purposes
described in Section 501(c)(3).

Your organizing document states that your purpose is to operate a burial cemetery located in Z. Operating a
cemetery is not an exempt purpose described in IRC Section 501(c)(3). As a result, you have not satisfied the
organizational test described in Treas. Reg. Section 1.501(c)(3)-1(b)(1)(i).

Your activity of operating a cemetery provides benefits to private individuals that are more than insubstantial in
nature. Your operation is similar to Linwood Cemetery Association. Therefore, you do not meet the operational

Letter 4034 (Rev. 01-2021)
Catalog Number 47628K

4

test under IRC Section 501(c)(3) because you are not operating exclusively for exempt purposes as described in
Treas. Reg. Section 1.501(c)(3)-1(c)(1).

You do not meet the provisions of Treas. Reg. Section 1.501(c)(3)-1(d)(1)(ii) because you are similar to the
organizations described in Rev. Rul. 65-6 and Rev. Rul. 69-175. Although you are not operating a family
cemetery, your activities serve to benefit the private interests rather than the public.

You are dissimilar to the organizations described in Rev. Rul. 79-359 and Passaic United Hebrew Burial
Association in the sense that your operation does not contributing to the advancement of religion.

Conclusion

Based on the facts presented, you are not organizing and operating exclusively for exempt purpose within the
meaning of IRC Section 501(c)(3). Your only activity is operating a cemetery. Therefore, you do not qualify for
exemption under Section 501(c)(3).

If you agree

If you agree with our proposed adverse determination, you don't need to do anything. If we don't hear from
you within 30 days, we'll issue a final adverse determination letter. That letter will provide information on
your income tax filing requirements.

If you don't agree

You have a right to protest if you don't agree with our proposed adverse determination. To do so, send us a
protest within 30 days of the date of this letter. You must include:

• Your name, address, employer identification number (EIN), and a daytime phone number

• A statement of the facts, law, and arguments supporting your position

• A statement indicating whether you are requesting an Appeals Office conference

• The signature of an officer, director, trustee, or other official who is authorized to sign for the
organization or your authorized representative

• The following declaration:

For an officer, director, trustee, or other official who is authorized to sign for the organization:
Under penalties of perjury, I declare that I have examined this request, or this modification to the
request, including accompanying documents, and to the best of my knowledge and belief, the request
or the modification contains all relevant facts relating to the request, and such facts are true, correct,
and complete.

Your representative (attorney, certified public accountant, or other individual enrolled to practice before the
IRS) must file a Form 2848, Power of Attorney and Declaration of Representative, with us if they haven't
already done so. You can find more information about representation in Publication 947, Practice Before the
IRS and Power of Attorney.

We'll review your protest statement and decide if you gave us a basis to reconsider our determination. If so,
we'll continue to process your case considering the information you provided. If you haven't given us a basis
for reconsideration, we'll send your case to the Appeals Office and notify you. You can find more information
in Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status.

Letter 4034 (Rev. 01-2021)
Catalog Number 47628K

5

If you don't file a protest within 30 days, you can't seek a declaratory judgment in court later because the
law requires that you use the IRC administrative process first (IRC Section 7428(b)(2)).

Where to send your protest

Send your protest, Form 2848, if applicable, and any supporting documents to the applicable address:

U.S. mail:

Internal Revenue Service
EO Determinations Quality Assurance
Mail Stop 6403
PO Box 2508
Cincinnati, OH 45201

Street address for delivery service:

Internal Revenue Service
EO Determinations Quality Assurance
550 Main Street, Mail Stop 6403
Cincinnati, OH 45202

You can also fax your protest and supporting documents to the fax number listed at the top of this letter. If you
fax your statement, please contact the person listed at the top of this letter to confirm that they received it.

You can get the forms and publications mentioned in this letter by visiting our website at www.irs.gov/forms-
pubs or by calling 800-TAX-FORM (800-829-3676). If you have questions, you can contact the person listed at
the top of this letter.

Contacting the Taxpayer Advocate Service

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your
taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or if you've tried but haven't
been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS
will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778.

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Letter 4034 (Rev. 01-2021)
Catalog Number 47628K