Private family cemetery denied section 501(c)(3) status

Plain-English summary

An unincorporated association applied for section 501(c)(3) status to maintain a privately operated family cemetery for cremated remains. Its bylaws limited plots and scattering rights to designated family members, and the record did not show a religious purpose or service to a charitable class. The IRS also found that the organizing document did not limit the association to an exempt purpose or dedicate its assets to an exempt purpose upon dissolution. Because the cemetery served private family interests and failed both the organizational and operational tests, the IRS denied exemption. The determination became final after the association did not protest the proposed denial within 30 days.

Ruling snapshot

• Question: Did a private family cemetery satisfy the organizational and operational requirements for section 501(c)(3) exemption?
• Outcome: denied
• Key authorities: IRC §§ 501(c)(3) and 501(c)(13); Treas. Reg. §§ 1.501(c)(3)-1(a), 1.501(c)(3)-1(b), 1.501(c)(3)-1(c), and 1.501(c)(3)-1(d)

Full text (IRS public release)

Department of the Treasury                                      Date:
Internal Revenue Service                                        09/25/2023

Tax Exempt and Government Entities                              Employer ID number:
IRS PO Box 2508
Cincinnati, OH 45201                                            Tax years:
                                                                All
Release Number: 202351015                                       Person to contact:

Release Date: 12/22/2023
UIL Code: 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
Cincinnati, OH 45201
                                                               Date: August 1, 2023

                                                               Employer ID number:

                                                               Person to contact:

                                                               Name:

                                                               ID number:

                                                               Telephone:

                                                               Fax:

Legend:                                                        UIL:
X = date                                                       501.03-00
Y = state                                                      501.03-30
Z = individual                                                 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, Streamlined Application for Recognition of Exemption Under Section 501(c)(3)
of the Internal Revenue Code.

You attested that you were organized as an unincorporated association 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 an 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 conducted 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

• 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

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

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• 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

On Form 1023EZ you briefly described your mission as “[operating a] private family burying ground/cemetery
for cremains that can only accept donations to help pay for necessary expenses to maintain and upkeep the
cemetery.”

Detailed information was subsequently requested.

You submitted a Certificate of Exemption from the state of Y, showing you as a registered family burial ground.
On the paperwork related to that certificate, you indicated that you are an individually owned family burying
ground that is privately operated and does not accept care funds.

You also submitted a Last Will and Testament of Z. One of the sections of the document calls for a trust to
create you. Z indicated that you should be located on a two-acre tract of his property. Z intends for his
descendants to maintain you.

Another document you submitted was your Bylaws. It indicates that you are a private family cemetery. Small
lots or plots will be made available to designated family members upon death, only for cremated human
remains, ashes and urns for scattering rights. Markers, plaques or headstones may be placed on the designated
area of the deposited human cremains as a memorial of the location. There is no indication the organization is
operated for religious purposes or for the benefit of a charitable class.

Law
IRC Section 501(c)(3) provides, in part, for the exemption from federal income tax of organizations organized
and operated exclusively for charitable, religious or educational purposes, no part of the net earnings of which
inure to the benefit of any private shareholder or individual.

Treasury Regulation Section 1.501(c)(3)-1(a)(1) states that, 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.

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

3

Treas. Reg. Section 1.501(c)(3)-1(b)(4) holds that that an organization's assets must be dedicated to an
exempt purpose, either by an express provision in its governing instrument or by operation of law.

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 which accomplish one or more of
such 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.

Rev. Rul. 65-6, 1965-1 C.B. 229, 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; the organization does not qualify for exemption from Federal income tax as an organization
described in IRC Section 501(c)(3) because it served a private rather than public interest. This organization also
did not qualify for exemption under Section 501(c)(13) nor are contributions to it deductible to donors.

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 documents states that your purpose is to operate a family burial ground located in Y. Operating
a cemetery is not an exempt purpose described in IRC Section 501(c)(3). It also does not contain a dissolution
clause that dedicates your assets to an exempt purpose. As a result, you have not satisfied the organizational test
described in Treas. Reg. Sections 1.501(c)(3)-1(b)(1)(i) and 1.501(c)(3)-1(b)(4).

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

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You are not operating exclusively for exempt purposes as described in Treas. Reg. Section 1.501(c)(3)-1(c)(1).

You are dissimilar to the organizations described in Rev. Rul. 79-359 and Passaic United Hebrew Burial
Association because you are not furthering exclusively religious purposes.

Your activity of operating a cemetery provides benefits to private individuals that are more than insubstantial in
nature. You are serving a private interest like the organization in Rev. Rul. 65-6, which also maintained a family
cemetery.

Your operation is similar to Linwood, which held that cemetery activities did not further a charitable purpose.
Therefore, you do not meet the operational test under IRC Section 501(c)(3).

Conclusion

Based on the information submitted, you are not operating exclusively for exempt purposes within the meaning
of IRC Section 501(c)(3). Your only activity is maintaining a family 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

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

5

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.

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:                                      Street address for delivery service:
Internal Revenue Service                        Internal Revenue Service
EO Determinations Quality Assurance             EO Determinations Quality Assurance
Mail Stop 6403                                  550 Main Street, Mail Stop 6403
PO Box 2508                                     Cincinnati, OH 45202
Cincinnati, OH 45201

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