Neighborhood association did not qualify as a cemetery company

Plain-English summary

The IRS denied Section 501(c)(13) exemption to a property owners' association because it did not operate a cemetery or perform related burial functions. The association held annual meetings about repairs to neighborhood structures, retaining walls, piers, and boat ramps. It also planned member picnics, managed common areas, supported a volunteer fire department, and collected membership dues. Those activities served a residential subdivision rather than maintaining cemetery property or administering funds for the perpetual care of a burial area. Because the association did not protest within 30 days, the proposed denial became final.

Ruling snapshot

• Question: Did a neighborhood association qualify as a cemetery company under Section 501(c)(13)?
• Outcome: denied
• Key authorities: IRC § 501(c)(13); Rev. Rul. 72-17; Rev. Rul. 78-143

Full text (IRS public release)

Department of the Treasury                         Date:
Internal Revenue Service                          02/12/2024
Tax Exempt and Government Entities                Employer ID number:
IRS PO Box 2508                                   [redacted]
Cincinnati, OH 45201
                                                   Form you must file:
                                                   1120
                                                   Tax years:
                                                   All
Release Number: 202419017                         Person to contact:
Release Date: 5/10/2024                           [redacted]
UIL Code: 501.13-00,
501.13-30

Dear [redacted]:

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)(13). 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.

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.

                                                   Sincerely,

                                                   Stephen A. Martin
                                                   Director, Exempt Organizations
                                                   Rulings and Agreements

Enclosures:

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

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

                                                   Date: November 20, 2023

                                                   Employer ID number:
                                                   [redacted]

                                                   Person to contact:
                                                   Name:
                                                   [redacted]
                                                   ID number:
                                                   [redacted]
                                                   Telephone:
                                                   [redacted]
                                                   Fax:
                                                   [redacted]

Legend:                                            UIL:
B = Date                                           501.13-00
C = Statement                                      501.13-30
D = Geographic Area
E = Geographic Area
F = Date

Dear [redacted]:

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)(13). 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)(13)? No, for the reasons stated below.

Facts

You were incorporated on B in the state C and applied for exemption under IRC Section 501(c)(13). There is no
indication that you were formed or are operated for the purpose of providing and maintaining a cemetery. There
is no indication that you are conducting any activity so closely related to burial purposes that those activities are
incident to those purposes. There is no indication you formed for receiving and administering funds for the
perpetual care of a nonprofit cemetery or like burial area.

Your Articles of Incorporation state your purpose is to foster, develop and promote activities and the
development of D Site Subdivision in E.

According to your by-laws, your purpose is to improve the [redacted] community through civic and social
activities. Your bylaws further state you are a membership organization. Membership is limited to those persons
owning property in D Site Subdivision in E.

Your activities consist of annual meetings to discuss recommendations on repair and replacement for structures,
retaining walls, piers, and boat ramps of the D Site Subdivision. You will also have a picnic and cook-out

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

2

for members. You will manage the common areas of the neighborhood and provide funding to the volunteer fire
department. You are supported by membership dues.

Law

IRC Section 501(c)(13) provides exemption for organizations whose purpose is the operation, maintenance, and
improvement of the cemetery, the acquisition of cemetery property, and accumulation of surpluses from
investment to provide a source of income for the maintenance and care of a cemetery.

Rev. Rul. 72-17; 1972-1 C.B. 151 describes an organization that was formed and is operated for the purpose of
providing and maintaining a cemetery which qualified for exemption under IRC Section 501(c)(13). The
organization sold cemetery lots, provided burial services, erected monuments, and maintained the cemetery
grounds. In addition, it sold monuments, markers, vaults, and flowers solely for use in the cemetery. All profits
realized from these sales were used to maintain the cemetery as a whole.

Rev. Rul. 78-143, 1978-1 C.B. 161 describes an organization that was created as a nonprofit organization by
citizens of a community to provide for the perpetual care and maintenance of a burial area. No cemetery
company was ever formed and no provision for care and maintenance of the area was ever made. A contiguous
church maintained the area for many years. When it could no longer do so, the present organization was formed
to provide for the perpetual care and maintenance of the area. The organization qualified for exemption under
IRC Section 501(c)(13).

Application of law

You are not described under IRC Section 501(c)(13) because you are not formed or operated for the purpose of
providing and maintaining a cemetery. You are also not formed for the purpose of the acquisition of cemetery
property, and accumulation of surpluses from investment to provide a source of income for the maintenance and
care of a cemetery.

You are not like the organization in Rev. Rul. 72-17 because you are not formed or operated for the purpose of
maintaining a cemetery nor are you conducting any activity so closely related to burial purposes that those
activities are incident to those purposes. You are formed and operated to foster, develop and promote activities
and the development of D Site Subdivision in E.

You are not like the organization in Rev. Rul. 78-143 because, in the absence of not providing and maintaining
a cemetery, you are not formed for receiving and administering funds for the perpetual care of a nonprofit
cemetery or like burial area. You are formed and operated to promote activities and the development of D
Site Subdivision in E. You will manage the common areas and provide funding to the volunteer fire department.

Conclusion

Based on the information submitted you have failed to show how you are described in IRC Section 501(c)(13).
You do not operate, maintain, or improve a cemetery nor are you acquiring cemetery property. You are also not
accumulating surpluses from investments to provide a source of income for the maintenance and care of a
cemetery. Therefore, you do not qualify for exemption under Section 501(c)(13).

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

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

3

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.

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.

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

4

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