Cemetery denied exemption for nonexempt activity and private interests

Plain-English summary

An organization applied for IRC § 501(c)(3) status to maintain a public cemetery and sell burial plots. It reported a small number of plot sales each year but did not show that the cemetery had historic significance, buried indigent people, or conducted religious activities. The IRS distinguished religious burial organizations and concluded that the cemetery's activities instead resembled cases involving substantial nonexempt operations and private interests. It found that the organization failed the operational test and the requirement to serve public rather than private interests. The IRS issued a final denial after the organization did not protest the proposed adverse determination within 30 days.

Ruling snapshot

• Question: Does the cemetery qualify for exemption as a charitable organization under IRC § 501(c)(3)?
• Outcome: Denied because its cemetery operations further substantial nonexempt purposes and private interests
• Key authorities: IRC § 501(c)(3); Treas. Reg. § 1.501(c)(3)-1; Rev. Ruls. 65-6, 79-359; Passaic United Hebrew Burial Association v. United States; Linwood Cemetery Association v. Commissioner

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 Box 2508
Cincinnati, OH 45201

Person to contact:

Release Number: 202419025
Release Date: 5/10/2024
UIL Code: 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 4038 (Rev. 11-2021)
Catalog Number 47632S

Department of the Treasury
Internal Revenue Service
IRS PO Box 2508
Cincinnati, OH 45201
Date: 11/13/2023

Employer ID number:

Person to contact:
Name:
ID number:
Telephone:
Fax:

Legend: UIL:
B = Date 501.00-00
C = State 501.03-00

D = Numbers 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, Streamlined Application for Recognition of Exemption Under Section 501(c)(3)
of the Internal Revenue Code.

You attest that you were incorporated on B, in the state of C. 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 did not attest that
you are organized and operated to further any other IRC Section 501(c)(3) purpose. You attest that you have not
conducted and will not conduct prohibited activities under 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

2

• 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 state your mission is to maintain a public cemetery and other related activities including burial. You
selected the NTEE code Y50 which is for organizations that maintain cemeteries or provide burial or funeral
services.

Detailed information was subsequently requested. In your response you stated that you sell burial plots. The
number of sales is approximately D a per year. You research a location for a plot on a map, write the deed, and
lay out the location at the cemetery that takes approximately a few hours per sale.

You did not provide any information that:
• The cemetery you maintain has any historic significance
• You bury indigent individuals
• You conduct religious activities.

You state you do not sell monuments, markers, vaults, or flowers, do not operate a mortuary, and do not have
any material promoting the sale of lots or solicitation of donations.

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(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, describes an organization that 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) or 501(c)(13), nor are contributions to it deductible to donors.

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

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) and Treas. Reg. Section 1.501(c)(3)-1(a)(1) set forth two main tests for an organization
to be recognized as exempt. An organization must be both organized and operated exclusively for purposes
described in Section 501(c)(3). We conclude that you fail the operational test for two reasons:
• You are not operating exclusively for exempt purposes as required by Treas. Reg. Section 1.501(c)(3)-
1(c)(1).

• You are serving substantial private interests in contravention to Treas. Reg. Section 1.501(c)(3)-
1(d)(1)(ii).

You did not attest that you are formed for religious purposes. Therefore, you are not like the qualifying
organizations described in Rev. Rul. 79-359 and Passaic United Hebrew Burial Association. You did attest you
are formed for charitable purposes. Your activities do not further charitable purposes. Like the organization in
Linwood, you are serving substantial nonexempt purposes and therefore do not meet Treas. Reg. Section

1.501(c)(3)-1(c)(1).

Your cemetery operations serve private interests that are more than insubstantial in nature. Your operations are
similar to those in Linwood Cemetery Association. Therefore, you fail to qualify for exemption under IRC
Section 501(c)(3) because you are not operating exclusively for exempt purposes as required by Treas. Reg.
Section 1.501(c)(3)-1(c)(1).

You fail to meet Treas. Reg. Section 1.501(c)(3)-1(d)(1)(ii). Although you state you are not operating a family
cemetery, you have not shown that your activities serve public interests rather than private interests. You are
similar to the organization described in Rev. Rul. 65-6.

Conclusion

Based on the information submitted, you have failed to show that you are operated exclusively for exempt
purposes within the meaning of IRC Section 501(c)(3). Therefore, based on the administrative record, we hold
that you do not qualify for exemption under Section 501(c)(3).

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

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.

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

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

5

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