IRS denies 501(c)(3) status to a general-public cemetery association

Plain-English summary

This is the IRS's final determination denying a cemetery organization's application to be recognized as a section 501(c)(3) charity. The organization applied using the streamlined Form 1023-EZ and described its mission as providing respectful and affordable burial (interment) services for the community. The IRS denies exemption for two reasons. First, the organizational test: the organization's Articles of Incorporation limit its purpose to keeping up a specific cemetery and its burial lots, rather than limiting it to charitable or other exempt purposes, and the articles contain no clause dedicating remaining assets to 501(c)(3) purposes on dissolution. Second, the operational test: running a cemetery open to the general public, by selling grave sites and layouts and providing perpetual care for fees, is a substantial nonexempt purpose and is not "charitable." The IRS draws a line between religious burial organizations that serve members of a particular faith (which can qualify by advancing religion, under Rev. Rul. 79-359 and the Passaic United Hebrew Burial Association case) and a general-public cemetery like this one, which resembles the organization in Linwood Cemetery Association v. Commissioner. Under the Better Business Bureau rule, a single substantial nonexempt purpose defeats exemption. Because the organization did not protest the earlier proposed denial within 30 days, it became final, and donations to it are generally not deductible under section 170.

Ruling snapshot

• Question: Does an organization whose only activity is operating a general-public cemetery qualify under IRC § 501(c)(3)?
• Outcome: denied (fails the organizational test and operates for a substantial nonexempt, noncharitable purpose)
• Key authorities: IRC § 501(c)(3); Treas. Reg. §§ 1.501(c)(3)-1(a)(1), (b)(1)(i), (b)(4), (c)(1), (d)(2); Rev. Rul. 79-359; Passaic United Hebrew Burial Association v. United States, 216 F. Supp. 500 (1963); Linwood Cemetery Association v. Commissioner, 87 T.C. 1314 (1986); Better Business Bureau v. United States, 326 U.S. 279 (1945)

Full text (IRS public release)

Department of the Treasury Date:
Internal Revenue Service 06/12/2023

Tax Exempt and Government Entities Employer ID number:
IRS PO Box 2508
Cincinnati, OH 45201 Form you must file:
Number: 202336030 Tax years:

Release Date: 9/8/2023

Person to contact:

UIL: 501.03-30

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
IRS PO Box 2508
Cincinnati, OH 45201
Date: 4/17/2023

Employer ID number:

Person to contact:
Name:
ID number:
Telephone:
Fax:
Legend: UIL:
X = Date 501.03-30
Y = State
B = Name
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 formed 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

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


* 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

Your mission indicated on the Form 1023-EZ is to provide respectful and affordable interment services that meet
the needs of the community. Detailed information was subsequently requested. Your Articles of Incorporation
state that your purpose "shall be the keeping in good condition and improvements of the grounds comprising the
present Cemetery ... and all burial lots therein, acquire title to real estate of lots now unsold in said cemetery
and also of lands contingent or adjacent thereto or elsewhere; to hold and dispose of the same for the purpose of
interment of the bodies of deceased persons under proper regulations; also acquire and hold funds subscribed
and which may be hereafter contributed thereto from or by any source, invest and reinvest and expend the same
for the purposes and object hereof, do and perform such other acts and things necessary for the maintenance of a
well-regulated and properly conducted cemetery". Further, there is no provision for the dedication of assets
upon dissolution.

You will provide general maintenance and improvement of the B, including mowing, road maintenance and
general upkeep. You are funded by the sale of grave sites and fees for grave layouts, maintenance, and perpetual
care proceeds. Your expenses consist of insurance, mowing, and trash pickup. Volunteers conduct your
activities.

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) provides that in order to be exempt under IRC Section
501(c)(3) an organization must be organized and operated exclusively for one or more of the exempt purposes
specified in that section. If an organization fails to meet either the organizational test or the operational test, it
does not qualify for exemption.

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

(a) Limit the purpose 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 purpose.

Treas. Reg. Section 1.501(c)(3)-1(b)(4) requires the dedication of remaining assets exclusively for purposes
described in IRC Section 501(c)(3).

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


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 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.

Treasury Regulation Section 1.501(c)(3)-1(d)(2) provides the term charitable is used in Section 501(c)(3) in its
generally accepted legal sense and is, therefore, not to be construed as limited by the separate enumeration in
Section 501(c)(3) of other tax-exempt purposes which may fall within the broad outlines of charity as developed
by judicial decisions. The regulation further provides the term charitable includes:

* Relief of the poor and distressed or of the underprivileged,
* Advancement of religion,
* Advancement of education or science,
* Erection or maintenance of public buildings, monuments, or works,
* Lessening of the burdens of Government, and
* Promotion of social welfare by organizations designed to accomplish any of the above purposes, or:
    * To lessen neighborhood tensions,
    * To eliminate prejudice and discrimination,
    * To defend human and civil rights secured by law, or
    * To combat community deterioration and juvenile delinquency

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).

Better Business Bureau of Washington. D.C., Inc. v. United States, 326 U.S. 279 (1945), the Supreme Court
held that the presence of a single non-exempt purpose, if substantial in nature, will destroy a claim for
exemption regardless of the number or importance of truly exempt purposes.

In Linwood Cemetery Association v. Commissioner, 87 T.C. 1314 (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 charitable in nature and such substantial activities defeat exemption under Section 501(c)(3).

Application of law
You are not described in IRC Section 501(c)(3) because you don't meet the organizational and operational tests
outlined in Treas. Reg. Section 1.501(c)(3)-1(a)(1).

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


Your Articles of Incorporation state in part that your purpose shall be "the keeping in good condition and
improvements of the grounds comprising the present cemetery ... and all burial lots therein". Because your
Articles of Incorporation do not limit your purposes to those described in Treas. Reg. Section 1.501(c)(3)-
1(b)(1)(i), you fail the organizational test under IRC Section 501(c)(3). Furthermore, your Articles of
Incorporation do not contain a dissolution clause as required by Treas. Reg. Section 1.501(c)(3)-1(b)(4).
Therefore, this also causes you to fail the organizational test under IRC Section 501(c)(3).

You do not meet the provisions of Treas. Reg. Section 1.501(c)(3)-1(c)(1), because you are operated for a
substantial nonexempt purpose. You are providing respectful and affordable interment services that meet the
needs of the community. These activities are not "charitable" as defined in Treas. Reg. Sec. 1.501(c)(3)-1(d)(i).

You are not similar to the organizations described in Passaic United Hebrew Burial Association and Rev. Rul.
79-359 because you do not provide burial services to members of a particular faith. Instead, you are similar to
the organization described in Linwood Cemetery Association v. Commissioner because you sell grave sites and
layouts and provide perpetual care services to the general public. As described in Better Business Bureau of
Washington. D.C., Inc. v. United States, the presence of a single non-exempt purpose, if substantial in nature,
defeats exemption under Section 501(c)(3).

Conclusion

Based on the facts presented, you are not organized and operated 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.

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


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.

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