IRS denies exemption for cemetery operations

Plain-English summary

The IRS finalized an adverse determination denying an organization's application for recognition as a tax-exempt organization under IRC § 501(c)(3). The organization performed burials, sold burial plots, dug graves, and maintained a cemetery, but did not show that these activities advanced religion or were otherwise exclusively charitable. The IRS concluded that the cemetery operations served a substantial non-exempt purpose, so donors generally could not deduct contributions under IRC § 170 and the organization had to file federal income tax forms for the listed tax years. The final letter states that the organization did not file a protest within 30 days.

Ruling snapshot

• Question: Does the organization qualify for exemption under IRC § 501(c)(3)?
• Outcome: Denied
• Key authorities: IRC §§ 501(c)(3), 170, 6104(c), 6110, and 7428; Treas. Reg. §§ 1.501(c)(3)-1(a)(1) and 1.501(c)(3)-1(c)(1); Revenue Rulings 79-359; Better Business Bureau of Washington, D.C. Inc. v. United States, 326 U.S. 279 (1945); Linwood Cemetery Association v. Commissioner, 87 T.C. 1314 (1986).

Full text (IRS public release)

Department of the Treasury
Internal Revenue Service
Tax Exempt and Government Entities

Date:
06/01/2026
Employer ID number:

Form you must file:
Tax years:
Release Number: 202635016
Release Date: 8/28/26
UIL Code: 501.03-00, 501.03-04, 501.03-30, 501.35-00
ID number:
Telephone:

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

Date:
04/06/2026

Employer ID number:

Person to contact:

Name:
ID number:
Telephone:
Fax:
Legend: UIL:
B = Date 501.03-00
C = State 501.03-04
D = Range 501.03-30
E = Entity 501.35-00

f dollars = Dollars
g dollars = Dollars
h dollars = Dollars

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.

You attest that you were formed 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 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

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

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• 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 state that you perform burials for the deceased, including ground maintenance and preservation. You perform D burials annually and contract E for grave digging services. You provide a price sheet showing that, including funds for your perpetual care and maintenance fund, single graves are f dollars and cremation plots are g dollars. You also offer Medicaid burials for h dollars.

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(c)(1) provides that an organization will be regarded as primarily in activities that 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.

Revenue Ruling 79-359, 1979-2 C.B. 226, held that a nonprofit 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 members is operated exclusively for charitable purposes and qualifies for exemption under IRC Section 501(c)(3).

In 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 defeat exemption under Section 501(c)(3).

Application of law

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

3

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). You do not satisfy the operational test.

Your sole activity and purpose is the operation of a cemetery for the sale of burial plots, the digging of graves, and maintenance and care of the cemetery. These activities serve a substantial non-exempt purpose and preclude exemption under Treas. Reg. Section 1.501(c)(3)-1(c)(1). In Linwood Cemetery Association, the court held that these type of cemetery activities are not considered exempt activities under IRC Section 501(c)(3).

You are not like the organization described in Rev. Rul. 79-359, that was formed to advance religious beliefs and provided traditional burial services that supported and maintained the basic tenets and beliefs of a religion and preserved traditional customs and obligations. You provided no indicators that your activities contribute to the advancement of religion.

While you provide for discounted cost burials, you have not provided any evidence that discounted burials further charitable purposes exclusively. In Linwood Cemetery Association, the court held cemetery activity is not charitable in nature. As such, offering some burial services at a discount does not make the activity exclusively charitable. Your cemetery operations, including the sale of burial plots, digging of graves, and maintenance of the cemetery property appear to be your primary purpose, a substantial non-exempt purpose. As described in Better Business Bureau, the presence of this substantial non-exempt purpose precludes exemption under Section 501(c)(3).

Conclusion

Based on the facts presented, you are not operated exclusively for exempt purposes within the meaning of IRC Section 501(c)(3). You operate a cemetery, including the sale of burial plots, digging graves, and the maintenance and upkeep of the cemetery. These activities are substantial and further non-exempt purposes. Therefore, you do not qualify for exemption under IRC 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

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

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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.

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,

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

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

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