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Operator of Family Cemetery Is Denied Exemption

AUG. 10, 2021

LTR 202144029

DATED AUG. 10, 2021
DOCUMENT ATTRIBUTES
  • Institutional Authors
    Internal Revenue Service
  • Code Sections
  • Subject Area/Tax Topics
  • Jurisdictions
  • Tax Analysts Document Number
    2021-42034
  • Tax Analysts Electronic Citation
    2021 TNTF 214-43
    2021 EOR 12-16
  • Magazine Citation
    The Exempt Organization Tax Review, Dec. 2021, p. 417
    88 Exempt Org. Tax Rev. 417 (2021)
Citations: LTR 202144029

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

UIL Code: 501.35-00
Release Date: 11/5/2021

Date: August 10, 2021

Employer ID number: * * *

Form you must file: * * *

Tax years: * * *

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 Notice 437, Notice of Intention to Disclose, and review the two attached letters that show our proposed deletions. If you disagree with our proposed deletions, follow the instructions in the Notice 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:
Notice 437
Redacted Letter 4034
Redacted Letter 4038


Contact person/ID number: * * *
Contact telephone number: * * *
Contact fax number: * * *

UIL: 501.35-00

Date: May 5, 2021

Employer ID number: * * *

LEGEND:

B = date
C = state
D = name
E = LLC

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.

During review of your Form 1023-EZ, detailed information was requested supplemental to your attestations. You were formed as a corporation on B in the state of C.

You preserve, maintain and provide general upkeep for the D family cemetery. Members of the D family serve on your governing body and are responsible for cemetery maintenance and tombstone upkeep. Grounds maintenance is conducted weekly during warm seasons and tombstone upkeep is provided annually or on an as needed basis.

The cemetery, which is owned by E, consists of a little over an * * *. Burials include family members of D along with * * * community members. You intend to use it to educate current and future generations of D on their history and to preserve the history of the community as it pertains to D. The cemetery is open to the public but is not on the National Registry of Historic Places.

All your revenue is received from donations and all expenses are for maintenance and tax return preparation.

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)(2) defines charitable as including the following purposes: 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 (i) to lessen neighborhood tensions; (ii) to eliminate prejudice and discrimination; (iii) to defend human and civil rights secured by law; or (iv) to combat community deterioration and juvenile delinquency.

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) or 501(c)(13), nor are contributions to it deductible to donors.

In Better Business Bureau of Washington, D.C., Inc. v. United States, 326 U.S. 179 (1945), the Supreme Court held that the presence of a single non-exempt purpose, if substantial in nature, will destroy a claim for exemption under IRC Section 501(c)(3) regardless of the number or importance of truly exempt purposes.

Application of law

Treas. Regs. Section 1.501(c)(3)-1(a)(1) states that an organization must be both organized and operated exclusively for one or more of the purposes specified in IRC Section 501(c)(3) in order to be found exempt under that section. To satisfy the operational test under Treas. Reg. Section 1.501(c)(3)-1(c)(1) an organization must establish that it is operated exclusively for one or more exempt purposes. You do not meet this test because you are operated to maintain a cemetery, which is not a recognized Section 501(c)(3) exempt purpose. [See Treas. Reg. Section 1.501(c)(3)-1(d)(2)]. You have not established or reported any educational programs. Thus, you are not qualified for exemption under Section 501(c)(3).

You are like the organization denied exemption in Rev. Rul. 65-6 because you are maintaining a cemetery in a similar manner. Although individuals are buried in your cemetery that are not direct family members this is not enough to overcome the private interests served to the family members of D.

As stated in Better Business Bureau of Washington, D.C., Inc., the presence of a single non-exempt purpose, if substantial in nature, will destroy a claim for exemption under IRC Section 501(c)(3). Since maintaining a cemetery does not further Section 501(c)(3) purposes, you do not qualify for exemption under 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 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 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 Decision 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:

Internal Revenue Service
EO Determinations Quality Assurance
Mail Stop 6403
P.O. Box 2508
Cincinnati, OH 45201

Street address for delivery service:

Internal Revenue Service
EO Determinations Quality Assurance
550 Main Street, Mail Stop 6403
Cincinnati, OH 45202

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

DOCUMENT ATTRIBUTES
  • Institutional Authors
    Internal Revenue Service
  • Code Sections
  • Subject Area/Tax Topics
  • Jurisdictions
  • Tax Analysts Document Number
    2021-42034
  • Tax Analysts Electronic Citation
    2021 TNTF 214-43
    2021 EOR 12-16
  • Magazine Citation
    The Exempt Organization Tax Review, Dec. 2021, p. 417
    88 Exempt Org. Tax Rev. 417 (2021)
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