Creating and Maintaining a 501(c)(13) Nonprofit Cemetery Organization

A 501(c)(13) nonprofit cemetery is a cemetery and/or crematorium that is used strictly for its members and their income is used exclusively for the care of the cemetery as a whole. Unlike other types of 501(c) corporations, donations to a 501(c)(13) cemetery are NOT deductible for federal estate or gift tax purposes under IRC 2055 and 2522. That means if you leave money to a nonprofit cemetery in your will (bequest) or give a large lifetime gift, your estate cannot claim a deduction to reduce estate taxes.

On the other hand, it is legal in some instances to create a nonprofit burial site for your family as long as it meets the requirements set out by the IRS. And although all of these rules and regulations can be a bit confusing, we’ll be explaining exactly what these special burial places are, how you can create your own legal nonprofit and what needs to be done in order to stay compliant with federal, state and local laws when it comes to burying human remains as a nonprofit entity.

What is a 501(c)(13) Non-profit Organization Exactly?

A 501(c)(13) nonprofit cemetery organization is dedicated to the perpetual care (long term) of cemeteries and burial grounds. It’s a specialized form of nonprofit that allows cemetery organizations to hold tax-exempt status, which is critical for managing the upkeep of cemeteries over time and making sure they are properly maintained into the future. Here's a simple breakdown of what this means:

1. Nonprofit status: It’s a legal tax-exempt 501(c) organization that meets the requirements set out by the IRS and doesn’t pay taxes on the money it makes or receives in the form of donations. This allows the organization to focus on its purpose without worrying about paying taxes.
2. Purpose: The cemetery is managed and maintained for the public good of its members and is not set up or allowed to operate in any way as a for profit venture. The funds it collects (like fees for plots or donations) go toward the maintenance and care of the cemetery as a whole and not for individual plots or family members.
3. Perpetual care: This is a key point, a 501(c)(13) cemetery must provide perpetual care and maintenance to the entire cemetery, meaning that the cemetery's funds are set aside for long-term maintenance, such as keeping the grounds clean, repairing headstones, and ensuring the cemetery stays operational over time and not just for the upkeep of a select few graves.
4. Tax-deductible donations: People who donate money to a 501(c)(13) cemetery for its maintenance can often get a tax deduction if the donation is in the form of cash or other transferable assets. However, donations or payments made for individual burial plots or specific grave care don’t count. In addition, donations to a 501(c)(13) cemetery are NOT deductible for federal estate or gift tax purposes under IRC 2055 and 2522.

So, in simple terms, a 501(c)(13) cemetery organization is a cemetery that is run as a nonprofit and is dedicated to the long-term care of the cemetery grounds, and enjoys certain tax benefits so that it can pursue its intended purpose.

Who Can Apply for 501(c)(13) Status?

Any cemetery (or burying grounds for human remains) that is a not-for-profit can apply to become a 501(c)(13) as long as the entity does not benefit of any private shareholder or individual, although that does not guarantee that the IRS will accept your nonprofit status. The most contested area of this is when it comes to family cemeteries as some of them may adhere to the rules outlining a 501(c)(13), but they must still comply with the basic 501(c) guidelines for any nonprofit enterprise.

Here’s a breakdown of who can apply:

1. Family Cemeteries: These are privately owned by individuals or families for the purpose of burying family members. If they are organized as nonprofit entities and their funds are irrevocably dedicated to the perpetual care of the cemetery, they can apply for 501(c)(13) status although their application will be closely reviewed. Court cases that have made this possible include DuPont de Nemours Cemetery Company, T.C.M. 1974-314, and The John D. Rockefeller Family Cemetery Corporation, 63 T.C. 355 (1974) (Acq. 1977-2 C.B. 2).
2. Fraternal or Organizational Cemeteries: Burial sites owned and operated by fraternal organizations, societies, or other similar groups (like the Masons or the Odd Fellows) are eligible for 501(c)(13) status, provided they are used exclusively for the burial of members and their families. These cemeteries must also use all funds allotted to the cemetery to be used for the care of the grounds and the maintenance of the burial plots exclusively.
3. Nonprofit Burial Sites Managed by Religious or Charitable Groups: Burial grounds that are part of a religious or charitable organization can also apply for 501(c)(13) status, provided they meet the requirements of maintaining the cemetery and not distributing profits for personal gain. This can even include a homeless charity that creates and maintains a cemetery for those that can’t afford to be buried. This can also include cremation services.
4. Municipal Cemeteries: A qualifying cemetery operated by local governments or municipalities for public use can apply for 501(c)(13) status. These are often run as nonprofits to maintain public burial grounds or so called ‘potter’s fields’ where the remains of humans are evident and the land is set aside and maintained by the government or municipality.
5. Veterans’ Cemeteries: Cemeteries established specifically for veterans and their families may be eligible for 501(c)(13) status. These could be operated by nonprofit veterans’ organizations, a group of private individuals that come together to create a cemetery or historical areas with known graves of veterans from past wars. The Veterans of Foreign Wars (VFW) is one of the most know nonprofit in the sector and is still in operation throughout the United States.
6. Nonprofit Memorial Parks: Memorial parks or cemeteries that are not part of a religious group but are established to serve the public as nonprofit memorial spaces might qualify. The oldest nonprofit cemetery in the United States is generally considered to be Mount Auburn Cemetery, located in Cambridge, Massachusetts and was founded in 1831. It is both a cemetery that is still in operation today as well as a park and historic site that allows visitors.
7. Cemeteries Operated by Charitable Organizations: These are cemeteries run by larger charitable organizations or foundations that do not primarily focus on religion or fraternal activities but serve a broader community purpose. For example, The National Trust for Historic Preservation is a charity that works to preserve historical sites, some of these being cemeteries.

In essence, any cemetery or burial ground that is nonprofit and whose funds are dedicated to cemetery care and maintenance, including maintaining burial lots and graves with no individual personally benefitting from the entity can potentially apply for 501(c)(13) status. The key is the nonprofit nature of the cemetery and the long term dedication to maintaining the cemetery grounds as a whole.

Steps to Establish a 501(c)(13) Organization

There are basically three key steps in forming your 501(c)(13) entity and each differs in complexity. Other than dealing with the IRS, it’s also important to note that each state and municipality has their own laws and regulations when it comes to forming a legal cemetery operation. The complexity of each is too broad for this article, so we will give details on what information you will need, but it depends on what state you will incorporate your new charity in to determine the specific rules and guidelines.

Forming the Mutual Cemetery Organization

The first step in establishing a 501(c)(13) nonprofit cemetery is to create the legal entity in the state you live in. This involves drafting your articles of incorporation, which outline the purpose of your nonprofit, how it will operate, and who will govern it. These articles must specifically state that the nonprofit mutual cemetery’s operations are dedicated to public use even if it is a ‘private’ family one and provides burial spaces for the community and it’s formation concentrates on the perpetual care of the property.

Along with the articles of incorporation, you'll also need to create your nonprofit’s bylaws. These are the rules that will govern the day to day operations of your cemetery organization. Bylaws typically cover topics like how board members and other leadership positions are chosen, how meetings are conducted, and how decisions are made. It's important to make sure these bylaws align with both the cemetery's goals and your local state laws. Once these documents are finalized and ratified by your board of directors, your organization will be ready to officially file with the state and begin operating as a nonprofit cemetery.

Applying for 501(c)(13) Status for Cemetery Organizations 

After forming your cemetery organization, the next step is to apply for 501(c)(13) status with the IRS. To do this, you will need to submit Form 1024 in order to apply for tax-exempt status. This form requires detailed information about your cemetery’s operations, including its purpose, organizational structure, and how it plans to care for burial grounds in the long term. It can take a while to complete and we do recommend using a professional service if you are not familiar at all with non-profit organizations.

Also, be prepared to submit supporting documentation as well, such as your articles of incorporation, bylaws, and any state filings as per the IRS’ instructions. It’s important to be as thorough as possible as incomplete or inaccurate information can get your application kicked back and you’ll need to start the process over again. Once your Form 1024 is submitted, the IRS will review your application which can take anywhere from a few weeks to a few months depending on the amount of applications they receive. If everything is correct and your application is approved, your cemetery will be granted tax-exempt status making it eligible for the benefits associated with 501(c)(13) organizations.

Meeting State and Local Requirements for Nonprofit Cemeteries 

In addition to federal requirements, your cemetery must also comply with state and local regulations when it comes to running a cemetery. Depending on which state and locality your burial site is located, you may need to obtain certain permits to operate legally. This is especially true for crematoriums. These could include burial permits, zoning permits, or other local approvals that allow you to offer burial spaces and maintain the cemetery.

Each state has its own rules for cemeteries, so it isn’t feasible to try and cover each in this article. Rather, you’ll need to do your own research in your own jurisdiction and familiarize yourself with the specific zoning laws and burial regulations in your area. Some areas might have restrictions on where cemeteries can be located, the number of burials allowed, the area it can cover or or they may require that cemetery land be set aside for perpetual care. You should also check with your state’s department of health or local government for additional steps needed to be sure that your cemetery is in full compliance with all legal requirements.

Are Donations to 501(c)(13) Cemeteries Tax-Deductible?

Income Tax Deductions (Allowed)

• If you donate money to a nonprofit burial site that qualifies under IRC 501(c)(13) and the funds are irrevocably dedicated to the care of the cemetery as a whole, you can deduct the donation on your federal income tax return under IRC 170(c)(5).
• However, if you donate specifically for the care of a particular lot or crypt, you cannot deduct it.

Estate and Gift Tax Deductions (Not Allowed)

• Unlike many other nonprofit organizations, donations to a 501(c)(13) cemetery are NOT deductible for federal estate or gift tax purposes under IRC 2055 and 2522.
• That means if you leave money to a nonprofit graveyard or 'mutual cemetery' in your will (bequest) or give a large lifetime gift, your estate cannot claim a deduction to reduce estate taxes.

Why the Difference?

The IRS treats income tax deductions separately from estate and gift tax deductions. While many nonprofits qualify for both, these types of cemeteries are an exception as they get the income tax deduction benefit but not the estate/gift tax deduction benefit.

If you want to read it directly from the IRS, here’s the document: https://www.irs.gov/pub/irs-tege/eotopicj80.pdf

Common Questions

Q: Can a mortuary become a 501(c)(13) organization?

A: A mortuary cannot be considered a 501(c)(3) or 501(c)(13) organization because of the way both types of nonprofit status are defined under the IRS tax code.

Q: Can I deduct my burial plot on my taxes?

A: No, burial plots are not tax deductible. Only donations made for the mutual benefit and maintenance of the entire cemetery are tax deductible.

Q: Can a pet cemetery become a 501(c)(13) organization?

A: No, pet cemeteries are not part of the 501(c)(13) statute and can not become a nonprofit entity.

Q: Can a nonprofit cemetery fundraise?

A: Yes, a nonprofit cemetery can fundraise since they are established for public purposes and are tax-exempt under 501(c)(13).