Non-profit cemeteries are those that are operative solely for the benefit of members and do not collect a profit. There are more benefits available to non-profit cemetery companies than just exemption from federal income tax under Section 501(c)(13) of the Internal Revenue Code. All potential benefits should be carefully evaluated by a death care specialist if you are considering non-profit status for your cemetery.
Exempt from Federal Income Tax
Tax exempt status allows you to accumulate funds free from federal income tax for cemetery improvements, maintenance and construction. While increasing life spans are good for society, they make it increasingly difficult to generate the revenue needed to sustain cemetery maintenance and upkeep. This and other unfavorable demographics are reasons to consider tax exempt status so you can retain the funds needed for maintenance and upkeep.
Voluntary Contributions Deductible by Donor
With tax exempt status, donors can make tax deductible charitable contributions to a non-profit cemetery for perpetual care. The contribution must be for the benefit of the cemetery as a whole, not a specific lot. Contributions can provide funds needed for maintenance and upkeep.
Sales of Ancillary Products
In addition to profits from burials and cremations, profits from the sale of monuments, markers, vaults, flowers and other ancillary products are tax exempt, if they are used for cemetery maintenance and upkeep. These profits provide a much needed source of funds for many cemeteries.
Non-profit organizations are restricted as to the amount of compensation, fringe benefits, travel and other non-operating expenses which may be paid. This is also true for non-profit cemeteries, but the restriction is based upon comparison to expenditure levels in other industries for comparable responsibility and size of operation. This methodology may provide the opportunity to structure compensation to achieve the overall return desired from a cemetery investment.
A non-profit cemetery may be organized as a mutual cemetery company or an incorporated cemetery company. Incorporated cemetery companies may issue common stock but they must be prohibited from paying dividends either by charter or state law. The ability to issue common stock makes it possible to raise additional capital for improvements. Having common stock may also make it easier for you to sell your interest to retire.
Non-profit cemeteries may issue debt to raise capital for acquisition of land and other assets. Debt may be an attractive alternative to investors who prefer to earn interest income on their investment.
Contact MKS&H Today
These and other possible benefits of a non-profit cemetery should be carefully evaluated to determine the right course of action for your cemetery. Choosing experienced and knowledgeable advisors to help you make the right decision is an essential part of this process.
MKS&H provides the business consulting, accounting and tax services you need to determine if non-profit status is the best choice for your cemetery. We have a highly skilled and experienced death care team which can help you through the entire process. If you would like to learn more about the benefits of a non-profit cemetery, please contact us today.