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April 23, 1963

UNITED STATES of America, Defendant

The opinion of the court was delivered by: AUGELLI

This is a suit for refund of a federal income tax deficiency and penalty assessed against and collected from plaintiff for the taxable year 1954 in the sum of $ 126.69.

Plaintiff claims to be exempt from federal income taxes under sections 501(a) and 501(c)(3) of the Internal Revenue Code of 1954, 26 U.S.C.A. ยงยง 501(a) and 501(c)(3). Section 501(a) exempts from taxation organizations described in section 501(c)(3). That section, in pertinent part, reads:

 'Corporations, * * * organized and operated exclusively for religious, charitable, * * * purposes, * * * no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation, and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of any candidate for public office.'

 The parties have stipulated that plaintiff is a corporation, and also that it does not engage in propaganda or political activity of any kind. The questions to be decided, then, are whether plaintiff is a corporation organized and operated exclusively for charitable or religious purposes, and whether any of its net earnings inures to the benefit of private individuals.

 The record shows that plaintiff was incorporated in 1921 under the New Jersey statute providing for the incorporation of associations not for pecuniary profit. Paragraph 'Third' of plaintiff's corporate certificate states:

 'The purposes for which this association is to (be) formed, are to transact a general undertaking, burial and funeral association for the purpose of providing for the remains of the indigent and poor of the Hebrew faith in the City of Passaic, and vicinity, where said family or families show bona fide evidence that they are in no position to care for or properly bury their dead, and in the discretion of the officers of the aforesaid corporation they may charge a reasonable fee where said person, family or families may be in a position to defray costs of said burial or part costs of said burial; these moneys to go into the treasury of said organization to be used for general burial costs.'

 In 1953, plaintiff amended its certificate of incorporation in several respects, and added thereto the following:

 'All the property, assets and income of the association earned or acquired in excess of the amount necessary for the maintenance, operation and improvement of the association property and the cost of conducting funerals is hereby declared to be a trust fund, the income and principal of which, shall be devoted to the care of the aged and the chronic ill, in such manner and at such times as the Trustees shall from time to time determine.'

 In 1954, the tax year in question, plaintiff's membership consisted of the synagogues then in the Passaic-Clifton area, 11 in number; the Jewish community agencies in that same area, 8 in number, which owned cemetery property for the burial of their deceased members; and the Jewish Community Council, which is the central coordinating agency for the Jewish organizations in the area. The affairs of plaintiff are conducted by a Board of Trustees made up of 2 delegates and 2 alternates from each synagogue and organization and 7 delegates appointed by the Jewish Community Council. The Board of Rabbis of the Passaic-Clifton area supervises and controls the religious aspects of plaintiff's activities.

 Whether or not a corporation is exempt from taxation as a charitable or religious organization is not, of course, to be determined by a mere reading or examination of its corporate charter. The facts in each case must be explored to ascertain the predominant or primary purpose for which the organization was formed, and also the manner of its operations. Samuel Friedland Foundation v. United States, 144 F.Supp. 74 (D. N.J.1956).

 The dispute in this case arises not so much in regard to the facts, but rather as to their interpretation. Some of the facts have been stipulated. From the record as a whole, the following picture emerges:

 Under the Hebrew religion the burial of a deceased person is a religious undertaking and obligation. The rituals of an orthodox Jewish burial are governed by the Shulchan Aruch, the Jewish Code of Law. Members of the Chevra Kadisha *fn1" perform the religious rituals of the Shulchan Aruch, and prepare the body of the deceased person for burial. The actual funeral services, however, are conducted by a rabbi. No charge is made by members of the Chevra Kadisha for their services, but they do receive gratuities. It is also part of the orthodox ritual that interment must be in a Jewish cemetery, and that the hearse may not be used for one not of the Jewish faith.

 When the Jewish community of Passaic and Clifton became established at the turn of this century, people of the Jewish faith living in that area, whenever a death occurred, would hold the burial services at the home of the decedent. It was there that the body would be prepared for burial and the religious rituals performed by the Chevra Kadisha. Indicative of indigency in the area is the fact that in 1910 a number of Jewish people banded together and formed the 'Hebrew Free Burial Association of Passaic, New Jersey', a corporation not for pecuniary profit, the sole object of which was 'to provide ways and means for the free burial of indigent deceased Hebrews'.

 Between 1910 and 1920, there was a considerable increase in the Jewish population in the Passaic-Clifton area, and an expansion, as well, of the geographical area inhabited by the families. These factors made it difficult for the Chevra Kadisha to reach the homes of deceased Hebrews in time to perform the required religious rituals. *fn2" As a result thereof, and for the purpose of providing a proper burial ...

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