News

Plenty of Money Made at 'Not-for-Profit' Cemetery

Paid $8.5M to Management Company That Controls Its Board

By Josh Nathan-Kazis

(Page 4 of 5)

New Jersey’s cemetery board, which Irwin Shipper chaired from 1972 until 1994, made no such regulatory effort. Efforts to reach Irwin Shipper for this story were unsuccessful.

---

After Loewen declared bankruptcy in 1999, some of its cemeteries, including Beth Israel, ended up with StoneMor, a publicly traded firm headed by former Loewen executives. Based in Levittown, Pa., the company owns 253 cemeteries and 69 funeral homes across the United States. The vast majority of these facilities are not Jewish.

The Levittown office of StoneMor is also the address of Beth Israel Cemetery Association, the not-for-profit corporation that owns Beth Israel Cemetery, according to the organization’s latest public tax filing with the IRS. Beth Israel’s board members, as listed in that 2010 filing, are all current and former StoneMor employees and executives.

In a 2011 filing with the SEC, StoneMor wrote that its deals with the not-for-profit cemeteries “provide us with management or operating fees that approximate what we would earn if we owned those cemeteries and held them in for-profit entities.”

Between 2005 and 2010, tax filings show that Beth Israel paid $8.5 million in management fees, presumably paid to cover management services. The filings don’t say where it paid those management fees, but elsewhere it states that Beth Israel’s management company employs Beth Israel’s officers, referring to StoneMor.

Those management fees make up a small portion of Beth Israel’s expenditures. The cemetery spent $60 million over that six-year period, including $15 million marked in its IRS filings as “other salaries and wages.”

The Beth Israel board’s practice of paying fees that resemble profits to a company that in turn pays salaries to members of its board could conflict with tax rules barring not-for-profit insiders from unreasonably profiting from their position, according to William Josephson, who ran the charities bureau in the office of the New York State Attorney General from 1999 to 2004. Beth Israel is not a 501(c)(3), the most common form of not-for-profit organization, but rather is organized under a related section of the federal tax code specifically applying to not-for-profit cemeteries. Josephson acknowledged that there’s little precedent for IRS enforcement action under that tax code section. Still, he said, in the case of Beth Israel, “the degree to which cash flows [to] foundation managers, directors and officers raises an issue in which the Internal Revenue Service should certainly be interested, let alone the New Jersey attorney general.”