§521 — Exemption of farmers’ cooperatives from tax
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Statute Text — 26 U.S.C. §521
A farmers’ cooperative organization described in subsection (b)(1) shall be exempt from taxation under this subtitle except as otherwise provided in part I of subchapter T (sec. 1381 and following). Notwithstanding part I of subchapter T (sec. 1381 and following), such an organization shall be considered an organization exempt from income taxes for purposes of any law which refers to organizations exempt from income taxes.
The farmers’ cooperatives exempt from taxation to the extent provided in subsection (a) are farmers’, fruit growers’, or like associations organized and operated on a cooperative basis (A) for the purpose of marketing the products of members or other producers, and turning back to them the proceeds of sales, less the necessary marketing expenses, on the basis of either the quantity or the value of the products furnished by them, or (B) for the purpose of purchasing supplies and equipment for the use of members or other persons, and turning over such supplies and equipment to them at actual cost, plus necessary expenses.
Exemption shall not be denied any such association because it has capital stock, if the dividend rate of such stock is fixed at not to exceed the legal rate of interest in the State of incorporation or 8 percent per annum, whichever is greater, on the value of the consideration for which the stock was issued, and if substantially all such stock (other than nonvoting preferred stock, the owners of which are not entitled or permitted to participate, directly or indirectly, in the profits of the association, upon dissolution or otherwise, beyond the fixed dividends) is owned by producers who market their products or purchase their supplies and equipment through the association.
Exemption shall not be denied any such association because there is accumulated and maintained by it a reserve required by State law or a reasonable reserve for any necessary purpose.
Exemption shall not be denied any such association which markets the products of nonmembers in an amount the value of which does not exceed the value of the products marketed for members, or which purchases supplies and equipment for nonmembers in an amount the value of which does not exceed the value of the supplies and equipment purchased for members, provided the value of the purchases made for persons who are neither members nor producers does not exceed 15 percent of the value of all its purchases.
Business done for the United States or any of its agencies shall be disregarded in determining the right to exemption under this section.
Exemption shall not be denied any such association because such association computes its net earnings for purposes of determining any amount available for distribution to patrons in the manner described in paragraph (1) of section 1388(j).
For treatment of value-added processing involving animals, see section 1388(k).
Treasury Regulations
- Treas. Reg. §Treas. Reg. §1.521-1 Farmers' cooperative marketing and purchasing associations; requirements for exemption under section 521
- Treas. Reg. §Treas. Reg. §1.521-1(a) §1.521-1(a)
- Treas. Reg. §Treas. Reg. §1.521-1(b) Cooperative associations engaged in the purchasing of supplies and equipment for farmers, fruit growers, livestock growers, dairymen, etc.
- Treas. Reg. §Treas. Reg. §1.521-1(c) In order to be exempt under either paragraph (a) or (b) of this section an association must establish that it has no taxable income for its own account other than that reflected in a reserve or surplus authorized in paragraph (a) of this section.
- Treas. Reg. §Treas. Reg. §1.521-1(d) Cooperative organizations engaged in occupations dissimilar from those of farmers, fruit growers, and the like, are not exempt.
- Treas. Reg. §Treas. Reg. §1.521-1(e) An organization is not exempt from taxation under this section merely because it claims that it complies with the requirements prescribed therein.
- Treas. Reg. §Treas. Reg. §1.521-1(f) A cooperative association will not be denied exemption merely because it makes payments solely in nonqualified written notices of allocation to those patrons who do not consent as provided in section 1388 and § 1.
40 Citing Cases
The IRS' Third Request for Additional Information In a letter to petitioner dated April 18, 2012, the IRS stated in pertinent part: Our previous letter * * * [ofMarch 2, 2012,] asked you to send us additional information about your application for tax-exempt status under section 501(c)(3) or section 521 ofthe Internal Revenue Code.
een the parties that the subject plans are "qualified plans" within the meaning of the Code. 2 The above quoted section of the Code was replaced by section 402(e) under the provisions of Unemployment Compensation Amendments of 1992, Pub. L. 102-318, sec. 521, 106 Stat. 291, 308, for years after Dec 31, 1992. For the year 1990, which is here in issue, sec. 402(a)(9) was in effect. 5 appear that the facts in this case fit the mandatory provisions of section 402(a)(9), calling for the taxation of t
In General.--This part shall apply to-- (1) any organization exempt from tax under section 521 (relating to exemption of farmers' cooperatives from tax), and (2) any corporation operating on a cooperative basis other than an organization-- (A) which is exempt from tax under this chapter, (B) which is subject to the provisions of-- (i) part II of subchapter H (relating to mutual savings banks, etc.), or (ii) subchapter L (relating