26 U.S.C. § 521 : US Code - Section 521: Exemption of farmers' cooperatives from tax

Search 26 U.S.C. § 521 : US Code - Section 521: Exemption of farmers' cooperatives from tax

(a) Exemption from tax
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.
(b) Applicable rules
(1) Exempt farmers' cooperatives
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.
(2) Organizations having capital stock
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.
(3) Organizations maintaining reserve
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.
(4) Transactions with nonmembers
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.
(5) Business for the United States
Business done for the United States or any of its agencies
shall be disregarded in determining the right to exemption under
this section.
(6) Netting of losses
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).
(7) Cross reference
For treatment of value-added processing involving animals,
see section 1388(k).