
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC521]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
                   Subchapter F--Exempt Organizations
 
                     PART IV--FARMERS' COOPERATIVES
 
Sec. 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).

(Aug. 16, 1954, ch. 736, 68A Stat. 176; Pub. L. 87-834, Sec. 17(b)(1), 
Oct. 16, 1962, 76 Stat. 1051; Pub. L. 99-272, title XIII, Sec. 13210(b), 
Apr. 7, 1986, 100 Stat. 324.)


                               Amendments

    1986--Subsec. (b)(6). Pub. L. 99-272 added par. (6).
    1962--Subsec. (a). Pub. L. 87-834 substituted ``part I of subchapter 
T (sec. 1381 and following)'' for ``section 522'' in two places.


                    Effective Date of 1986 Amendment

    Amendment by Pub. L. 99-272 applicable to taxable years beginning 
after Dec. 31, 1962, see section 13210(c) of Pub. L. 99-272, set out as 
a note under section 1388 of this title.


                    Effective Date of 1962 Amendment

    Amendment by Pub. L. 87-834 applicable, except as otherwise 
provided, to taxable years of organizations described in section 1381(a) 
of this title beginning after Dec. 31, 1962, see section 17(c) of Pub. 
L. 87-834, set out as an Effective Date note under section 1381 of this 
title.

                  Section Referred to in Other Sections

    This section is referred to in sections 50, 52, 168, 246, 337, 854, 
860E, 1245, 1250, 1381, 1388, 3306, 4421, 6044 of this title; title 15 
section 77c.
