26 U.S.C. § 1382 — Taxable income of cooperatives

Page 2470 TITLE 26—INTERNAL REVENUE CODE § 1382 2004—Subsec. (c). Pub. L. 108–357 added subsec. (c). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2017 AMENDMENT Amendment by Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 13001(c)(1) of Pub. L. 115–97, set out as a note under sec- tion 11 of this title. EFFECTIVE DATE OF 2004 AMENDMENT Amendment by Pub. L. 108–357 applicable to taxable years beginning after Oct. 22, 2004, see section 319(e) of Pub. L. 108–357, set out as a note under section 501 of this title. EFFECTIVE DATE Pub. L. 87–834, § 17(c), Oct. 16, 1962, 76 Stat. 1051, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ‘‘(1) FOR THE COOPERATIVES.—Except as provided in paragraph (3), the amendments made by subsections (a) and (b) [enacting this subchapter, amending sections 521 and 6072 of this title, and repealing section 522 of this title] shall apply to taxable years of organizations described in section 1381(a) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as added by sub- section (a)) beginning after December 31, 1962. ‘‘(2) FOR THE PATRONS.—Except as provided in para- graph (3), section 1385 of the Internal Revenue Code of 1986 (as added by subsection (a)) shall apply with re- spect to any amount received from any organization described in section 1381(a) of such Code, to the extent that such amount is paid by such organization in a tax- able year of such organization beginning after Decem- ber 31, 1962. ‘‘(3) APPLICATION OF EXISTING LAW.—In the case of any money, written notice of allocation, or other property paid by any organization described in section 1381(a)— ‘‘(A) before the first day of the first taxable year of such organization beginning after December 31, 1962, or ‘‘(B) on or after such first day with respect to pa- tronage occurring before such first day, the tax treatment of such money, written notice of al- location, or other property (including the tax treat- ment of gain or loss on the redemption, sale, or other disposition of such written notice of allocation) by any person shall be made under the Internal Revenue Code of 1986 without regard to subchapter T of chapter 1 of such Code [this subchapter].’’ § 1382. Taxable income of cooperatives (a) Gross income Except as provided in subsection (b), the gross income of any organization to which this part applies shall be determined without any adjust- ment (as a reduction in gross receipts, an in- crease in cost of goods sold, or otherwise) by reason of any allocation or distribution to a pa- tron out of the net earnings of such organization or by reason of any amount paid to a patron as a per-unit retain allocation (as defined in sec- tion 1388(f)). (b) Patronage dividends and per-unit retain allo- cations In determining the taxable income of an orga- nization to which this part applies, there shall not be taken into account amounts paid during the payment period for the taxable year— (1) as patronage dividends (as defined in sec- tion 1388(a)), to the extent paid in money, qualified written notices of allocation (as de- fined in section 1388(c)), or other property (ex- cept nonqualified written notices of allocation (as defined in section 1388(d))) with respect to patronage occurring during such taxable year; (2) in money or other property (except writ- ten notices of allocation) in redemption of a nonqualified written notice of allocation which was paid as a patronage dividend during the payment period for the taxable year dur- ing which the patronage occurred; (3) as per-unit retain allocations (as defined in section 1388(f)), to the extent paid in money, qualified per-unit retain certificates (as de- fined in section 1388(h)), or other property (ex- cept nonqualified per-unit retain certificates, as defined in section 1388(i)) with respect to marketing occurring during such taxable year; or (4) in money or other property (except per- unit retain certificates) in redemption of a nonqualified per-unit retain certificate which was paid as a per-unit retain allocation during the payment period for the taxable year dur- ing which the marketing occurred. For purposes of this title, any amount not taken into account under the preceding sentence shall, in the case of an amount described in paragraph (1) or (2), be treated in the same manner as an item of gross income and as a deduction there- from, and in the case of an amount described in paragraph (3) or (4), be treated as a deduction in arriving at gross income. (c) Deduction for nonpatronage distributions, etc. In determining the taxable income of an orga- nization described in section 1381(a)(1), there shall be allowed as a deduction (in addition to other deductions allowable under this chapter)— (1) amounts paid during the taxable year as dividends on its capital stock; and (2) amounts paid during the payment period for the taxable year— (A) in money, qualified written notices of allocation, or other property (except non- qualified written notices of allocation) on a patronage basis to patrons with respect to its earnings during such taxable year which are derived from business done for the United States or any of its agencies or from sources other than patronage, or (B) in money or other property (except written notices of allocation) in redemption of a nonqualified written notice of allocation which was paid, during the payment period for the taxable year during which the earn- ings were derived, on a patronage basis to a patron with respect to earnings derived from business or sources described in subpara- graph (A). (d) Payment period for each taxable year For purposes of subsections (b) and (c)(2), the payment period for any taxable year is the pe- riod beginning with the first day of such taxable year and ending with the fifteenth day of the ninth month following the close of such year. For purposes of subsections (b)(1) and (c)(2)(A), a qualified check issued during the payment pe- riod shall be treated as an amount paid in money during such period if endorsed and cashed on or before the 90th day after the close of such period. Page 2471 TITLE 26—INTERNAL REVENUE CODE § 1382 (e) Products marketed under pooling arrange- ments For purposes of subsection (b), in the case of a pooling arrangement for the marketing of prod- ucts— (1) the patronage shall (to the extent pro- vided in regulations prescribed by the Sec- retary) be treated as patronage occurring dur- ing the taxable year in which the pool closes, and (2) the marketing of products shall be treat- ed as occurring during any of the taxable years in which the pool is open. (f) Treatment of earnings received after patron- age occurred If any portion of the earnings from business done with or for patrons is includible in the or- ganization’s gross income for a taxable year after the taxable year during which the patron- age occurred, then for purposes of applying para- graphs (1) and (2) of subsection (b) to such por- tion the patronage shall, to the extent provided in regulations prescribed by the Secretary, be considered to have occurred during the taxable year of the organization during which such earn- ings are includible in gross income. (g) Use of completed crop pool method of ac- counting (1) In general An organization described in section 1381(a) which is engaged in pooling arrangements for the marketing of products may compute its taxable income with respect to any pool opened prior to March 1, 1978, under the com- pleted crop pool method of accounting if— (A) the organization has computed its tax- able income under such method for the 10 taxable years ending with its first taxable year beginning after December 31, 1976, and (B) with respect to the pool, the organiza- tion has entered into an agreement with the United States or any of its agencies which includes provisions to the effect that— (i) the United States or such agency shall provide a loan to the organization with the products comprising the pool serving as collateral for such loan, (ii) the organization shall use an amount equal to the proceeds of such loan to make price support advances to eligible pro- ducers (as determined by the United States or such agency), to defray costs of han- dling, processing, and storing such prod- ucts, or to pay all or part of any adminis- trative costs associated with the price sup- port program, (iii) an amount equal to the net proceeds (as determined under such agreement) from the sale or exchange of the products in the pool shall be used to repay such loan until such loan is repaid in full (or all the products in the pool are disposed of), and (iv) the net gains (as determined under such agreement) from the sale or exchange of such products shall be distributed to eli- gible producers, except to the extent that the United States or such agency permits otherwise. (2) Completed crop pool method of accounting defined For purposes of this subsection, the term ‘‘completed crop pool method of accounting’’ means a method of accounting under which gain or loss is computed separately for each crop year pool in the year in which the last of the products in the pool are disposed of. (Added Pub. L. 87–834, § 17(a), Oct. 16, 1962, 76 Stat. 1046; amended Pub. L. 89–809, title II, § 211(a)(1)–(4), Nov. 13, 1966, 80 Stat. 1580, 1581; Pub. L. 91–172, title IX, § 911(a), Dec. 30, 1969, 83 Stat. 722; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 95–345, § 3, Aug. 15, 1978, 92 Stat. 483.) Editorial Notes AMENDMENTS 1978—Subsec. (g). Pub. L. 95–345 added subsec. (g). 1976—Pub. L. 94–455 struck out ‘‘or his delegate’’ after ‘‘Secretary’’ wherever appearing. 1969—Subsec. (b)(3). Pub. L. 91–172 expanded the cat- egory of per-unit retain allocations that may not be taken into account in determining the taxable income of an organization, by including per-unit retain alloca- tions paid for in money or other property (except non- qualified per-unit retain certificates as defined in sec- tion 1388(i) of this section). 1966—Subsec. (a). Pub. L. 89–809, § 211(a)(1), inserted reference to amounts paid to patrons as a per-unit re- tain allocation as defined in section 1388(f). Subsec. (b). Pub. L. 89–809, § 211(a)(2), inserted ‘‘and per-unit retain allocations’’ in heading, added pars. (3) and (4), and, in text following par. (4), inserted provi- sions making existing text applicable only to amounts described in pars. (1) and (2) and inserted text covering the treatment of amounts described in pars. (3) and (4). Subsec. (e). Pub. L. 89–809, § 211(a)(3), inserted provi- sion that the marketing of products shall be treated as occurring during any of the taxable years in which the pool is open. Subsec. (f). Pub. L. 89–809, § 211(a)(4), substituted ‘‘paragraphs (1) and (2) of subsection (b)’’ for ‘‘sub- section (b)’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1969 AMENDMENT Pub. L. 91–172, title IX, § 911(c), Dec. 30, 1969, 83 Stat. 722, provided that: ‘‘The amendments made by this sec- tion [amending this section and section 1388 of this title] shall apply to per-unit retain allocations made after October 9, 1969.’’ EFFECTIVE DATE OF 1966 AMENDMENT Pub. L. 89–809, title II, § 211(e), Nov. 13, 1966, 80 Stat. 1584, provided that: ‘‘(1) The amendments made by subsections (a), (b), and (c) [amending this section and sections 1383, 1385, and 1388 of this title] shall apply to per-unit retain allo- cations made during taxable years of an organization described in section 1381(a) (relating to organizations to which part I of subchapter T of chapter 1 applies) be- ginning after April 30, 1966, with respect to products de- livered during such years. ‘‘(2) The amendments made by subsection (d) [amend- ing section 6044 of this title] shall apply with respect to calendar years after 1966.’’ EFFECTIVE DATE Section applicable, except as otherwise provided, to taxable years of organizations described in section 1381(a) of this title beginning after Dec. 31, 1962, see sec- tion 17(c) of Pub. L. 87–834, set out as a note under sec- tion 1381 of this title. Page 2472 TITLE 26—INTERNAL REVENUE CODE § 1383 § 1383. Computation of tax where cooperative re- deems nonqualified written notices of alloca- tion or nonqualified per-unit retain certifi- cates (a) General rule If, under section 1382(b)(2) or (4), or (c)(2)(B), a deduction is allowable to an organization for the taxable year for amounts paid in redemption of nonqualified written notices of allocation or nonqualified per-unit retain certificates, then the tax imposed by this chapter on such organi- zation for the taxable year shall be the lesser of the following: (1) the tax for the taxable year computed with such deduction; or (2) an amount equal to— (A) the tax for the taxable year computed without such deduction, minus (B) the decrease in tax under this chapter for any prior taxable year (or years) which would result solely from treating such non- qualified written notices of allocation or nonqualified per-unit retain certificates as qualified written notices of allocation or qualified per-unit retain certificates (as the case may be). (b) Special rules (1) If the decrease in tax ascertained under subsection (a)(2)(B) exceeds the tax for the tax- able year (computed without the deduction de- scribed in subsection (a)) such excess shall be considered to be a payment of tax on the last day prescribed by law for the payment of tax for the taxable year, and shall be refunded or cred- ited in the same manner as if it were an over- payment for such taxable year. (2) For purposes of determining the decrease in tax under subsection (a)(2)(B), the stated dollar amount of any nonqualified written notice of al- location or nonqualified per-unit retain certifi- cate which is to be treated under such sub- section as a qualified written notice of alloca- tion or qualified per-unit retain certificate (as the case may be) shall be the amount paid in re- demption of such written notice of allocation or per-unit retain certificate which is allowable as a deduction under section 1382(b)(2) or (4), or (c)(2)(B) for the taxable year. (3) If the tax imposed by this chapter for the taxable year is the amount determined under subsection (a)(2), then the deduction described in subsection (a) shall not be taken into account for any purpose of this subtitle other than for purposes of this section. (Added Pub. L. 87–834, § 17(a), Oct. 16, 1962, 76 Stat. 1047; amended Pub. L. 89–809, title II, § 211(a)(5)–(7), Nov. 13, 1966, 80 Stat. 1581.) Editorial Notes AMENDMENTS 1966—Pub. L. 89–809, § 211(a)(5), inserted ‘‘or non- qualified per-unit retain certificates’’ in section catch- line. Subsec. (a). Pub. L. 89–809, § 211(a)(6), substituted ‘‘section 1382(b)(2) or (4)’’ for ‘‘1382(b)(2)’’ and inserted references to per-unit retain certificates. Subsec. (b)(2). Pub. L. 89–809, § 211(a)(7), substituted ‘‘section 1382(b)(2) or (4)’’ for ‘‘section 1382(b)(2)’’ and in- serted references to per-unit retain certificates. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1966 AMENDMENT Amendment by Pub. L. 89–809 applicable to per-unit retain allocations made during taxable years of an or- ganization described in section 1381(a) of this title (re- lating to organizations to which part I of subchapter T of chapter 1 applies) beginning after Apr. 30, 1966, with respect to products delivered during such years, see section 211(e)(1) of Pub. L. 89–809, set out as a note under section 1382 of this title. EFFECTIVE DATE Section applicable, except as otherwise provided, to taxable years of organizations described in section 1381(a) of this title beginning after Dec. 31, 1962, see sec- tion 17(c) of Pub. L. 87–834, set out as a note under sec- tion 1381 of this title. PART II—TAX TREATMENT BY PATRONS OF PATRONAGE DIVIDENDS AND PER- UNIT RETAIN ALLOCATIONS Sec. 1385. Amounts includible in patron’s gross income. Editorial Notes AMENDMENTS 1962—Pub. L. 87–834, § 17(a), Oct. 16, 1962, 76 Stat. 1048, added heading of part II and item 1385. § 1385. Amounts includible in patron’s gross in- come (a) General rule Except as otherwise provided in subsection (b), each person shall include in gross income— (1) the amount of any patronage dividend which is paid in money, a qualified written no- tice of allocation, or other property (except a nonqualified written notice of allocation), and which is received by him during the taxable year from an organization described in section 1381(a), (2) any amount, described in section 1382 (c)(2)(A) (relating to certain nonpatronage dis- tributions by tax-exempt farmers’ coopera- tives), which is paid in money, a qualified written notice of allocation, or other property (except a nonqualified written notice of allo- cation), and which is received by him during the taxable year from an organization de- scribed in section 1381(a)(1), and (3) the amount of any per-unit retain alloca- tion which is paid in qualified per-unit retain certificates and which is received by him dur- ing the taxable year from an organization de- scribed in section 1381(a). (b) Exclusion from gross income Under regulations prescribed by the Secretary, the amount of any patronage dividend, and any amount received on the redemption, sale, or other disposition of a nonqualified written no- tice of allocation which was paid as a patronage dividend, shall not be included in gross income to the extent that such amount— (1) is properly taken into account as an ad- justment to basis of property, or (2) is attributable to personal, living, or fam- ily items.