Taxation of Farmer Organiza- 

 tions Under Internal Revenue 

 Code 



By Donald Kirkpatrkk 



The Internal Revenue Code, as amend- 

 ed in 1943, provides for the first time 

 that all income tax exemption corpora- 

 tions, other than religious, charitable and 

 educational organizations, make an an- 

 nual information return to the Collector 

 of Internal Revenue in the district in 

 which the corporation maintains its home 

 office. Such return is made on form 

 designated "Form 990." Prior to this act 

 , y the government could, at its request, re- 



quire such a return but now the require- 

 ment for an annual informational return 

 is mandatory. The making of an informa- 

 tional return does not in and of itself 

 affect the exemption status of the corpora- 

 tion. The return, however, may disclose 

 a situation which will deprive the exempt 

 corporation of its right to income tax 

 exemption and force it to make a regular 

 return and have a corporation income tax 

 assessed against all taxable income. A 

 farmer tax exempt association desiring to 

 maintan an exempt status must therefore 

 examine its operation with care and re- 

 spect of limitations of law and valid reg- 

 ulations making possible the exemption. 



It will be surprising indeed if some of 

 the many .exempt corporations will not, 

 from their Information returns, disclose 

 to the Internal Revenue Department that 

 their operations are not wholly within the 

 tax exempt limitations. Extreme care, of 

 course, should be exercised in the making 

 of the return on Form 990 so that it will 

 truly reflect operations of the corporation. 

 It is very important for a farmer tax-ex- 

 empt corporation desiring to maintain its 

 exempt status to see that its operation is 

 within all of the limitations. 



Since the first federal graduated in- 

 come tax law was passed in 1916, farm- 

 er organizations have been permitted ex- 

 emption from income tax under the fed- 

 eral law. The classes of exempt corpora- 

 tions have been increased over the years 

 until now there are nineteen separate 

 classifications of corporations that are 

 permitted exemptions from federal in- 

 come tax. These classes are as follows: 



(1) Agricultural, horticultural and 

 labor membership organizations. 



(2) Mutual savings banks. 



(3) Fraternal beneficial societies. 



(4) Mutual building and loan associ- 

 ations. 



(5) Mutual cemetary associations. 



(6) Religious, charitable institutions 

 and community chests. 



(7) Chambers of Commerce, business 

 leagues, etc. 



(8) Civic leagues and local associations 

 of employees. 



(9) Recreational clubs not for profit. 



(10) Benevolent life insurance associ- 

 ations of local character. Mutual 

 ditch and irrigation companies, and 

 mutual telephone companies. 



(11) Mutual fire insurance companies. 



(12) Farmers' cooperative marketing and 

 purchasing associations. 



(13) Corporations organized to finance 

 cooperative operations. 



(14) Corporations organized for the ex- 

 clusive purpose of holding title to 

 property. 



(15) Corporations organized by Con- 

 gress as a governmental instru- 

 mentality. 



(16) Voluntary employees' beneficiary 

 associations. 



(17) Teachers Retirement Fund associ- 

 ations. 



(18) Religious organizations. 



(19) Voluntary employees' beneficiary 

 associations for Federal employees. 



Farm people are interested primarily in 

 tax exemption for their membership or- 

 ganizations, for their marketing cooper- 

 atives, for their farm supply cooperatives, 

 and for their local mutual insurance as- 

 sociations. It is proposed to treat these 

 several activities separately through the 

 use of this column in succeeding issues 

 of the Record. 



Jo Daviess Makes Study 



of Rural School Problems 



Jo Daviess County's Rural Schools Committee is one of a number of 

 such committees over the state studying various phases of rural school prob- 

 lems. Statistics obtained from the county superintendent of schools furnished 

 the basis for some of the discussion periods and proved interesting. A brief 

 analysis of this phase of the study for the school year of 194J-43 follows: 



Highest assessed valuation on a rural school district $323,970.00 



Lowest assessed valuation on a rural school district - 50,545.00 



Average school district assessed valuation - 118,073-42 



Highest educational tax rate on a rural school 

 Lowest educational tax rate on a rural school ... 

 Average school district educational tax rate 



Highest building tax rate on a rural school - 



Lowest building tax rate on a rural school 



Average school district building tax rate _ 



Highest current expense on a rural school 

 Lowest current expense on a rural school 

 Average school district current expense 



Highest claim for State Aid by a rural school 



Lowest claim for State Aid by a rural school 



Average school district claim for state aid 



1.00 

 .28 



.77 



.37 

 .02 

 .10 



1,670.00 

 601.00 

 882.83 



557.80 



33.11 



131.97 



Highest teacher's salary per rural school _ -.. 1,035.00 



Lowest teacher's salary per rural school _ 640.00 



Average teacher's salary _ 822.57 



Highest school enrollment . 

 Lowest school enrollment 



Number of schools with average daily attendance 



from 1 to 10 pupils - 



Number of schools with average daily attendance 



from 11 to 20 pupils - 



Number of schools with average daily attendance 



from 21 to 30 pupils 



Number of schools with average daily attendance 



from 31 to 40 pupils 



Highest net operating cost per pupil .._ - 



Lowest net operating cost per pupil - _..; 



Average of all districts net operating cost per pupil 



35 

 2 



65 



34 



2 



562.00 



29.26 



101.31 



OCTOBER, 1944 



23 



