88 BULLETIN 110 6, U. S. DEPARTMENT OE AGRICULTURE 
The test which those interested in an association should apply, 
to learn if their association comes within the scope of the act, is: 
Does the association meet the conditions set forth therein? These 
conditions are as follows: 
A. " That persons engaged in the production of agricultural 
products as farmers, planters, ranchmen, dairymen, nut or fruit 
growers may act together in associations, corporate or otherwise, 
with or without capital stock, in collectively processing, preparing 
for market, handling, and marketing in interstate and foreign com- 
merce such products of persons so engaged." 
This and other language which appears in the act makes it plain 
that a cooperative association, to come within the act, must be com- 
posed of producers. Probably, in those isolated instances in which 
nonproducers become members of an association through inheritance 
or otherwise by operation of law contrary to the policy of the asso- 
ciation, or in which producers cease to be such, the association being 
one which is incontrovertibly controlled and dominated by its pro- 
ducer members, would not, because of such nonproducer members, if 
it otherwise complied with the terms of the act, fall without its pro- 
visions. Such an association should take such measures as are com- 
patible with law to eliminate and exclude voting nonproducers from 
membership. This is true, .whether it is incorporated or unincor- 
porated, and whether it is organized with or without capital stock. 
B. Associations that desire to come within the act must be operated 
for the mutual benefit of the members thereof, as such producers, and 
conform to one or both of the following requirements: First, that 
no member of the association is allowed more than one vote because 
of the amount of stock or membership capital he may own therein, 
or, second, that the association does not pay dividends on stock 
and membership capital in excess of 8 per cent per annum. And 
in any case to the following: Third, that the association shall not 
deal in products of nonmembers to an amount greater in value than 
such as are handled by it for members. 
Associations must comply with either the first or second condi- 
tion and may comply with both. As the first condition embodies 
the one-man one-vote principle, associations operating on this basis, 
or which elect to operate on this basis, need not, unless they wish to 
do so, give consideration to the second condition. Of course, an 
association, if it desires, may operate in accordance with both of 
these conditions, but it will come within the scope of the act by 
complying with only one of them, if it complies with the other 
conditions of the act. 
If an association elects to operate under the second condition, 
dividends on stock or membership capital are limited to 8 per cent 
per annum. This does not mean that voting stock may be owned 
by or sold to nonproducers so far as this act is concerned. Only 
associations whose voting stock is held by or whose membership is 
made up of producers can come within the act. It is not necessary 
for associations that operate under the act to pay dividends in any 
amount unless they elect to do so. It is entirely a matter of choice 
with them. If, however, an association elects to operate under the 
second condition, dividends, if paid, must not exceed 8 per cent 
per annum. 
