LEGAL PHASES OF COOPERATIVE ASSOCIATIONS 99 
amount paid. 25 The court held that the certificates of membership of 
the association did not come within the scope of the statutory pro- 
vision in question and said that " Before any member has anything 
of monetary value in the hands of the association, he must not alone 
have become a member, as shown by certificate of membership, but 
must further have delivered wheat to the association; that two or a 
dozen certificates of membership in the association are of no more 
actual worth or value than is one." 
The stamp provision quoted above was amended by section 441 
of the revenue act of 1928 26 so as to make it plain that the provision 
referred to did not apply to " stocks and bonds and other certificates 
of indebtedness issued by any farmers' or fruit growers' or like asso- 
ciations organized and operated on a cooperative basis for the pur- 
poses, and subject to the conditions, prescribed in paragraph (12) 
of section 231 of the revenue act of 1926. 
INCOME TAXES 
Section 103 of the revenue act of 1928 27 provides that — 
The following organizations shall be exempt from taxation under this title— 
******* 
(12) 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 the 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 sup- 
plies 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. 
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 per centum 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 ; nor shall exemption 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. 
Such an association may market the products of nonmembers in an amount 
the value of which does not exceed the value of the products marketed for 
members, and may purchase supplies and equipment for nonmembers in an 
amount the value of which does not exceed the value of the supplies and equip- 
ment purchased for members, provided the value of the purchases made for 
persons who are neither members nor producers does not exceed 15 per centum 
of the value of all its purchases. 28 
(13) Corporations organized by an association exempt under the provisions 
of paragraph (12), or members thereof, for the purpose of financing the or- 
dinary crop operations of such members or other producers, and operated in 
conjunction with such association. Exemption shall not be denied any such 
corporation 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 per centum per annum, whichever is greater, on the value of the considera- 
tion for which the stock was issued, and if substantially all such stock (other 
25 Kansas Co-op. Wheat Marketing Ass'n v. Hotter, and Kansas Wheat Growers' Ass'n v. 
Motter, 14 P. (2d) 242. 
26 45 Stat. 791. 
27 45 Stat. 791, see United States v. Cambridge Loan & Building Co., 278 U. S. , 
49 S. Ct. 39. 
28 Appeared first in revenue act of 1926, 44 Stat., p. 40-41, sec. 231. 
