26 U.S. Code § 1388 - Definitions; special rules
For purposes of this subchapter, the term “written notice of allocation” means any capital stock, revolving fund certificate, retain certificate, certificate of indebtedness, letter of advice, or other written notice, which discloses to the recipient the stated dollar amount allocated to him by the organization and the portion thereof, if any, which constitutes a patronage dividend.
For purposes of this subchapter, the term “qualified check” means only a check (or other instrument which is redeemable in money) which is paid as a part of a patronage dividend, or as a part of a payment described in section 1382(c)(2)(A), to a distributee who has not given consent as provided in paragraph (2)(A) or (B) with respect to such patronage dividend or payment, and on which there is clearly imprinted a statement that the endorsement and cashing of the check (or other instrument) constitutes the consent of the payee to include in his gross income, as provided in the Federal income tax laws, the stated dollar amount of the written notice of allocation which is a part of the patronage dividend or payment of which such qualified check is also a part. Such term does not include any check (or other instrument) which is paid as part of a patronage dividend or payment which does not include a written notice of allocation (other than a written notice of allocation described in paragraph (1)(A)).
For purposes of this subchapter, the term “nonqualified written notice of allocation” means a written notice of allocation which is not described in subsection (c) or a qualified check which is not cashed on or before the 90th day after the close of the payment period for the taxable year for which the distribution of which it is a part is paid.
For purposes of this subchapter, the term “per-unit retain allocation” means any allocation, by an organization to which part I of this subchapter applies, to a patron with respect to products marketed for him, the amount of which is fixed without reference to the net earnings of the organization pursuant to an agreement between the organization and the patron.
For purposes of this subchapter, the term “per-unit retain certificate” means any written notice which discloses to the recipient the stated dollar amount of a per-unit retain allocation to him by the organization.
For purposes of this subchapter, the term “qualified per-unit retain certificate” means any per-unit retain certificate which the distributee has agreed, in the manner provided in paragraph (2), to take into account at its stated dollar amount as provided in section 1385(a).
For purposes of this subchapter, the term “nonqualified per-unit retain certificate” means a per-unit retain certificate which is not described in subsection (h).
The net earnings of such organization may, at its option, be determined by offsetting patronage losses (including any patronage loss carried to such year) which are attributable to 1 or more allocation units (whether such units are functional, divisional, departmental, geographic, or otherwise) against patronage earnings of 1 or more other such allocation units.
For purposes of section 521 and this subchapter, the marketing of the products of members or other producers shall include the feeding of such products to cattle, hogs, fish, chickens, or other animals and the sale of the resulting animals or animal products.
2004—Subsec. (a). Pub. L. 108–357, § 312(a), inserted at end of concluding provisions “For purposes of paragraph (3), net earnings shall not be reduced by amounts paid during the year as dividends on capital stock or other proprietary capital interests of the organization to the extent that the articles of incorporation or bylaws of such organization or other contract with patrons provide that such dividends are in addition to amounts otherwise payable to patrons which are derived from business done with or for patrons during the taxable year.”
Subsec. (k). Pub. L. 108–357, § 316(a), added subsec. (k).
1990—Subsec. (k). Pub. L. 101–508 struck out subsec. (k) which cross-referenced section 46(h) for provisions relating to apportionment of investment credit between cooperative organizations and their patrons.
1986—Subsecs. (j), (k). Pub. L. 99–272 added subsec. (j) and redesignated former subsec. (j) as (k).
1978—Subsec. (j). Pub. L. 95–600 added subsec. (j).
1976—Subsec. (c)(2)(B)(i). Pub. L. 94–455, § 1901 (a)(153)(A), substituted “October 16, 1962” for “the date of the enactment of the Revenue Act of 1962”.
Subsec. (h)(2)(B)(i). Pub. L. 94–455, § 1901(a)(153)(B), substituted “November 13, 1966” for “the date of the enactment of this subsection”.
1969—Subsec. (f). Pub. L. 91–172 struck out reference to allocations made by organizations other than by payment of money or other property except per-unit retain certificates.
1966—Subsec. (e). Pub. L. 89–809, § 211(c)(1), inserted references to per-unit retain certificates.
Subsecs. (f) to (i). Pub. L. 89–809, § 211(c)(2), added subsecs. (f) to (i).
Amendment by Pub. L. 101–508 applicable to property placed in service after Dec. 31, 1990, but not applicable to any transition property (as defined in section 49(e) of this title), any property with respect to which qualified progress expenditures were previously taken into account under section 46(d) of this title, and any property described in section 46(b)(2)(C) of this title, as such sections were in effect on Nov. 4, 1990, see section 11813(c) of Pub. L. 101–508, set out as a note under section 45K of this title.
Amendment by Pub. L. 89–809 applicable to per-unit retain allocations made during taxable years of an organization described in section 1381(a) of this title (relating 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.
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 section 17(c) of Pub. L. 87–834, set out as a note under section 1381 of this title.
For provisions that nothing in amendment by Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title.
Pub. L. 89–809, title II, § 211(f), Nov. 13, 1966, 80 Stat. 1584, provided that a written agreement between a patron and a cooperative association which met certain qualifications and was entered into after Oct. 14, 1965 and before Nov. 13, 1966, and which was in effect on Nov. 13, 1966, was to be treated for purposes of subsec. (h) of this section as if entered into after Nov. 13, 1966.
Written determinations for this section
These documents, sometimes referred to as "Private Letter Rulings", are taken from the IRS Written Determinations page; the IRS also publishes a fuller explanation of what they are and what they mean. The collection is updated (at our end) daily. It appears that the IRS updates their listing every Friday.
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- Taxable Income of Cooperatives : 2017-01-27
- Definitions Special Rules : 2017-01-27
- Definitions : 2015-03-13
- Organizations to Which Part Applies : 2015-03-13
- Treatment of Certain Liabilities : 2015-03-13
- Nonrecognition of Gain or Loss on Contributions : 2015-03-13
- Patronage Dividends : 2015-03-13
- Taxability of Corporation on Distribution : 2015-03-13
- Amounts Includible in Patron's Gross Income : 2015-03-13
- Definitions Special Rules : 2015-03-13
- Definitions Special Rules : 2009-08-28
- Definitions Special Rules : 2008-10-17
- Mutual or Cooperative Electric Companies : 2008-09-19
- Definitions Special Rules : 2008-09-19
- Organizations to Which Part Applies : 2006-07-21
- Definitions Special Rules : 2006-07-21
- Organizations to Which Part Applies : 2006-07-07
- Definitions Special Rules : 2006-07-07
- Organizations to Which Part Applies : 2006-06-23
- Definitions Special Rules : 2006-06-23
- Organizations to Which Part Applies : 2005-10-14
- Patronage Dividends : 2005-10-14
- Deductions : 2005-10-14
- Definitions Special Rules : 2005-10-14
- Definitions Special Rules : 2002-12-27
- Definitions Special Rules : 2002-11-01
- Definitions Special Rules : 2002-06-28
- Definitions Special Rules : 2002-02-08
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