Internal Revenue Code · 26 U.S.C.
§ 521. Exemption of farmers’ cooperatives from tax
Official text, no changes From the Office of the Law Revision Counsel, release point 119-121 (current through Public Law 119-121 (October 9, 2026)). Compare it with the official text at uscode.house.gov (external site).
Cite as 26 U.S.C. § 521
At a glance
Read from the text, the source credit and the official notes. Not part of the law.
- Status
- In force
- Enacted
- October 16, 1962 by Pub. L. 87–834
- Last amended
- October 22, 2004 by Pub. L. 108–357
- Amendments
- 2 dated changes in the source credit
- Length
- 2 subsections · 544 words · about 2 min to read
- Cross-references
- cites 2; cited by 18 Code sections and 34 other regulations
- Regulations
- 1 issued under this section
A farmers’ cooperative organization described in subsection (b)(1) shall be exempt from taxation under this subtitle except as otherwise provided in part I of subchapter T (sec. 1381 and following). Notwithstanding part I of subchapter T (sec. 1381 and following), such an organization shall be considered an organization exempt from income taxes for purposes of any law which refers to organizations exempt from income taxes.
The farmers’ cooperatives exempt from taxation to the extent provided in subsection (a) are 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 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 supplies 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 percent 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.
Exemption shall not 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.
Exemption shall not be denied any such association which markets the products of nonmembers in an amount the value of which does not exceed the value of the products marketed for members, or which purchases supplies and equipment for nonmembers in an amount the value of which does not exceed the value of the supplies and equipment purchased for members, provided the value of the purchases made for persons who are neither members nor producers does not exceed 15 percent of the value of all its purchases.
Business done for the United States or any of its agencies shall be disregarded in determining the right to exemption under this section.
Exemption shall not be denied any such association because such association computes its net earnings for purposes of determining any amount available for distribution to patrons in the manner described in paragraph (1) of section 1388(j).
For treatment of value-added processing involving animals, see section 1388(k).
(Aug. 16, 1954, ch. 736, 68A Stat. 176; Pub. L. 87–834, § 17(b)(1), Oct. 16, 1962, 76 Stat. 1051; Pub. L. 99–272, title XIII, § 13210(b), Apr. 7, 1986, 100 Stat. 324; Pub. L. 108–357, title III, § 316(b), Oct. 22, 2004, 118 Stat. 1469.)
Regulations under this section
Treasury regulations (26 CFR) issued under § 521
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 2 other sections
Cited by 18 Code sections
- § 50(b)(3) Other special rules
- § 52(c)(1) Special rules
- § 168(h)(2)(A)(ii) Accelerated cost recovery system
- § 246(a)(1) Rules applying to deductions for dividends received
- § 337(b)(2)(A) Nonrecognition for property distributed to parent in complete liquidation of subsidiary
- § 854(b)(2)(B)(i) Limitations applicable to dividends received from regulated investment company
- § 860E(e)(5)(B) Treatment of income in excess of daily accruals on residual interests
- § 1245(b)(3) Gain from dispositions of certain depreciable property
- § 1250(d)(3) Gain from dispositions of certain depreciable realty
- § 1381(a)(1) Organizations to which part applies
- § 1388(j)(3)(C)(ii) Definitions; special rules
- § 3121(a)(16) Definitions
- § 3306(c)(10)(A) Definitions
- § 3405(e)(4) Special rules for pensions, annuities, and certain other deferred income
- § 4421(2)(B) Definitions
- § 4960(c)(1)(B) Tax on excess tax-exempt organization executive compensation
- § 6044(b)(1)(B) Returns regarding payments of patronage dividends
- § 7428(a)(1)(D) Declaratory judgments relating to status and classification of organizations under section 501(c)(3), etc.
Cited in 34 regulations not issued under it
- § 1.45R-1 Definitions.
- § 1.48-1 Definition of section 38 property.
- § 1.163(j)-4 General rules applicable to C corporations (including REITs, RICs, and members of consolidated groups) and tax-exempt corporations.
- § 1.199A-8 Deduction for income attributable to domestic production activities of specified agricultural or horticultural cooperatives.
- § 1.246-1 Deductions not allowed for dividends from certain corporations.
- § 1.403(c)-1 Taxability of beneficiary under a nonqualified annuity.
- § 1.467-7 Section 467 recapture and other rules relating to dispositions and modifications.
- § 1.501(c)(16)-1 Corporations organized to finance crop operations.
- § 1.522-2 Manner of taxation of cooperative associations subject to section 522.
- § 1.522-3 Patronage dividends, rebates, or refunds; treatment as to cooperative associations entitled to tax treatment under section 522.
- § 1.617-4 Treatment of gain from disposition of certain mining property.
- § 1.1245-4 Exceptions and limitations.
- § 1.1250-3 Exceptions and limitations.
- § 1.1251-4 Exceptions and limitations.
- § 1.1252-2 Special rules.
- § 1.1254-2 Exceptions and limitations.
- § 1.1381-1 Organizations to which part applies.
- § 1.1381-2 Tax on certain farmers' cooperatives.
- § 1.1382-3 Taxable income of cooperatives; special deductions for exempt farmers' cooperatives.
- § 1.1382-7 Special rules applicable to cooperative associations exempt from tax before January 1, 1952.
- § 1.1385-1 Amounts includible in patron's gross income.
- § 1.1388-1 Definitions and special rules.
- § 1.6012-2 Corporations required to make returns of income.
- § 1.6042-1 Return of information as to dividends paid in calendar years before 1963.
Show 10 more
- § 1.6044-2 Returns of information as to payments of patronage dividends.
- § 1.6044-3 Amounts subject to reporting.
- § 1.6072-2 Time for filing returns of corporations.
- § 31.3121(b)(10)-1 Services for remuneration of less than $50 for calendar quarter in the employ of certain organizations exempt from income tax.
- § 31.3306(c)(10)-1 Services in the employ of certain organizations exempt from income tax.
- § 53.4960-0 Table of contents.
- § 53.4960-1 Scope and definitions.
- § 301.6104(a)-1 Public inspection of material relating to tax-exempt organizations.
- § 601.106 Appeals functions.
- § 601.201 Rulings and determinations letters.
Amendment history
From the source credit and the official notes, newest first.
Where it sits in the Code
- Subtitle A Income Taxes
- Chapter 1 NORMAL TAXES AND SURTAXES
- Subchapter F Exempt Organizations
- Part IV FARMERS’ COOPERATIVES
Nearby sections
- § 521 Exemption of farmers’ cooperatives from tax
- § 522 Repealed
Official notes
Show the Law Revision Counsel's notes (amendments, effective dates)
Editorial Notes
Amendments
2004—Subsec. (b)(7). Pub. L. 108–357 added par. (7).
1986—Subsec. (b)(6). Pub. L. 99–272 added par. (6).
1962—Subsec. (a). Pub. L. 87–834 substituted “part I of subchapter T (sec. 1381 and following)” for “section 522” in two places.
Statutory Notes and Related Subsidiaries
Effective Date of 2004 Amendment
Pub. L. 108–357, title III, § 316(c), Oct. 22, 2004, 118 Stat. 1469, provided that: “The amendments made by this section [amending this section and section 1388 of this title] shall apply to taxable years beginning after the date of the enactment of this Act [Oct. 22, 2004].”
Effective Date of 1986 Amendment
Amendment by Pub. L. 99–272 applicable to taxable years beginning after Dec. 31, 1962, see section 13210(c) of Pub. L. 99–272, set out as a note under section 1388 of this title.
Effective Date of 1962 Amendment
Amendment by Pub. L. 87–834 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 an Effective Date note under section 1381 of this title.