I

103D CONGRESS

2D SESSION H. R. 3951

To amend the Internal Revenue Code of 1986 to prevent the reclassification

of certain dues paid to tax-exempt agricultural or horticultural organizations.

IN THE HOUSE OF REPRESENTATIVES

MARCH 3, 1994

Mr. CAMP (for himself, Mr. BREWSTER, Mr. ARCHER, Mr. GRANDY, Mr.

HOAGLAND, Mr. SUNDQUIST, Mr. PAYNE of Virginia, Mr. DOOLITTLE,

Mr. BOEHNER, Mr. QUILLEN, Mr. HANSEN, Mr. CANADY, Mr. BARLOW,

Mr. BARCIA of Michigan, Mr. BUNNING, Mr. HANCOCK, Mr. SLATTERY,

Mr. MCCRERY, Mr. THOMAS of California, Mr. HOUGHTON, Mr. EDWARDS of Texas, Mr. SHAW, Mr. HERGER, Mr. PETE GEREN of Texas,

Mr. LEWIS of Florida, Mr. BONILLA, Mr. LIGHTFOOT, Mr. GORDON, and

Mr. FIELDS of Texas) introduced the following bill; which was referred

to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to prevent

the reclassification of certain dues paid to tax-exempt

agricultural or horticultural organizations.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Tax Fairness for Agri5 culture Act of 1994’’.
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1 SEC. 2. TREATMENT OF DUES PAID TO AGRICULTURAL OR

2 HORTICULTURAL ORGANIZATIONS.

3 (a) GENERAL RULE.—Section 512 of the Internal

4 Revenue Code of 1986 (defining unrelated business tax5 able income) is amended by adding at the end thereof the

6 following new subsection:

7 ‘‘(d) TREATMENT OF DUES OF AGRICULTURAL OR

8 HORTICULTURAL ORGANIZATIONS.—

9 ‘‘(1) IN GENERAL.—If—

10 ‘‘(A) an agricultural or horticultural orga11 nization described in section 501(c)(5) requires

12 annual dues to be paid in order to be a member

13 of such organization, and

14 ‘‘(B) the amount of such required annual

15 dues does not exceed $75,

16 in no event shall any portion of such dues be treated

17 as derived by such organization from an unrelated

18 trade or business by reason of any benefits or privi19 leges to which members of such organization are en20 titled.

21 ‘‘(2) INDEXATION OF $75 AMOUNT.—In the case

22 of any taxable year beginning in a calendar year

23 after 1994, the $75 amount in paragraph (1) shall

24 be increased by an amount equal to—

25 ‘‘(A) $75, multiplied by
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1 ‘‘(B) the cost-of-living adjustment deter2 mined under section 1(f)(3) for the calendar

3 year in which the taxable year begins, by sub4 stituting ‘calendar year 1993’ for ‘calendar year

5 1992’ in subparagraph (B) thereof.’’

6 (b) EFFECTIVE DATES.—

7 (1) IN GENERAL.—The amendment made by

8 subsection (a) shall apply to taxable years beginning

9 after December 31, 1993.

10 (2) TRANSITIONAL RULE.—If—

11 (A) for purposes of applying part III of

12 subchapter F of chapter 1 of the Internal Reve13 nue Code of 1986 to any taxable year beginning

14 before January 1, 1994, an agricultural or hor15 ticultural organization did not treat any portion

16 of membership dues received by it as income de17 rived in an unrelated trade or business, and

18 (B) such organization had a reasonable

19 basis for not treating such dues as income de20 rived in an unrelated trade or business,

21 then, for purposes of applying such part III to any

22 such taxable year, in no event shall any portion of

23 such dues be treated as derived in an unrelated

24 trade or business.
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1 (3) REASONABLE BASIS.—For purposes of

2 paragraph (2), an organization shall be treated as

3 having a reasonable basis for not treating member4 ship dues as income derived in an unrelated trade or

5 business if the taxpayer’s treatment of such dues

6 was in reasonable reliance on any of the following:

7 (A) Judicial precedent, published rulings,

8 technical advice with respect to the organiza9 tion, or a letter ruling to the organization.

10 (B) A past Internal Revenue Service audit

11 of the organization in which there was no as12 sessment attributable to the reclassification of

13 membership dues for purposes of the tax on un14 related business income.

15 (C) Long-standing recognized practice of

16 agricultural or horticultural organizations.

Æ