I

104TH CONGRESS

1ST SESSION H. R. 783

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

FEBRUARY 1, 1995

Mr. CAMP (for himself, Mr. PAYNE of Virginia, Mr. THOMAS, Mr. BUNNING

of Kentucky, Mr. HOUGHTON, Mr. HERGER, Mr. MCCRERY, Mr. HANCOCK, Mr. ENGLISH of Pennsylvania, Mr. BREWSTER, Mr. BLILEY, Mr.

KNOLLENBERG, Mrs. MEYERS of Kansas, Mr. DOOLEY, Mr. BARCIA, Mr.

CONYERS, Mr. GORDON, Mr. DICKEY, Mr. WILSON, Mr. BAESLER, Mr.

HUTCHINSON, Mr. BARRETT of Nebraska, Mr. CANADY of Florida, Mr.

HANSON, Mr. EHLERS, Mr. PARKER, Ms. DANNER, Mr. COMBEST, Mr.

MINGE, Mr. KLUG, Mr. CHRYSLER, Mr. SISISKY, Mr. EDWARDS, Mr.

HAMILTON, and Mr. WOLF) 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 1995’’.
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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 $100,

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 $100 AMOUNT.—In the

22 case of any taxable year beginning in a calendar

23 year after 1995, the $100 amount in paragraph (1)

24 shall be increased by an amount equal to—

25 ‘‘(A) $100, 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 1994’ for ‘calendar year

5 1992’ in subparagraph (B) thereof.

6 ‘‘(3) DUES.—For purposes of this subsection,

7 the term ‘dues’ includes any payment required to be

8 made in order to be recognized by the organization

9 as a member of the organization.’’

10 (b) EFFECTIVE DATES.—

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

12 subsection (a) shall apply to taxable years beginning

13 after December 31, 1994.

14 (2) TRANSITIONAL RULE.—If—

15 (A) for purposes of applying part III of

16 subchapter F of chapter 1 of the Internal Reve17 nue Code of 1986 to any taxable year beginning

18 before January 1, 1995, an agricultural or hor19 ticultural organization did not treat any portion

20 of membership dues received by it as income de21 rived in an unrelated trade or business, and

22 (B) such organization had a reasonable

23 basis for not treating such dues as income de24 rived in an unrelated trade or business,
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1 then, for purposes of applying such part III to any

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

3 such dues be treated as derived in an unrelated

4 trade or business.

5 (3) REASONABLE BASIS.—For purposes of

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

7 having a reasonable basis for not treating member8 ship dues as income derived in an unrelated trade or

9 business if the taxpayer’s treatment of such dues

10 was in reasonable reliance on any of the following:

11 (A) Judicial precedent, published rulings,

12 technical advice with respect to the organiza13 tion, or a letter ruling to the organization.

14 (B) A past Internal Revenue Service audit

15 of the organization in which there was no as16 sessment attributable to the reclassification of

17 membership dues for purposes of the tax on un18 related business income.

19 (C) Long-standing recognized practice of

20 agricultural or horticultural organizations.

21 (4) DUES.—For purposes of this subsection,

22 the term ‘‘dues’’ includes any payment required to

23 be made in order to be recognized by the organiza24 tion as a member of the organization.

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