I

103D CONGRESS

1ST SESSION H. R. 1931

To amend the Internal Revenue Code of 1986 to allow farmers’ cooperatives

to elect to include gains or losses from certain dispositions in the determination of net earnings, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

APRIL 29, 1993

Mr. KOPETSKI (for himself, Mr. GRANDY, Mr. HOAGLAND, and Mr. HERGER)

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 allow farmers’ cooperatives to elect to include gains or losses from

certain dispositions in the determination of net earnings,

and for other purposes.

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

3 SECTION 1. GAINS AND LOSSES FROM CERTAIN DISPOSI4 TIONS BY FARMERS COOPERATIVES.

5 (a) IN GENERAL.—Section 1388 of the Internal Rev6 enue Code of 1986 (relating to definitions and special

7 rules) is amended by adding at the end thereof the follow8 ing new subsection:
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1 ‘‘(k) TREATMENT OF GAINS OR LOSSES ON THE DIS2 POSITION OF CERTAIN ASSETS.—For purposes of this

3 title, in the case of any farmer cooperative—

4 ‘‘(1) IN GENERAL.—A farmer cooperative may

5 elect to include gain or loss from the sale or other

6 disposition of any asset (including stock or any other

7 ownership or financial interest in another entity) in

8 net earnings of the organization from business done

9 with or for patrons, if such asset was used by the

10 organization to facilitate the conduct of business

11 done with or for patrons.

12 ‘‘(2) ALLOCATION.—An election under para13 graph (1) shall not apply to gain or loss on the sale

14 or other disposition of any asset to the extent that

15 such asset was used for purposes other than to fa16 cilitate the conduct of business done with or for pa17 trons. For purposes of this paragraph, the extent of

18 such use may be determined on the basis of any rea19 sonable method for making allocations of income or

20 expense between patronage and nonpatronage oper21 ations.

22 ‘‘(3) PERIOD OF ELECTION.—An election under

23 paragraph (1) shall apply to the taxable year for

24 which made and all subsequent taxable years unless

25 revoked by the organization. Any such revocation
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1 shall be effective for taxable years beginning after

2 the date on which notice of the revocation is filed

3 with the Secretary.

4 ‘‘(4) ELECTION AFTER REVOCATION.—If an or5 ganization has made an election under paragraph

6 (1) and such election has been revoked under para7 graph (3), such organization shall not be eligible to

8 make an election under paragraph (1) for any tax9 able year before its 3rd taxable year which begins

10 after the 1st taxable year for which such revocation

11 is effective, unless the Secretary consents to such

12 election.

13 ‘‘(5) COORDINATION WITH SECTION 1231.—If

14 an organization has made an election under para15 graph (1), section 1231 shall be applied separately

16 with respect to both patronage-sourced gains and

17 losses and nonpatronage-sourced gains and losses.

18 ‘‘(6) FARMER COOPERATIVE.—For purposes of

19 this subsection, the term ‘farmer cooperative’ means

20 any farmers’, fruit growers’, or like association to

21 which subpart I of this subchapter applies.

22 ‘‘(7) NO INFERENCE.—Nothing in this sub23 section shall be construed to infer that a change in

24 the law is intended for farmer cooperatives not hav25 ing in effect an election under paragraph (1) or
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1 other organizations. Any gain or loss from the sale

2 or other disposition of any asset by such organiza3 tion shall be treated as if this subsection had not

4 been enacted.’’

5 (b) EFFECTIVE DATE.—The amendment made by

6 subsection (a) shall apply to sales or other dispositions in

7 taxable years beginning after the date of the enactment

8 of this Act.

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