The Omaha guide., 1946-04-27
WNU Washington Bureau.
1916 Eye ST., N. w.
Co-Ops Battle to Keep
Tax-Exempt Status

I've representing dP
p~roximately 1900, 900 members 81
local farm co-operatives, is clearing
decks for action. A bitter fight IN
congress is anticipated over the
move to tax farm co-operatives or
income, along with other so-calleo
tax-exempt organizations.
These would include such tax.
exempt financial institutions as mu.
tual savings banks and building and
loan associations. According to a re-
cent report of the internal revenue
division. total assets reported by tax.
exempt groups for 1914 aggregated
$13, 438, 908, 900. Organizations en-.
gagged in business such as the mutual
banks, and co-operatives. accounted
for the bulk of these assets with $12..
034, 959, 900. The report further
showed that the gross income Of the
tax-free groups exceeds 5000. 000,-
600 annually. OF this total income
the farm co~-operatives are the larg-
est tax-free group with gross income
in 1913 of 50, 1888, 804, 900.
Co-Ops Pay Many Taxes.
Members Of the farm co-opera.
tives received SIT. 646, 900 in refunds
or patronage dividends and other di.
rect disbursements, according to the
report. To combat the impression
that the farm co-operatives are, in
fact, tax-free. the National Council
Of Farmer Co-operatives, however.
has just issued a statement showing
that for the year 1943, the 1888 CO.
operatives included in the treasury
statement paid a total of S14, 1922. 900
in various kinds Of taxes including
property tax. social security tax. use
taxes and all other taxes paid by
other business groups.
Farmer Co-operatives which are
exempt under section 101 (12) oper-
ate as non-p-ofit organizations and
they pay no federal income tax be-
cause they have no income to tax"
said John III. Davis. executive Sec
rotary Of the national council.
Davis further pointed out that
there are approximately 10000 CO.
operative organizations reporting to
the Farm Credit administration,
whereas the treasury report only in
cluded 5,223 of the farm marketing
and purchasing associations or only
slightly over so per cent of the total.
The treasury report, Mr.. Davis
says, completely refutes the claims
of those who say that farmer CO.
operatives r avoiding the payment
of their fair share of taxes"
Tax League is Spearhead.
The National Tax Equality league.
supported by large industries in the
grain, meat and other industrial
fields, is carrying the ball for those
seeking to bring the farmer cooper
atives into the income tax fold. They
are being supported in some in
stances by organizations of small in
dependent merchants, who are said
to feel the greatest burden of COM
petition from the co-operatives. And
at this time the smaller business
committee Of the house is working
on a report which is expected to
make recommendations on the tax
question. Hearings held by the COM
mittee occupied several days and
representatives of all the major
farm organizations testified against
the proposed move.
The small business men up and
down Main street in the smaller
home towns of the nation, the indie
pendent grain dealers, hardware and
implement dealers and others, are
loudest in their demands that the
co-operatives pay the federal tax.
The treasury department itself, how
ever, could not say what proportion
of the dividends or refunds could be
classed as taxable income and it is
likely that if there is any action
either way, it is more likely to be
proposed to equalize competition
with this private business rather
than for the revenue involved.
Too Many Votes Involved.
Then too, there is always the polit-
ical angle. This writer is convinced
that this congress, which is so sensi-
tive to the political winds, will not
take action, since the farm men,
bership so far outnumbers the men,
bership Of the small business
groups. The political potency of
some two million farm members, all
allied with one or the other of the
three large farm organizations, is
something this reactionary congress
will not overlook.
And so the prospects are that any
attempt to extend the federal gov
ernment's taxing power to include
these farm c~o-operatives will reach
an impasse. At least it will be a
steep uphill fight, which the co-opera-
tives are most likely to win.
At any rate. they are prepared
here to 60 to bat on the question,
and they will be aided by other pow
erful forces included in the t~ax-free
groups, such as the unions. the tax
free financial and lending institu-
tons, and mutual insurance COM
panies. Tied in with this group also
are the non-business organizations
which also are tax free, such as
chambers Of commerce, hospitals
and social welfare organizations,
educational organizations and scien-
tifc foundations all Of which
feel that an hroad into one tax-free
group may endanger the others.