The people's voice. [volume] (Helena, Mont.) 1939-1969, 1947-01-24
Co-ops Look Out
Continued from Page one)

terson, Billings furniture dealer; J
L. Sherbourne, Browning merchant;
c. r. McClave, Great Falls.
NAM Supports Coop Position
A recent National Association of
Manufacturers report entitled Scoop
eratives in Relation to Other Forms of
Business Enterprise" states &C. no
justification is found for taxing at the
source patronage refunds paid to Gus
toners of co-operatives - but
g. amount available for, but not
distributed to, patrons as patronage
dividends, should be taxed as earn
ings " as is the current practice
of the Bureau of Internal Revenue
In other words the NAM upholds the
contention of all co-operatives-th
dividends which are not returned to
patrons, like those profits of corpora
tions which are not returned to stock
holders, are taxable.
The NAM report points out further:
"a cooperative is a form of bust
ness enterprise that enables a group
of individuals, partnerships, or cor
porations to combine together for the
purpose of producing or buying or sell
ing commodity or service. City con-
sumers have gotten together to buy
goods and sell them. Business men
have formed mutual fire insurance
companies. Individuals join together
to buy life insurance through a mutual
insurance company or merchandise
through a mutual wholesale purchas-
ing association. People who save
money put their funds in a mutual
savings bank. Farmers join together
to buy the goods they use in produc-
ton or to sell the things they grow
All of these are 'co-operatives'. They
are also legitimate forms of private
Tax Position of Individual
Coop Patrons
Before dealing with the tax status
If co-operatives, let's get straight the
income tax position of individual
members and patrons on patronage re-
unds from the various kinds of CO.
operatives. This general rule can be
stated. If the patronage refund adds
70 the income either directly or in
directly by reducing the cost of doing
business it is taxable. If the refund
ioes not so add to the income it is
rot taxable.
Suppose you are a member of
consumer or purchasing cooperative
through which you buy groceries and
household goods. Your patronage re-
und from your coop would not in
rease your income. Nor would it re-
uce any of your costs of doing bust
ess. 1t would simply enable you to |
et more for your money than the |
elbow across the way, who doesn't |
NY through the coop. Your refund,
therefore,, would in no way whatever
Igure in your income tax return.
Now suppose that through your
o-op you buy tractor fuel and other
arm supplies. Patronage refunds on
hose items would reduce your cost
doing business, ie., of operating
our farm, and therefore would be
lxable.
Again, suppose that you also belong
} and sell your farm products through
marketing coop. Patronage refunds
lere would represent a direct addi-
on to your income and would of
purse be taxable.
Position of Co-ops ;
The position of co-operatives, well
disseminated by interpretations of the
ureau of Internal Revenue and the
1ngress over the years, and reaf
rmed only few months ago by a
)ecial house investigating committee 1
inns up to this:
Ever since the Federal Income Tax
ct of 1916, farmer co-operatives have |
cen exempted by congressional &C T.
on from paying income taxes on
leir savings Congress presumably
as recognizing two facts. CD that G
lose savings are NOT income to the a
but instead belong to t
e member; that, in other words, CO. 4
)eratives are just another money L
,cket in their members trousers, and +
y that encouragement of American t
rmers to organize and to do bust Q