Document ID: ./input/supremecourt_opinions/opinions/boundvolumes/524bv.pdf
Page Number: 469.0

524US2

Unit: $U93

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424

CLINTON v. CITY OF NEW YORK

Opinion of the Court

In § 968 of the Taxpayer Relief Act of 1997, Congress
amended § 1042 of the Internal Revenue Code to permit own-
ers of certain food reﬁners and processors to defer the rec-
ognition of gain if they sell their stock to eligible farmers’
cooperatives.4 The purpose of the amendment, as repeat-
edly explained by its sponsors, was “to facilitate the transfer
of reﬁners and processors to farmers’ cooperatives.” 5 The

4 Section 968(a) of the Taxpayer Relief Act of 1997 amended 26 U. S. C.
§ 1042 by adding a new subsection (g), which deﬁned the sellers eligible
for the exemption as follows:

“(2) QUALIFIED REFINER OR PROCESSOR.—For purposes of this
subsection, the term ‘qualiﬁed reﬁner or processor’ means a domestic
corporation—

“(A) substantially all of the activities of which consist of the active
conduct of the trade or business of reﬁning or processing agricultural or
horticultural products, and

“(B) which, during the 1-year period ending on the date of the sale,
purchases more than one-half of such products to be reﬁned or processed
from—

“(i) farmers who make up the eligible farmers’ cooperative which is pur-
chasing stock in the corporation in a transaction to which this subsection
is to apply, or

111 Stat. 896.

“(ii) such cooperative.”
5 H. R. Rep. No. 105–148, p. 420 (1997); see also 141 Cong. Rec. S18739
(Dec. 15, 1995) (Senator Hatch, introducing a previous version of the bill,
stating that it “would provide farmers who form farmers cooperatives the
opportunity for an ownership interest in the processing and marketing of
their products”); ibid. (Senator Craig, cosponsor of a previous bill, stating
that “[c]urrently, farmers cannot compete with other business entities . . .
in buying such [processing] businesses because of the advantages inherent
in the tax deferrals available in transactions with these other purchases”;
bill “would be helpful to farmers cooperatives”); App. 116–117 (Letter from
Congresspersons Roberts and Stenholm (Dec. 1, 1995)) (congressional
sponsors stating that a previous version of the bill was intended to “pro-
vide American farmers a more ﬁrm economic footing and more control
over their economic destiny. We believe this proposal will help farmers,
through their cooperatives, purchase facilities to reﬁne and process their
raw commodities into value-added products. . . . It will encourage farmers
to help themselves in a more market-oriented environment by vertically
integrating.
If this legislation is passed, we are conﬁdent that, 10 years
from now, we will look on this bill as one of the most beneﬁcial actions
Congress took for U. S. farmers”).