Alabama Administrative Code › Title 810 - ALABAMA DEPARTMENT OF REVENUE › Chapter 810-3-32 - EXEMPTION OF CERTAIN ORGANIZATIONS, ASSOCIATIONS, ETC › Section 810-3-32-.01 - Exempt Organizations

Current through Register Vol. 42, No. 9, June 28, 2024
(1) The
			 following organizations are exempt from taxation as provided by §
								40-18-32:
(a) Labor, agricultural or horticultural
			 organizations. In order to be exempt, these organizations must have no net
			 earnings inuring to the benefit of any member, and have as their object the
			 betterment of the conditions of those engaged in such pursuits, the improvement
			 of the grade of their products, and the development of a higher degree of
			 efficiency in their respective organizations. These organizations, otherwise
			 exempt, are taxable on their unrelated business taxable income.
(b) Fraternal beneficiary societies, orders,
			 or associations. A fraternal beneficiary society is exempt from tax only if
			 operated under the "lodge system" or for the exclusive benefit of the members
			 so operating. "Operating under the lodge system" means carrying on its
			 activities under a form of organization that comprises local branches,
			 chartered by a parent organization and largely self-governing, called lodges,
			 chapters, or the like. In order to be exempt it is also necessary that the
			 society have an established system for the payment to its members or their
			 dependents of life, sick, accident, or other benefits.
1. To be exempt a fraternal beneficiary
			 society must be operated in furtherance of its fraternal purposes and may not
			 engage in business activities of a kind carried on for profit, except that the
			 carrying on of activities which raise revenues from members and their guests,
			 will not deprive the society of its exemption.
(c) Business league, chambers of commerce or
			 boards of trade, not organized for profit, and no part of the net earnings of
			 which inures to the benefit of any private stockholder or individual. A
			 business league is an association of persons having some common business
			 interest, the purpose of which is to promote such common interest and not to
			 engage in a regular business of a kind ordinarily carried on for profit. It is
			 an organization of the same general class as a chamber of commerce or board of
			 trade. Thus, its activities should be directed to the improvement of business
			 conditions of one or more lines of business as distinguished from the
			 performance of particular services for individual persons. These organizations,
			 otherwise exempt, are taxable upon their unrelated business taxable
			 income.
(d) A civic league or
			 organization may be exempt as an organization if it is not organized or
			 operated for profit, and it is operated exclusively for the promotion of social
			 welfare. An organization is operated exclusively for the promotion of social
			 welfare if it is primarily engaged in promoting in some way the common good and
			 general welfare of the people of the community.
1. Clubs organized and operated exclusively
			 for pleasure, recreation and other nonprofitable purposes, no part of the
			 earnings of which inures to the benefit of any private stockholder or members.
			 In general, this exemption extends to social and recreation clubs which are
			 supported solely by membership fees, dues, and assessments. However, a club
			 otherwise entitled to exemption will not be disqualified because it raises
			 revenue from members through the use of club facilities or in connection with
			 club activities. A club which engages in business, such as making its social
			 and recreational facilities available to the general public or by selling real
			 estate (other than an incidental sale of property), timber, or other products,
			 is not exempt.
(e)
			 Farmers, and other mutual hail, cyclone or fire insurance companies, mutual
			 ditch or irrigation companies, or like organizations of a purely local
			 character, the income of which consists solely of assessments, dues and fees
			 collected from members for the sole purpose of meeting expenses. An
			 organization of a purely local character is one whose business activities are
			 confined to a particular community, place, or district, irrespective, however,
			 of political subdivisions. If the activities of an organization are limited
			 only by the borders of a state, it cannot be considered to be purely local in
			 character.
(f) Cooperative
			 associations engaged in the marketing of farm products for farmers, fruit
			 growers, livestock growers, dairymen, etc., and turning back to the producers
			 the proceeds of the sales of their products less the necessary operating
			 expenses, on the basis of either the quantity or the value of the products
			 furnished by them, are exempt from income tax. If the proceeds of the business
			 are distributed in any other way than on such a proportionate basis, the
			 association does not meet the requirements of the Code and is not exempt. In
			 order to show its cooperative nature and to establish compliance with the
			 requirement of the Code that the proceeds of sales, less necessary expenses, be
			 turned back to all producers on the basis of either the quantity or the value
			 of the products furnished by then, it is necessary for such an association to
			 keep permanent records of the business done both with members and
			 nonmembers.
(g) Federal land banks
			 and national farm loan associations as provided in §26 of the Act of
			 Congress approved July 17, 1916, entitled "An act to provide for agricultural
			 development, to create standard forms of investment based upon farm mortgages,
			 to equalize rates of interest upon farm loans, to furnish a market for United
			 States bonds, to create government depositories and financial agent for the
			 United States, and for other purposes."
(h) All national banks and national banking
			 associations and all corporations engaged in the business of banking and of
			 conducting a financial business employing moneyed capital coming into
			 competition with the business of national banks during and for the periods
			 during which such national banks and corporations are subject to an excise tax
			 imposed by this state on or with respect to their respective incomes.
(i) Building and loan associations,
			 substantially all the business of which is confined to making loans to
			 members.
(j) Insurance companies
			 upon which the statutes of Alabama impose a tax upon their premium
			 income.
(k) Code §
									40-18-25 and
			 regulations thereunder, provide that certain trusts are exempt from taxation
			 under this chapter.
Authors:
Fred H. Pritchard, John H.
				Burgess