Court Opinion

ID: 4129702
Source: CourtListenerOpinion
Date Created: 2017-02-18 00:55:21.876632+00
Date Added: 2024-06-11T14:31:39.268983
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DAN MORALES
 ATTORNEY
      GENERAL                                  June 15,199s

   The Honorable Albert0 R. Gonzales                   Opinion No. DM-479
   Secretary of State
   Oftice of the Secretary of State                    Re: Whether a corporation that intends to operate
   P.O. Box 12697                                      as a cooperative may incorporate under the Texas
   Austin, Texas 7871 l-2697                           Non-Profit     Act or must      the corporation
                                                       incorporate under the Cooperative Association
                                                       Act (RQ-966)
   Dear Mr. Gonzales:

            Your predecessor requested an opinion about the incorporation of a cooperative corpora-
   tion under the Texas Non-Profit Corporation Act, Texas Civil Statutes articles 1396-l .Ol through
   1396-l 1.01 (the “nonprofit act”). Your predecessor explained that your office has received articles
   of incorporation for a proposed corporation to be named Poka Lambro Communication Cooperative,
   Inc. (“Poka”). Poka’s stated purpose is

              on behalf of its patrons, to engage in the cooperative purchase, primarily by
              contract with third parties, of various utility and utility-related services which
              may include, but are not limited to, voice and data transmission
              communications,      security and monitoring services, cable television and
              electric services, and for all lawful business for which cooperative non-profit
              corporations may be organized under Texas law.

   ARTS. OF INC. OFPOKA LAMBRO COMMUNICATIONS             COOP.,INC., art.IV (Purpose) (Mar. 11,1997).
   Poka’s patrons are its members. Id. art. VII. The members do not vote. Id. Article III of the articles
   of incorporation states that Poka is organized as a nonprofit cooperative corporation pursuant to the
   nonprofit act, but article IX provides that Poka

               shall operate on a cooperative basis as that term is defined in the Texas
               Cooperative Act, Article 1396-50.01, Tex. Rev. Civ. Stat. The net savings
               after payment of operating expenses and reasonable reserves for capital, as
               determined by the directors of the Corporation, shall be allocated and/or
               distributed to its patrons in proportion to their patronage or retained by the
               enterprise for the actual or potential expansion of its services, the reduction
               of charges to the patrons, or for other purposes consistent with the best
               interest of the Corporation as determined by its Board of Directors.
               [Emphasis added].
The Honorable    Albert0 R. Gonzales       - Page 2        @M-479)

        “Cooperative basis” is a term of art specifically defined in the Cooperative            Association    Act
(the “cooperative act”). See V.T.C.S. art. 1396-50.01, 5 Z(5).

         Your predecessor asked if “a corporation, which intends to operate as a cooperative [may]
incorporate under the [non-profit act] when there is no specific statute providing for incorporation
for that specific cooperative purpose, or must the corporation be incorporated under the [cooperative
act 1.” In our opinion, such a corporation must incorporate under the cooperative act.’

         Before we consider the relevant provisions of the nonprofit act and the cooperative act, we
believe it would be helpful to provide a brief overview of a “cooperative” corporation or association
and its distinctive features. A “cooperative” is a corporation or association organized for the purpose
of providing economic services, without gain to itself, to shareholders or members who own and
control it. United Grocers, Ltd. v. United States, 186 F. Supp. 724, 733 (N.C. Ca. 1960), aff’d, 308
F.2d 634 (9th Cir. 1962). The defining characteristic of a cooperative is its obligation to distribute
net proceeds,r the revenues derived from its business operations minus operating expenses, to its
members.      Roswell Magi11 & Allen H. Merrill, The Taxable Income of Cooperatives, 49 MICH.
L&v. 169, 173-74 (1950). The net proceeds are generally distributed to the members in the form
of patronage refunds3 or dividends in amounts determined by the use made by the members of the
association facilities.    18 AM. JUR. 2D Cooperative Associations 4 22 (1985). Cooperatives in
general are distinguishable horn other business structures by the features of democratic control and
voting; distribution of economic benefits on an equal basis or proportionate to the use made of
association facilities; limited return on capital; and of transaction of business with their own
members. Id. § 2. Finally, cooperatives may be either not-for-profit or for-profit corporations. See
1 CHARLES R. P. KEATING & G. O’GRADNEY, FLETCHERCYCLOPEDIAOF THE LAW OF PRIVATE
CORPORATIONS$68.10 (1990).4 “Nonprofit” as applied to a cooperative corporation means that it
is not organized primarily to pay dividends on invested capital. See Greene County Rural Elec.
Coop. v. Nelson, 12 N.W.Zd 886, 888 (Iowa 1944).

        ‘Given our conclusion, we do not address the other questions

        ‘The net proceeds derived by cooperatives from business operations are described at various times as “net
income,” “net earnings,” “net profits,” “net margins,” “net proceeds,” “net savings,”or “net over-deposits.” Magi11
&Merrill, supra n. 17, at 173.

        ‘See infranote 14.

         ‘See also Chited Grocers, Ltd., 186 F. Supp. at 733 (rule that patronage refunds do not constitute income to
cooperative not based on ground that cooperative is nonprofit); 18 AM.JUR.2D Cooperatives $j1 (1985) (Business
cooperatives formed for tbe purpose of aiding their members and, thus, are not charitable organizations since their
motive is profit).

                                                          p.   2712
The Honorable      Albert0 R. Gonzales        - Page 3       (nM-479)

         With the above overview of the nature of cooperatives, we consider now the relevant
provisions of the nonprofit act adopted by the legislature in 1959.’ The statute provides that
“[elxcept as hereinafter in this Article expressly excluded herefrom, non-profit corporations may be
organized under this Act for any lawful purpose or purposes        .“(’V.T.C.S. art. 1396-2.01(A). The
phrase “nonprofit corporation” is defined as “the equivalent of ‘not for profit corporation’ and means
a corporation no part ofthe income ofwhich is distributable to its members, directors, or officers.”
Id. art. 1396-1.02(3). Article 1396-2.24(A) additionally provides that “[n]o dividend shall be paid
and no part of the income of a corporation shall be distributed to its members, directors, or offricers.”
The statute does not define “income of a corporation,” nor have we found any Texas cases
construing this phrase.

          Since 1959, the nonprofit act has expressly excluded from its application7 cooperatives
organized for particular purposes, i.e., “Co-operative Credit Associations, Farmers’ Co-operative
Societies, Co-operative Marketing Act Corporations, Rural Electric Co-operative Corporations, [and]
Telephone Co-operative Corporations            _” Id. art. 1396-2.01(B)(3). Each one of the excluded
cooperatives is provided for and may be incorporated under a specific statute.’ Poka is not one of
the excluded cooperatives.9 The act does not expressly prohibit incorporation of other nonprofit
cooperatives, and in an opinion issued in 1960, before the legislature enacted the cooperative act,
this office refused to construe the exclusionary language discussed above to exclude all cooperatives
from the purview of the act. See Attorney General Opinion WW-849 (1960) at 2. In Attorney
General Opinion WW-849, this office determined that the secretary of state was not prohibited horn
accepting and filing under the nonprofit act articles of incorporation of a nonprofit corporation

         ‘See Act of April 27, 1959,56th   Leg., RX,   ch. 162, 1959 Tex. Gen. Laws 286,286.

          6Your predecessor did not indicate, and we have no reason to believe, that any of the purposes for which Poka
proposes to organize are unlawful. See also V.T.C.S. art. 1396-2.01(B)(l)    (act does not apply if one or more purposes
expressly forbidden in this state). We also assume for the purposes of this opinion that Poka will not engage in an
activity requiring a license that cannot be granted to a corporation. See id. art. 1396-2.01(B)(2) (act does not apply if
any of corporate purposes to engage in activity that cannot be engaged in without obtaining license and such license
cannot be lawfully granted to corporation).

          ‘See V.T.C.S. arts. 1528b (Electric Cooperative Corporation Act), 1528~ (Telephone Cooperative Act); Agric.
Code chs. 51 (Fanner’s Cooperative Societies), 55 (Cooperative Credit Associations);        see also Attorney General
opinion WW-849 (1960) at 1-2 (named cooperatives no doubt excluded because incorporated pursuant to specific and
special statutes).

          gPoka is described to us as a consumer cooperative which will purchase utility related services on behalf of its
members.    Clearly it is not a Co-operative Credit Association, or a Fanners’ Co-operative Society. It is not a Co-
operative Marketing Act Corporation, which is operated for the benefit of agricultural producers; a Rural Electric Co-
operative engaged in fixnishing electticity in rural areas; or a Telephone Co-operative also engaged in furnishing
communication     services.

                                                               p.   2713
The Honorable       Albert0 R. Gonzales        - Page 4        W-4 79 )

merely because its stated corporate purpose was to acquire and operate an apartment building to be
used by its members on a cooperative basis.‘O Id. at 4.

          In 1975, subsequent to the issuance of Attorney General Opinion WW-849, the legislature
enacted the cooperative act. ” The cooperative act authorizes incorporation of any association’2 “to
engage in acquiring, producing, building, operating, manufacturing, furnishing, exchanging, or
distributing any type ofproperty, commodities, goods, or services for the prim;lIy and mutual benefit
of the members of the association.” V.T.C.S. art. 1396-50.01, 5 5. The statute does not apply to
associations or corporations organized to provide or related to health or medical care, or organized
under the Cooperative Marketing Act, Agriculture Code chapter 52. Id, $5 4,45.

        Only an association incorporated under the cooperative act, a group organized on a
cooperative basis under any other state law, or a foreign corporation organized on a cooperative basis
and authorized to do business in this state, may use the term “cooperative” as part of its name, or
represent itself as conducting business on a cooperative basis. Id. 5 39(a).13 “Cooperative basis” is
defined as follows:

                   ‘Cooperative basis’ means that the net savings after payment, if any, of
              invesfment dividends and after making provisions for separate funds required
              or specifically permitted by statute, articles, or by-laws is allocated OY
              distributed to member patrons. or to all patrons, in proportion to their
              patronage or retained by the enterprise for the actual or potential expansion
              of its services, the reduction of its charges to the patrons, or for other
              purposes not inconsistent with its non-profit character.

          “‘l%eattorney general’sconclusion was based, fust, on the rationale that the cooperatives excluded from the
act’s application were those incorporated pursuant to other specific statutes, and were so excluded precisely because
there were specific statutes dealing with that particular type of cooperative. Attorney General Opinion WW-849 (1960)
at 1-2. Since no specific s&Me dealt with an apartment cooperative, the exclusionary language would not be construed
to exclude incorporation of an apartment cooperative. Id. Secondly, that the nonprofit act generally excludes from its
purview enterprises that seek to return 01 distribute to members, directors, OT&icers, any portion of the net revenues
above and beyond actual costs of operation. Id. at 3. The attorney general reasoned that although some cooperatives
may and do distribute a portion of their income to members, in which case they would be excluded from the purview
of the act, some do not. Id. The corporation in question, the attorney general stated, may well be in the latter category,
and, therefore, may incorporate under the act. Id.

          “SeeActofMay24,1975,64thLeg.,R.S.,ch.318,                 197STex.Gen.Laws814,814.

          ‘2”Association”   means “a group enterprise   legally incorporated    under this Act.”   V.T.C.S.   art. 1396-50.01
§ 2(l).

        “But see House Judiciary Comm., Bill Analysis, H.B. 643,64th           Leg., R.S. (1975) (section 39 restricts use of
name “cooperative” to associations organized under cooperarive acr).

                                                               p.     2714
The Honorable    Albert0 R. Gonzales         - Page 5       (DM-479)

V.T.C.S. art. 1396-50.01 5 2(5) (emphasis added). “Net savings” means “the total income of an
association less the costs of operation.” Id. 5 2(3). The net savings must be apportioned in the order
and distributed in the manner set forth in section 34. Groups operating on a cooperative basis on the
effective date of the statute may elect to secure the benefits of and be governed by the statute. Id.
5 42. The cooperative act does not expressly require that all eligible cooperatives incorporate
thereunder.

         No court has addressed the question of whether a cooperative not specifically provided for
by a different statute must incorporate under the cooperative act rather than the nonprofit act. The
following principles of statutory construction guide our resolution of this question of first
impression:

                Our ultimate purpose must be to effect the Legislature’s intent. Union
           Bankers Ins. Co. v. Shelton, 889 S.W.2d 278,280 (Tex. 1994). We resort to
           rules of construction only when the statute in question is ambiguous.          Ex
           parte RolofJ 510 S.W.2d 913, 915 (Tex. 1974). When the meaning of an
           existing law is uncertain, the Legislature’s later interpretation of it is highly
           persuasive. Stanford v. Butler, 142 Tex. 692, 181 S.W.2d 269,274 (1944).
           In addition, the construction of a statute by an agency charged with its
           execution is entitled to serious consideration unless the agency’s construction
           is clearly inconsistent with the Legislature’s intent. Tarrant Appraisal Dist.
           v. Moore, 845 S.W.2d 820, 823 (Tex. 1993); see also Tex. Gov’t Code
           5 311.023(6).

Texas Water Comm’n v. Brushy CreekMun. Util. Dist., 917 S.W.2d 19,21 (Tex. 1996). Application
of these rules leads us to conclude that the legislature          intended cooperatives     to incorporate     only
under the cooperative act.

         First, we apply these rules to reexamine the nonprofit act. Although the nonprofit act does
not prohibit incorporation of cooperatives generally, it does not provide for such incorporation, nor
does it otherwise provide for cooperatives.    No provision is made for operation on a “cooperative
basis,” as described above, i.e., the equal or proportionate distribution of income or dividend to
members after payment of actual operation expenses. In fact, on its face, the statute would appear
to exclude corporations that intend or do operate on a cooperative basis, given its definition of
a “nonprofit corporation” as a “a corporation no part of the income of which is distributable to
the members, directors, or officers.” See V.T.C.S. art. 1396-1.02(3) (defining “non-profit
corporation”); see also arts. 1396-2.24(A) (prohibiting dividends and distribution of corporation’s
income), 1396-50.01, 5 2(5) (definition of “cooperative basis”). This is not fully dispositive,
however, since the nonprofit act does not define “income of a corporation” and, arguably, income
derived by a cooperative from its business operations does not constitute income to the cooperative.‘4

        “For purposes   of federal   tax law, net proceeds derived by a cooperative and paid to its members do not
                                                                                                     (continued...)

                                                           p.   2715
The Honorable     Albert0 R. Gonzales         - Page 6       @M-479)

Although this office in Attorney General Opinion WW-849 did conclude that an apartment
cooperative may be formed under the nonprofit act, that opinion was issued prior to the adoption of
the cooperative act. Indeed, the conclusion in that opinion is premised partly on the fact that there
were no statutes providing for the incorporation of an apartment cooperative. See Attorney General
Opinion WW-849 (1960) at 2. The conclusion was also premised on the assumption that the
cooperative in question did not contemplate distribution of dividends or income to its members or
directors, prohibited by the nonprofit act. Id. at 3. The opinion clearly acknowledges that some
cooperatives do in fact distribute income and that those cooperatives would not be within the
purview of the nonprofit act. Id.

         That the legislature did not view the nonprofit act as providing for cooperatives is evidenced
by the legislative history of the cooperative act. See Brushy Creek M. UD., 917 S.W.2d at 21 (when
meaning of existing law uncertain, legislature’s later interpretation of it highly persuasive). The
House Judiciary Committee bill analysis for the cooperative act gives the following explanation for
its adoption:

                  Under present statutes there are no provisions           relating to the
             incorporation, regulation, and organization of cooperative associations. Due
             to the increasing number of cooperative associations being created, it is felt
             that legislation is needed to protect those people who might become members
             of such organizations.

constitute taxable income to the cooperative. As discussed above, net proceeds are generally distributed to cooperative
members in the form of patronage refunds OI dividends. See 18 AM. JUR. 2~ Cooperative Associations 5 22 (1985).
Pursuant to judicial determinations,   payments made by members to a cooperative under an arrangement by which the
cooperative is obligated to return to the member, as patronage refunds, any savings over and above operating expenses,
constitute income to the member and not to the cooperative for federal income tax purposes. United States v. Mssissippi
Chem. Co., 326 F.2d 569,571 (5th Cit. 1964); United Grocers, Ltd., 186 F Supp. at 733; see also Allied Supermarkets,
Inc. v. Grocer’s Dairy Co., 206 N.W.2d 490,492 (Mich. App. 1973) (refimds differ from dividends because former are
not distribution of income). This judicial mle is not based on the reasoning that the cooperative is a nonprofit but on
the reasoning that patronage refunds, if required to be returned to the member, are in effect discounts or rebates to
members or returns of overcharges and, thus, not income to the cooperative. Unifed Grocers, Ltd., 186 F. Supp. at 733;
see also Mississippi Chem. CO., 326 F.2d at 571 (listing grounds on which courts have enforced this rule). Consistent
with this theory, however, if a cooperative’s board of directors retains the discretion to use any portion of the net
proceeds to pay common stock dividends or for other purposes, that portion is taxable income to the cooperative. Id.
Additionally, amounts derived by a cooperative from sales to non-member patrons who are not entitled to patronage
refunds on their purchases are also taxable income. Id.

          One court has speculated, in connection with resolving the separate question of what income is taxable to a
cooperative, that “[i]t is quite probable that income of a cooperative, which is so organized as to be in the relation of
agent OI trustee to its members, would not be considered income to the cooperative but, rather, the income of the
principals or beneficiaries--the   members.”    Urzited Grocers, 186 F. Supp. at 733; see also Linnton Plywood Ass’n v.
State Tar Comm ‘n, 403 P.2d 708, 712 (Ore. 1965) (Denecke, J., dissenting) (cooperatives have been considered merely
conduits for passage of income through to members, or agents for their principals, the members).

                                                             p.   2716
The Honorable   Albert0 R. Gonzales     - Page 7     @M-479)

House Judiciary Comm., Bill Analysis, H.B. 643,64th Leg., R.S. (1975). The House Study Group,
the predecessor to the House Research Organization, makes the following comment with respect to
cooperatives and the nonprofit act:

                No current law offers a satisfactory vehicle through which consumer
           cooperatives may incorporate -- (and thereby gain the tax benefits, limited
           liability, regulation by the State and other benefits [ofJ incorporation). The
           Texas Non-Profit Corporation Act does not provide for distribution of
           dividends to members; the Cooperative Marketing Act only applies to
           producers’ cooperatives.

House Study Group, Judiciary      Comm. Cooperative       Association   Act, H.B. 643, 64th Leg., R.S.
(1975) (emphasis in original).

         We next apply the rules of statutory construction set out above to analyze the cooperative act.
The legislature, by adopting the cooperative act, intended to address the gap in the law regarding
cooperatives,    and to provide a comprehensive          statutory framework for the incorporation,
organization, and regulation of cooperative associations. See Act of May 24, 1975,64th Leg., R.S.,
ch. 318, 1975 Tex. Gen. Laws 814, 814 (caption) (“An Act relating to the incorporation,
organization, and regulation of cooperative associations; providing penalties; and declaring an
emergency.“); Judiciary Comm. Cooperative Association Act, H.B. 643, 64th Leg., R.S. (1975)
(“The purpose of H.B. 643 is to provide statutes relating to incorporation, organization, and
regulation of cooperative associations.“); House Study Group, Judiciary Comm. Cooperative
Association Act, H.B. 643,64th Leg., R.S. (1975) (“This bill provides an entire statutory scheme
for the incorporation, regulation, and organization of cooperative associations.       The bill permits
cooperatives to incorporate to engage in practically any kind of enterprise for the ‘mutual benefit of
the members of the association.“‘).

         Moreover, as the House Judiciary Committee’s statements indicate, the legislature intended
by enacting the cooperative act to protect those persons who might become members of a
cooperative.   Thus, the cooperative act provides that each individual member has one vote unless
the member is another association or cooperative group in which case the voting rights of the
member association may be as prescribed in the articles of incorporation or bylaws. V.T.C.S. art.
 1396-50.01, 5 16(a). No voting agreement or other device to evade the one-member-one-vote       rule
is enforceable. Id. 5 16(b). Furthermore, the association must be managed by a board of directors
elected by and from members of the association. Id. $ 21(a). With certain exceptions, net savings
must be apportioned at least annually and in the order set forth in the statute. Id. 5 34(a); see id.
 5 34(b) (exceptions) (section does not prevent association engaged in rendering services from
disposing of net savings in manner calculated to lower service fees or further common benefit to
members), id. 5 34(c) (section does not prevent association from adopting system in which savings
are deferred for fixed period). The net savings, remaining after payment of investment dividends
and allocation to an educational fund or retained earnings funds, if any, must “be allocated at the

                                                     p.   2717
The Honorable Albert0 R. Gonzales                 - Page 8        (DM-479)

same uniform rate to all patrons of the association in proportion                  to their individual patronage             .”
Zd. $34(4).

         Requiring cooperatives to incorporate under the cooperative act furthers the legislative
purpose of the cooperative act to protect cooperative members. See Brushy Creek M. UD., 917
S.W.2d at 21 (court’s ultimate purpose must be to effect legislature’s intent). On the other hand,
construing the nonprofit act to permit cooperative incorporations would allow such organizations
to obtain the benefits of the cooperative association form but evade the constraints placed on
cooperative associations to protect the members. In contrast to the cooperative act, the nonprofit act
does not require that each member have a vote or that directors be elected from and by the members,
nor does it contain any provision regarding and requiring generally annual and uniform distribution
of net savings to the members. Compare cooperative act, V.T.C.S. art. 1396-50, $5 16 (a), (b),
21(a), 41, with nonprofit act, V.T.C.S. arts. 1396-2.08, 2.13 (voting and membership rights as
provided in articles of incorporation or bylaws), 1396-2.14 (board of directors may be elected in
whole or part by one or more associations or corporation), -2.15 (directors elected, appointed, or
designated in manner provided in articles of incorporation or bylaws). For example, in the case of
the entity at issue, Poka’s articles of incorporation provide for operation on a “cooperative basis,”
but they also state that members will have no voting rights, see ARTS. OF INC. OF POKA LAMBRO
COMMUNICA~ONS COOP., INC., supra, art. VII; that its board of directors shall be elected and
removed by a third-party corporate entity, the Poka Lambro Telephone Cooperative, Inc., id. art. VI;
and that the net savings will be allocated to members in proportion to their patronage, or retained by
the enterprise for actual or potential expansion, reduction of charges “or for other purposes
consistent with the best interest of the Corporation as determined by its Board of Directors,”
compare id. art. IX (emphasis added), with V.T.C.S. art. 1396-50.01, $ 34(a) (annual and uniform
distributions), @) (section does not prevent services cooperative from disposing of net savings to
lower service fees or further common benefit to members).

         Our conclusion that cooperatives must incorporate under the cooperative act is also supported
by the long-standing interpretation of the administrative agency charged with administration of the
nonprofit act and the cooperative act. See Brushy CreekM.U.D., 917 S.W.2d at 21 (construction of
statute by agency charged with its execution entitled to serious consideration unless clearly
inconsistent with legislative intent). The secretary of state’s request letter states that since the
adoption of the cooperative act in 1975, that office has required corporations which intend to be
cooperatives, but for which there is no specific statute, to incorporate under the cooperative act rather
than the nonprofit act.” Thus, the administrative agency the legislature entrusted with the
responsibility of overseeing the incorporation of nonprofit corporations and cooperatives16 has

         “See infranote 16

           ‘6Articles of incorporation for a   nonprofit corporation must be tiled with tbe secretary of state; if the articles
conform to law, the secretary must tile        them and issue a certificate of incorporation.   V.T.C.S. art. 1396-3.03(A).
Futthermore, the secretmy has “the power        and authority reasonably necessary to enable him to administer [the nonprofit
act] efficiently and to perform the duties      therein imposed.” Id. art. 1396-9.04(A).    The secretary of state has similar
                                                                                                                (continued...)

                                                                  p.   2718
The Honorable       Albert0 R. Gonzales         - Page 9        m-479)

interpreted the cooperative act to govern the incorporation of cooperatives for more than twenty
years. Based on our discussion above, such interpretation is consistent with and furthers the
legislative intent of the cooperative act.”

authority with respect to the cooperative act. See id. art. 1396-50.01 55 9 (articles of incorporation    tiled with secretary
of state; if secretay of state finds they conform to law, he shall tile them and issue certificate       of incorporation),    3
(cooperative association subject to provisions of nonprofit act to extent not in conflict).

           “A letter brief submitted on behalf of Poka asserts that legislation adopted during the 1997 legislative session
constitutes “exmess acknowledement       by the legisl&re of its intent to allow a cooperative to be formed pursuant to the
Non-profit Act.” (Emphasis in original). We disagree. House Bill 3203, among other amendments, adds a new section,
to be codified at Property Code section 74.3013, which authorizes a nonprofit cooperative corporation to deliver
reported unclaimed funds to a scholarship f&d for rural students or to an economic development fund. See Act of
May 24, 1997, 75th Leg., R.S., ch. 904, 5 1, 1997 Tex. Gen. Laws 2847,2847.           Subsection(h)  of this provision states
that:

                   In this section, a nonprofit cooperative corporation means a cooperative corporation
              organized under Chapters 5 1 and 52, Agriculture Code, the Texas Non-Profit Corporation
              Act (Article 1396-1.01 et seq., Vernon’s Texas Civil Statutes), the Cooperative Association
              Act (Article 1396-50.01, Vernon’s Texas Civil Statutes), and the Electric Cooperative
              Corporation Act (Article 1528b, Vernon’s Texas Civil Statutes).

At most, this provision recognizes that some cooperatives have been organized under the nonprofit             act prior to the
adoption of the cooperative act. Cf Attorney General Opinion w-849     (1960).

                                                                p.   2719
The Honorable Albert0 R. Gonzales     - Page   10 W-479)

                                       SUMMARY

               A corporation that calls itself a cooperative and purports to operate as a
           cooperative   must incorporate under the Cooperative Association Act,
           V.T.C.S. art. 1396-50.01, and may not incorporate under the Texas Non-
           Profit Act, V.T.C.S. arts. 1396-1.10 - 11.01.

                                               DAN- MORALES
                                               Attorney General of Texas

JORGE VEGA
First Assistant Attorney General

SARAH J. SHIRLEY
Chair, Opinion Committee

Prepared by Sheela Rai
Assistant Attorney General

                                                   p.   2720