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Membership dues. The cooperative

may have to adjust the amount on line 28,

assets in a reorganization), the amount of

may deduct amounts paid or incurred for

Form 990-C.

pre-acquisition losses that may offset

membership dues in civic or public

recognized built-in gain may be limited

A taxpayer is generally considered

service organizations, professional

(see sections 384 and 1388(j)(2)).

“at-risk” for an amount equal to his or her

organizations, business leagues, trade

For details on the NOL deduction, see

investment in the entity. That investment

associations, chambers of commerce,

Pub. 542, Corporations, section 172, and

consists of money and other property

boards of trade, and real estate boards,

Form 1139, Corporation Application for

contributed to the entity and amounts

unless a principal purpose of the

Tentative Refund.

borrowed on behalf of the entity.

organization is to entertain or provide

Line 30. Taxable income. Certain

The at-risk rules do not apply to the

entertainment facilities for members or

cooperatives may need to file Form 8817.

following:

their guest. In addition, cooperatives may

•

If so, taxable income reported on line 30

Holding real property placed in service

not deduct membership dues in any club

may not exceed the combined taxable

by the cooperative before 1987;

organized for business, pleasure,

•

income shown on line 30, Form 8817.

Equipment leasing under sections

recreation, or other social purpose. This

Attach Form 8817 to the cooperative’s tax

465(c)(4), (5), and (6); and

includes country clubs, golf and athletic

•

return.

Any qualifying business of a qualified

clubs, airline and hotel clubs, and clubs

Net operating loss. If line 30 is zero

cooperative under section 465(c)(7).

operated to provide meals under

or less, the cooperative may have an

However, the at-risk rules do apply to

conditions favorable to business

NOL that can be carried back or forward

the holding of mineral property.

discussion.

as a deduction to other tax years.

If the at-risk rules apply, complete

Entertainment facilities. The

Generally, a cooperative first carries back

Form 6198, At-Risk Limitations, then

cooperative cannot deduct an expense

an NOL 2 tax years (5 tax years for NOLs

adjust the amount on this line for any

paid or incurred for a facility (such as a

incurred in tax years ending in 2001 or

section 465(d) losses. These losses are

2002). However, the cooperative may

yacht or hunting lodge) used for an

limited to the amount for which the

activity that is usually considered

elect to waive the carryback period and

cooperative is at risk for each separate

entertainment, amusement, or recreation.

instead carry the NOL forward to future

activity at the close of the tax year. If the

tax years. To make the election, see the

Note. The cooperative may be able to

cooperative is involved in one or more

instructions for Schedule N, item 19, on

deduct the otherwise nondeductible

activities, any of which incurs a loss for

page 18. See Form 1139 for details,

expense if the amount is treated as

the year, report the losses for each

including other elections that may be

compensation and reported on Form W-2

activity separately. Attach Form 6198

available, which must be made no later

for an employee or on Form 1099-MISC

showing the amount at risk and gross

than 6 months after the due date

for an independent contractor.

income and deductions for the activities

(excluding extensions) of the

with the losses.

Deduction for clean-fuel vehicles and

cooperative’s return.

certain refueling property. Section

If the cooperative sells or otherwise

Patronage source losses cannot

179A allows a deduction for part of the

disposes of an asset or its interest (either

be used to offset nonpatronage

cost of qualified clean-fuel vehicle

total or partial) in an activity to which the

income.

CAUTION

property and qualified clean-fuel vehicle

at-risk rules apply, determine the net

refueling property placed in service during

profit or loss from the activity by

Line 32b. Estimated tax payments.

the tax year. For more information, see

combining the gain or loss on the sale or

Enter any estimated tax payments the

Pub. 535, Business Expenses.

disposition with the profit or loss from the

cooperative made for the tax year.

activity. If the cooperative has a net loss,

Beneficiaries of trusts. If the

Lobbying expenses. Generally,

the loss may be limited because of the

lobbying expenses are not deductible.

cooperative is the beneficiary of a trust,

at-risk rules.

These expenses include:

and the trust makes a section 643(g)

•

Treat any loss from an activity not

election to credit its estimated tax

Amounts paid or incurred in connection

allowed for the tax year as a deduction

with influencing Federal or state

payments to its beneficiaries, include the

allocable to the activity in the next tax

legislation (but not local legislation) or

cooperative’s share of the estimated tax

•

year.

payment in the total amount entered on

Amounts paid or incurred in connection

with any communication with certain

line 32b. Write “T” and the amount of the

Line 29a. Net operating loss deduction.

payment in the blank space to the right of

Federal executive branch officials in an

A cooperative may use the net operating

attempt to influence the official actions or

the entry space.

loss incurred in one tax year to reduce its

positions of the officials. See Regulations

taxable income in another year. Enter the

Line 32f. Credit from refiguring tax for

section 1.162-29 for the definition of

total NOL carryovers from other tax years

years in which nonqualified per-unit

“influencing legislation.”

on line 29a, but do not enter more than

retain certificates or nonqualified

Dues and other similar amounts paid

the cooperative’s taxable income (after

written notices of allocation (redeemed

to certain tax-exempt organizations may

special deductions). Attach a schedule

this year) were issued. If the

not be deductible. See section 162(e)(3).

showing the computation of the NOL

cooperative would pay less total tax by

If certain in-house expenditures do not

deduction. Also complete item 20 on

claiming the deduction for the redemption

exceed $2,000, they are deductible. See

Schedule N.

of nonqualified written notices of

section 162(e)(5)(B). For information on

allocation or nonqualified per-unit retain

The following special rules apply.

•

contributions to charitable organizations

certificates in the issue year versus the

If an ownership change occurs, the

that conduct lobbying activities, see the

current tax year, refigure the tax for the

amount of taxable income of a loss

instructions for line 19. For more

years the nonqualified written notices or

cooperative that may be offset by the

information on lobbying expenses, see

certificates were originally issued, then

pre-change NOL carryovers may be

section 162(e).

enter the amount of the reduction in the

limited (see section 382 and the related

issue years’ taxes on this line. Attach a

regulations). A loss cooperative must file

Line 28

schedule showing how the credit was

an information statement with its income

Taxable income before NOL

figured. This credit is treated as a

tax return for each tax year that certain

deduction and special deductions

payment, and any amount that is more

ownership shifts occur (see Temporary

than the tax on line 31 will be refunded.

At-risk rules. Special at-risk rules under

Regulations section 1.382-2T(a)(2)(ii) for

section 465 generally apply to closely

details). See Regulations section

Line 32g. Credit for federal tax on

held cooperatives (see Passive activity

1.382-6(b) for details on how to make the

fuels. Enter the credit from Form 4136,

limitations on page 8) engaged in any

closing-of-the-books election.

Credit for Federal Tax Paid on Fuels, if

•

activity as a trade or business or for the

If a cooperative acquires control of

the cooperative qualifies to take this

production of income. These cooperatives

another cooperative (or acquires its

credit. Attach Form 4136 to Form 990-C.

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Instructions For Form 990-C - Farmers' Cooperative Association Income Tax Return - Internal Revenue Service - 2002 Page 11

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