Abstract: The article discusses the tax-exempt status of cooperatives and application of the cooperative principle to commercial business in the United States. The principle is used to give customers a discount based on their patronage volume. Section 23 of the Internal Revenue Code indicates that patronage refunds or price adjustments are not a deductible expense, but are an exclusion from gross income. Nine requirements for tax exemption are in Section 101, Paragraph 12 of the Code and refer to the agricultural organization's legal structure, recordkeeping, voting control, financial reserves, and dividend rate. Topics include Uniform Printing and Supply Company v. Commissioner of Internal Revenue and a proposed amendment for reporting patronage refunds.

Subject Terms: COOPERATIVE societies; TAXATION; TAX exemption; INTERNAL revenue law; PATRONAGE dividends; BUSINESS enterprises -- Taxation; INCOME tax deductions; TAX evasion; CORPORATIONS -- Taxation; TAX loopholes; AGRICULTURE, Cooperative; UNITED States; LAW & legislation; PREVENTION