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Line 30. Taxable income. For

See section 6655 for details and

merchandise during the tax year on line 2.

cooperatives required to file Form 8817,

exceptions including special rules for

The amount the cooperative can deduct

taxable income reported on line 30 may

large cooperatives.

for the tax year is figured on line 9. For

not exceed the combined taxable income

Use Form 2220, Underpayment of

additional guidance on this method of

shown on line 30, Form 8817. Attach

Estimated Tax by Corporations, to see if

accounting for inventory items, see Rev.

Form 8817 to the cooperative’s tax return.

the cooperative owes a penalty and to

Proc. 2001-10 and Pub. 538.

See Form 8817 for more details.

figure the amount of the penalty.

All filers not using the cash method of

Generally, the cooperative does not have

accounting should see Section 263A

Patronage source losses cannot

to file this form because the IRS can

uniform capitalization rules on page 7

be used to offset nonpatronage

figure the amount of any penalty and bill

before completing Schedule A.

income. See section 1388(j) for

CAUTION

the cooperative for it. However, even if

more information.

Line 1. Inventory at beginning of year.

the cooperative does not owe the penalty

If the cooperative is changing its method

complete and attach Form 2220 if:

Line 32b. Estimated tax payments.

•

of accounting for the current tax year, it

The annualized income or adjusted

Enter any estimated tax payments the

must refigure last year’s closing inventory

seasonal installment method is used or

cooperative made for the tax year.

•

using the new method of accounting and

The cooperative is a large cooperative

Beneficiaries of trusts. If the

enter the result on line 1. If there is a

computing its first required installment

cooperative is the beneficiary of a trust,

difference between last year’s closing

based on the prior year’s tax. (See the

and the trust makes a section 643(g)

inventory and the refigured amount,

Instructions for Form 2220 for the

election to credit its estimated tax

attach an explanation and take it into

definition of a large corporation.)

payments to its beneficiaries, include the

account when figuring the cooperative’s

If Form 2220 is attached, check the

cooperative’s share of the estimated tax

section 481(a) adjustment explained on

box on line 33, and enter the amount of

payment in the total amount entered on

page 4.

any penalty on this line.

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

Line 4a. Qualified per-unit retain

Line 36. Direct deposit of refund. If the

payment in the blank space to the right of

certificates are issued to patrons who

cooperative has a refund of $1 million or

the entry space.

have agreed to include the stated dollar

more and wants it directly deposited into

Line 32f. Credit from refiguring tax for

amount in current income.

its checking or savings account at any

years in which nonqualified per-unit

U.S. bank or other financial institution

Line 5. Enter the amount paid in money

retain certificates or nonqualified

instead of having a check sent to the

or other property (except per-unit retain

written notices of allocation (redeemed

cooperative, complete Form 8302 and

certificates) to patrons to redeem

this year) were issued. If the

attach it to the cooperative’s tax return.

nonqualified per-unit retain certificates. If

cooperative paid less total tax by not

a per-unit retain certificate does not

claiming the deduction for the redemption

qualify, no deduction is allowable at the

Schedule A

of nonqualified written notices of

time it is issued. However, the

allocation or nonqualified per-unit retain

cooperative may take a deduction or a

certificates in the current tax year, and

Cost of Goods Sold

refund of tax when the nonqualified

instead the cooperative refigured the tax

Generally, inventories are required at the

per-unit retain certificate is finally

for the years the nonqualified written

beginning and end of each tax year if the

redeemed, provided that the nonqualified

notices or certificates were originally

production, purchase, or sale of

per-unit retain certificate was paid as a

issued, enter the amount of the reduction

merchandise is an income-producing

per-unit retain allocation during the

in the issue years’ taxes on this line.

factor. See Regulations section 1.471-1.

payment period for the tax year during

Attach a schedule showing how the credit

which the marketing occurred. The

However, if the cooperative is a

was figured. This credit is treated as a

deduction is allowed only for amounts

qualifying taxpayer, it may adopt or

payment, and any amount that is more

paid in money or other property (other

change its accounting method to account

than the tax on line 31 will be refunded.

than per-unit retain certificates) that are

for inventoriable items in the same

not more than the stated dollar amount of

Line 32g. Credit for federal tax on

manner as materials and supplies that are

the nonqualified per-unit retain certificate.

fuels. Complete Form 4136, Credit for

not incidental. A qualifying taxpayer is a

See section 1382(b).

Federal Tax Paid on Fuels, if the

taxpayer (a) whose average annual gross

cooperative qualifies to take this credit.

receipts for the 3 prior years is $1 million

See section 1383 and the instructions

or less and (b) whose business is not a

for line 32f for a special rule for figuring

Line 32h. Total payments. Add the

tax shelter (as defined in section

the cooperative’s tax in the year of

amounts on lines 32d through 32g and

448(d)(3). In addition, for tax years ending

redemption of a nonqualified per-unit

enter the total on line 32h.

on or after December 31, 2001, this rule

retain certificate.

Backup withholding. If the cooperative

applies to an eligible business of a

Line 6a. An entry is required on this line

had income tax withheld from any

qualifying small business taxpayer. A

only for cooperatives electing a simplified

payments it received, because, for

qualifying small business taxpayer

method of accounting.

example, it failed to give the payer its

includes a cooperative with an average

correct EIN, include the amount withheld

For cooperatives that have elected the

annual gross receipts of more than $1

in the total for line 32h. This type of

simplified production method,

million but less than or equal to $10

withholding is called backup withholding.

additional section 263A costs are

million and that is not prohibited from

Show the amount withheld in the blank

generally those costs, other than interest,

using the cash method under section 448.

space in the right-hand column between

that were not capitalized under the

For more details, including the definition

lines 31 and 32h, and write “Backup

cooperative’s method of accounting

of an eligible business, see Notice

Withholding.”

immediately prior to the effective date of

2001-76.

section 263A that are now required to be

Line 33. Estimated tax penalty. A

Under this accounting method,

capitalized under section 263A. For

cooperative that does not make estimated

inventory costs for raw materials

details, see Regulations section

tax payments when due may be subject

purchased for use in producing finished

1.263A-2(b).

to an underpayment penalty for the period

goods and merchandise purchased for

of underpayment. Generally, a

resale are deductible in the year the

For cooperatives that have elected the

cooperative is subject to the penalty if its

finished goods or merchandise are sold

simplified resale method, additional

tax liability is $500 or more and it did not

(but not before the year the cooperative

section 263A costs are generally those

timely pay the smaller of:

paid for the raw materials or merchandise

costs incurred with respect to the

•

Its tax liability for 2001 or

if it is also using the cash method). Enter

following categories:

•

Its prior year’s tax.

amounts paid for all raw materials and

Off-site storage or warehousing.

-12-

Instructions For Form 990-C - Farmers' Cooperative Association Income Tax Return - 2001 Page 12

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