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service organizations, professional

investment in the entity. That investment

For details on the NOL deduction, see

organizations, business leagues, trade

consists of money and other property

Pub. 542, Corporations, section 172, and

associations, chambers of commerce,

contributed to the entity and amounts

Form 1139, Corporation Application for

boards of trade, and real estate boards,

borrowed on behalf of the entity.

Tentative Refund.

unless a principal purpose of the

Line 30. Taxable income. Certain

The at-risk rules do not apply to:

organization is to entertain or provide

•

cooperatives may need to file Form 8817.

Holding real property placed in service

entertainment facilities for members or

If so, taxable income reported on line 30

by the cooperative before 1987;

their guest. In addition, cooperatives may

•

may not exceed the combined taxable

Equipment leasing under sections

not deduct membership dues in any club

income shown on line 30, Form 8817.

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

organized for business, pleasure,

•

Attach Form 8817 to Form 990-C.

Any qualifying business of a qualified

recreation, or other social purpose. This

cooperative under section 465(c)(7).

Patronage source losses cannot

includes country clubs, golf and athletic

The at-risk rules do apply to the

be used to offset nonpatronage

clubs, airline and hotel clubs, and clubs

holding of mineral property.

income. See Form 8817.

operated to provide meals under

CAUTION

conditions favorable to business

If the at-risk rules apply, complete

Net operating loss. If line 30 is zero

discussion.

Form 6198, At-Risk Limitations, then

or less, the cooperative may have an

adjust the amount on line 28 for any

Entertainment facilities. The

NOL that can be carried back or forward

section 465(d) losses. These losses are

cooperative cannot deduct an expense

as a deduction to other tax years.

limited to the amount for which the

paid or incurred for a facility (such as a

Generally, a cooperative first carries an

cooperative is at risk for each separate

yacht or hunting lodge) used for an

NOL back 2 tax years. However, the

activity at the close of the tax year. If the

activity that is usually considered

cooperative may elect to waive the

cooperative is involved in one or more

entertainment, amusement, or recreation.

carryback period and instead carry the

activities, any of which incurs a loss for

NOL forward to future tax years. To make

Note. The cooperative may be able to

the year, report the losses for each

the election, see the instructions for

deduct the otherwise nondeductible

activity separately. Attach Form 6198

Schedule N, item 19, on page 18. See

expense if the amount is treated as

showing the amount at risk and gross

Form 1139 for details, including other

compensation and reported on Form W-2

income and deductions for the activities

elections that may be available, which

for an employee or on Form 1099-MISC

with the losses.

must be made no later than 6 months

for an independent contractor.

after the due date (excluding extensions)

If the cooperative sells or otherwise

Deduction for clean-fuel vehicles and

of the cooperative’s return.

disposes of an asset or its interest (either

certain refueling property. Section

total or partial) in an activity to which the

Line 32b. Estimated tax payments.

179A allows a deduction for part of the

at-risk rules apply, determine the net

Enter any estimated tax payments the

cost of qualified clean-fuel vehicle

profit or loss from the activity by

cooperative made for the tax year.

property and qualified clean-fuel vehicle

combining the gain or loss on the sale or

Beneficiaries of trusts. If the

refueling property placed in service during

disposition with the profit or loss from the

cooperative is the beneficiary of a trust,

the tax year. For more information, see

activity. If the cooperative has a net loss,

Pub. 535, Business Expenses.

and the trust makes a section 643(g)

the loss may be limited because of the

election to credit its estimated tax

Lobbying expenses. Generally,

at-risk rules.

payments to its beneficiaries, include the

lobbying expenses are not deductible.

cooperative’s share of the estimated tax

Treat any loss from an activity not

These expenses include amounts paid or

payment in the total amount entered on

allowed for the current tax year as a

incurred in connection with:

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

•

deduction allocable to the activity in the

Influencing Federal or state legislation

payment in the blank space below line 31.

next tax year.

(but not local legislation) or

•

Line 32f. Credit from refiguring tax for

Any communication with certain

Line 29a. Net operating loss deduction.

years in which nonqualified per-unit

Federal executive branch officials in an

A cooperative may use the net operating

retain certificates or nonqualified

attempt to influence the official actions or

loss incurred in one tax year to reduce its

written notices of allocation (redeemed

positions of the officials. See Regulations

taxable income in another year. Enter the

this year) were issued. If the

section 1.162-29 for the definition of

total NOL carryovers from other tax years

cooperative would pay less total tax by

“influencing legislation.”

on line 29a, but do not enter more than

claiming the deduction for the redemption

Dues and other similar amounts paid

the cooperative’s taxable income (after

of nonqualified written notices of

to certain tax-exempt organizations may

special deductions). Attach a schedule

allocation or nonqualified per-unit retain

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

showing the computation of the

certificates in the issue year versus the

If certain in-house expenditures do not

deduction. Also complete item 20 on

current tax year, refigure the tax for the

exceed $2,000, they are deductible. See

Schedule N.

years the nonqualified written notices or

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

The following special rules apply.

certificates were originally issued

contributions to charitable organizations

•

If an ownership change occurs, the

(deducting them in the issue year), then

that conduct lobbying activities, see

amount of taxable income of a “loss”

enter the amount of the reduction in the

Contributions to organizations

cooperative that may be offset by the

issue years’ taxes on this line. Attach a

conducting lobbying activities on page

pre-change NOL carryovers may be

schedule showing how the credit was

9. For more information on lobbying

limited (see section 382 and the related

figured. This credit is treated as a

expenses, see section 162(e).

regulations). A loss cooperative must file

payment, and any amount that is more

Line 28

an information statement with its income

than the tax on line 31 will be refunded.

Taxable income before NOL

tax return for each tax year that certain

Line 32g. Credit for federal tax on

ownership shifts occur (see Temporary

deduction and special deductions

fuels. Enter the credit from Form 4136,

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

Credit for Federal Tax Paid on Fuels, if

At-risk rules. Special at-risk rules under

details). See Regulations section

the cooperative qualifies to take this

section 465 generally apply to closely

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

credit. Attach Form 4136.

held cooperatives (see Passive activity

closing-of-the-books election.

limitations on page 8) engaged in any

•

Line 32h. Total payments. Add the

If a cooperative acquires control of

activity as a trade or business or for the

amounts on lines 32d through 32g and

another cooperative (or acquires its

production of income. These cooperatives

enter the total on line 32h.

assets in a reorganization), the amount of

may have to adjust the amount on line 28.

pre-acquisition losses that may offset

Backup withholding. If the cooperative

A taxpayer is generally considered

recognized built-in gain may be limited

had federal income tax withheld from any

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

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

payments it received, because, for

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Instructions For Form 990-C - Farmers' Cooperative Association Income Tax Return - Internal Revenue Service - 2003 Page 11

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