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Part II—Type of Entity and

purchase more than 50% of their supplies

lease of premises, from investment in

and equipment through the cooperative

securities, or from the sale or exchange of

Organizational Documents

during the cooperative’s tax year.

capital assets constitutes income from

sources other than patronage.

One of the basic requirements for

Part IV—Financial Data

exemption is that the organization be

Also include in the schedule the total

“organized” for one or more exempt

amount of per-unit retain allocations other

The statement of receipts and

purposes. If the organization does not

than those reflected in cost of sales on

expenditures and the balance sheets

have an organizing instrument, it will not

line 3b and the total amount of written

must be completed for the current year

qualify for exempt status.

notices of allocation other than those

and each of the 3 immediately preceding

reflected on line 16. (See sections 1382

years (or for the time the organization has

None of the documents submitted in

and 1388.)

existed if less than 4 years). We may

support of this application, including

request financial data for more than 4

organizational documents, will be

Line 16 — Patronage Dividends. In the

years if circumstances warrant. All

returned.

attached schedule, show the amount of

financial information for the current year

patronage dividends paid to patrons in

Instead of the originals, submit

must cover the period beginning on the

money, qualified written notices of

“conformed” copies of these documents.

first day of your organization’s established

allocation, or other property (except

A “conformed” copy is one that agrees

annual accounting period and ending on

non-qualified written notices of allocation)

with the original document and all of its

any day which is within 60 days of the

and the amount paid to patrons in money

amendments. If the copies are not signed,

date of the application. If the date of the

or other property (except written notices

they must be accompanied by a

application is less than 60 days after the

of allocation) to redeem nonqualified

declaration signed by an officer

first day of the current accounting period,

written notices of allocation. (See sections

authorized to sign for the organization,

no financial information is required for the

1382 and 1388 and the related

certifying that they are complete and

current year. Financial information is

regulations.)

accurate copies of the original

required for the 3 preceding years

documents.

Paperwork Reduction Act Notice. We

regardless of the current year

Chemically or photographically

ask for the information on this form to

requirements. Please note that if no

reproduced copies of articles of

carry out the Internal Revenue laws of the

financial information is required for the

incorporation showing the certification of

United States. If you want your

current year, the preceding year’s

an appropriate government official need

organization to be recognized as

financial information can end on any day

not be accompanied by a declaration.

tax-exempt by the IRS, you are required

which is within 60 days of the date of the

to give us this information. We need it to

application.

Part III—Activities and

determine whether the organization

You may reproduce page 4 of the form

Operational Information

meets the legal requirements for

and complete the financial data for each

tax-exempt status.

required year. Attach the financial data for

Lines 17 through 19. The information

You are not required to provide the

all required years to the application.

requested on lines 17 through 19 must be

information requested on a form that is

The statements should be consistent

completed for the current year and each

subject to the Paperwork Reduction Act

with the method of accounting the

of the 3 immediately preceding years (or

unless the form displays a valid OMB

organization uses in maintaining its books

for the time the organization has existed if

control number. Books or records relating

and records.

less than 4 years). The requested

to a form or its instructions must be

information for the current year must

Line 3b — Cost of Goods Sold. Include

retained as long as their contents may

cover the period beginning on the first day

per-unit retain allocations paid to patrons

become material in the administration of

of your organization’s established annual

in money, qualified written notices of

any Internal Revenue law. Generally, tax

accounting period and ending on any day

allocation, or other property (except

returns and return information are

which is within 60 days of the date of the

nonqualified per-unit retain certificates)

confidential, as required by section 6103.

application. If the date of the application is

and the amount paid to patrons in money

The time needed to complete and file

less than 60 days after the first day of the

or other property (except per-unit retain

this form will vary depending on individual

current accounting period, no information

certificates) to redeem nonqualified

circumstances. The estimated average

is required for the current year.

per-unit retain certificates. (See sections

time is:

Requested information is required for the

1382 and 1388.)

3 preceding years regardless of the

Line 15 — Other Expenditures. In the

Recordkeeping . . . . . . . . .

44 hr., 14 min.

current year requirement. Please note

attached schedule for other expenditures,

Learning about the law or

that if no information is required for the

include a breakdown for nonpatronage

the form . . . . . . . . . . . . . .

1 hr., 44 min.

current year, the preceding year’s

distributions paid as dividends on capital

Preparing the form . . . . . . .

4 hr., 23 min.

information period can end on any day

stock and nonpatronage distributions

Copying, assembling, and

which is within 60 days of the date of the

made on a patronage basis. This

sending the form to the IRS

32 min.

application.

breakdown should include only

If you have comments concerning the

Definitions. The term “producer” means

distributions of earnings derived from

accuracy of these time estimates or

an individual or corporation engaged in

business done for the United States

suggestions for making this form simpler,

farming as a business receiving income

Government or any of its agencies or

we would be happy to hear from you. You

based on farm production rather than

income from sources other than

can write to the Internal Revenue Service,

fixed compensation. For example, a

patronage, but only to the extent such

Tax Products Coordinating Committee,

corporation leases its land to a tenant

amounts are paid in the same manner

SE:W:CAR:MP:T:T:SP, 1111 Constitution

farmer who agrees to pay a rental fee

provided for patronage dividends below.

Ave. NW, IR-6406, Washington, DC

based on a percentage of the farm crops

The term “income from sources other

20224. Do not send the tax form to this

produced. Both the landowner and the

than patronage” means incidental income

address. Instead, see Where To File on

tenant farmer qualify as producers.

derived from sources not directly related

page 1.

to the marketing, purchasing, or service

“Current and active” producers are

activities of the cooperative association.

patrons of a cooperative who market

For example, income derived from the

more than 50% of their products or

-2-

Instructions For Form 1028 - Application For Recognition Of Exemption Under Section 521 Of The Internal Revenue Code Page 2

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