||2001 Tax Year
501(c)(5) -- Labor, Agricultural, &
If you are a member of an organization that wants to obtain
recognition of exemption from federal income tax as a labor,
agricultural, or horticultural organization, you should submit an
application on Form 1024. You must indicate in your application for
exemption and accompanying statements that your organization will not
have any net earnings benefiting any member. In addition, you should
follow the procedure for obtaining recognition of exempt status
described in chapter 1. Submit any additional information that may be
required, as described in this section.
Tax treatment of donations.
Contributions to labor, agricultural, and horticultural
organizations are not deductible as charitable contributions on the
donor's federal income tax return. However, such payments may be
deductible as business expenses if they are ordinary and necessary in
the conduct of the taxpayer's trade or business. For more information
about certain limits affecting the deductibility of these business
expenses, see Deduction not allowed for dues used for political
or legislative activities on page 46.
A labor organization is an association of workers who have combined
to protect and promote the interests of the members by bargaining
collectively with their employers to secure better working conditions.
To show that your organization has the purpose of a labor
organization, you should include in the articles of organization or
accompanying statements (submitted with your exemption application)
information establishing that the organization is organized to better
the conditions of workers, improve the grade of their products, and
develop a higher degree of efficiency in their respective occupations.
In addition, no net earnings of the organization may benefit any
Composition of membership.
While a labor organization generally is composed of employees or
representatives of the employees (in the form of collective bargaining
agents) and similar employee groups, evidence that an organization's
membership consists mainly of workers does not in itself indicate an
exempt purpose. You must show in your application that your
organization has the purposes described in the preceding paragraph.
These purposes may be accomplished by a single labor organization
acting alone or by several organizations acting together through a
Benefits to members.
The payment by a labor organization of death, sick, accident, and
similar benefits to its individual members with funds contributed by
its members, if made under a plan to better the conditions of the
members, does not preclude exemption as a labor organization. However,
an organization does not qualify for exemption as a labor organization
if it has no authority to represent members in job-related matters,
even if it provides weekly income to its members in the event of a
lawful strike by the members' union, in return for an annual payment
by the member.
Agricultural and horticultural organizations are connected with
raising livestock, forestry, cultivating land, raising and harvesting
crops or aquatic resources, cultivating useful or ornamental plants,
and similar pursuits.
For the purpose of these provisions, aquatic resources
include only animal or vegetable life, but not mineral
resources. The term harvesting, in this case, includes fishing and
Agricultural organizations may be quasi-public in character and are
often designed to encourage the development of better agricultural and
horticultural products through a system of awards, using income from
entry fees, gate receipts, and donations to meet the necessary
expenses of upkeep and operation. When the activities are directed
toward the improvement of marketing or other business conditions in
one or more lines of business, rather than the improvement of
production techniques or the betterment of the conditions of persons
engaged in agriculture, the organization must qualify for exemption as
a business league, board of trade, or other organization, as discussed
next in the section on 501(c)(6) organizations.
The primary purpose of exempt agricultural and horticultural
organizations must be to better the conditions of those engaged in
agriculture or horticulture, develop more efficiency in agriculture or
horticulture, or improve the products.
The following list contains some examples of activities
that show an agricultural or horticultural purpose.
- Promoting various cooperative agricultural, horticultural,
and civic activities among rural residents by a state and county farm
and home bureau.
- Exhibiting livestock, farm products, and other
characteristic features of agriculture and horticulture.
- Testing soil for members and nonmembers of the farm bureau
on a cost basis, the results of the tests and other recommendations
being furnished to the community members to educate them in soil
- Guarding the purity of a specific breed of livestock.
- Encouraging improvements in the production of fish on
privately-owned fish farms.
- Negotiating with processors for the price to be paid to
members for their crops.
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