Schedule J

Tax Computation

Lines 1 and 2

Members of a controlled group.   A member of a controlled group, as defined in section 1563, must check the box on line 1 and complete lines 2a and 2b of Schedule J.

Line 2a.   Members of a controlled group are entitled to share one $50,000, one $25,000, and one $9,925,000 taxable income bracket amount (in that order) on line 2a.

When a controlled group adopts or later amends an apportionment plan, each member must attach to its tax return a copy of its consent to this plan.

The copy (or an attached statement) must show the part of the amount in each taxable income bracket apportioned to that member. See Regulations section 1.1561-3(b) for other requirements and for the time and manner of making the consent.

Equal apportionment plan.   If no apportionment plan is adopted, members of a controlled group must divide the amount in each taxable income bracket equally among themselves. For example, Controlled Group AB consists of Cooperative A and Cooperative B. They do not elect an apportionment plan. Therefore, each cooperative is entitled to:

• $25,000 (one-half of $50,000) on line 2a(1),
• $12,500 (one-half of $25,000) on line 2a(2), and
• $4,962,500 (one-half of $9,925,000) on line 2a(3).

Unequal apportionment plan.   Members of a controlled group may elect an unequal apportionment plan and divide the taxable income brackets as they want. There is no need for consistency among taxable income brackets. Any member may be entitled to all, some, or none of the taxable income bracket. However, the total amount for all members cannot be more than the total amount in each taxable income bracket.

Line 2b.   Members of a controlled group are treated as one group to figure the applicability of the additional 5% tax and the additional 3% tax. If an additional tax applies, each member will pay that tax based on the part of the amount used in each taxable income bracket to reduce that member's tax. See section 1561(a). If an additional tax applies, attach a schedule showing the taxable income of the entire group and how the cooperative figured its share of the additional tax.

Line 2b(1).   Enter the cooperative's share of the additional 5% tax on line 2b(1).

Line 2b(2).   Enter the cooperative's share of the additional 3% tax on line 2b(2).

Line 3

Tax Computation Worksheet for Members of a Controlled Group (keep for your records)

Note. Each member of a controlled group must compute its tax using this worksheet.
1.	Enter taxable income (line 30, page 1)
2.	Enter line 1 or the cooperative's share of the $50,000 taxable income bracket, whichever is less
3.	Subtract line 2 from line 1
4.	Enter line 3 or the cooperative's share of the $25,000 taxable income bracket, whichever is less
5.	Subtract line 4 from line 3
6.	Enter line 5 or the cooperative's share of the $9,925,000 taxable income bracket, whichever is less
7.	Subtract line 6 from line 5
8.	Multiply line 2 by 15%
9.	Multiply line 4 by 25%
10.	Multiply line 6 by 34%
11.	Multiply line 7 by 35%
12.	If the taxable income of the controlled group exceeds $100,000, enter this member's share of the smaller of: 5% of the taxable income in excess of $100,000, or $11,750. See instructions for line 2b
13.	If the taxable income of the controlled group exceeds $15 million, enter this member's share of the smaller of: 3% of the taxable income in excess of $15 million, or $100,000. See instructions for line 2b
14.	Add lines 8 through 13. Enter here and on Schedule J, line 3.

Note.   Members of a controlled group must attach to form 990-C a statement showing the computation of the tax entered on line 3.

Most cooperatives figure their tax by using the Tax Rate Schedule below. Exceptions apply to members of a controlled group (see the worksheet above).

Tax Rate Schedule If taxable income on line 30, page 1, Form 990-C is:

Over -	But not over -	Tax is:	Of the amount over -
$0	$50,000	15%	$0
50,000	75,000	$ 7,500 + 25%	50,000
75,000	100,000	13,750 + 34%	75,000
100,000	335,000	22,250 + 39%	100,000
335,000	10,000,000	113,900 + 34%	335,000
10,000,000	15,000,000	3,400,000 + 35%	10,000,000
15,000,000	18,333,333	5,150,000 + 38%	15,000,000
18,333,333	- - - - -	35%	0

Deferred tax under section 1291.   If the cooperative was a shareholder in a passive foreign investment company (PFIC), and the cooperative received an excess distribution or disposed of its investment in the PFIC during the year, it must include the total increase in taxes due under section 1291(c)(2) in the amount entered on line 3, Schedule J. On the dotted line next to line 3, Schedule J, write Section 1291 and the amount.

Do not include on line 3 any interest due under section 1291(c)(3). Instead, show the amount of interest owed in the bottom margin of page 1, Form 990-C, and write Section 1291 interest. For details, see Form 8621.

Line 4. Alternative minimum tax (AMT).   Unless the cooperative is treated as a small corporation exempt from the AMT, it may owe AMT if it has any of the adjustments and tax preference items listed on Form 4626, Alternative Minimum Tax - Corporations. The cooperative must file Form 4626 if its taxable income (or loss) before the NOL deduction combined with these adjustments and tax preference items is more than the lesser of:

• $40,000 or
• The cooperative's allowable exemption amount (from Form 4626).

See Form 4626 for details.

Exemption for small corporations.   A cooperative is treated as a small corporation exempt from the AMT for its tax year beginning in 2002 if that year is the cooperative's first tax year in existence (regardless of its gross receipts) or:

1. It was treated as a small corporation exempt from the AMT for all prior tax years beginning after 1997 and
2. Its average annual gross receipts for the 3-tax-year period (or portion thereof during which the cooperative was in existence) ending before its tax year beginning in 2002 did not exceed $7.5 million ($5 million if the cooperative had only 1 prior tax year).

For more details, see the Instructions for Form 4626.

Line 6a. Foreign tax credit.   To find out when a cooperative can take the credit for payment of income tax to a foreign country or U.S. possession, see Form 1118, Foreign Tax Credit - Corporations.

Line 6b. Other Credits

Possessions tax credit.   The Small Business Job Protection Act of 1996 repealed the possessions credit. However, existing credit claimants may qualify for a credit under the transitional rules. See Form 5735, Possessions Corporation Tax Credit (Under Sections 936 and 30A).

Nonconventional source fuel credit.   A credit is allowed for the sale of qualified fuels produced from a nonconventional source. Section 29 contains a definition of qualified fuels, provisions for figuring the credit, and other special rules. Attach a separate schedule to the return showing the computation of the credit.

Qualified electric vehicle (QEV) credit.   Include on line 6b any credit from Form 8834, Qualified Electric Vehicle Credit. Vehicles that qualify for this credit are not eligible for the deduction for clean-fuel vehicles under section 179A.

Line 6c. General business credit.   Enter on line 6c the cooperative's total general business credit.

If the cooperative is filing Form 8844, Empowerment Zone and Renewal Community Employment Credit, or Form 8884, New York Liberty Zone Business Employee Credit, check the Form(s) box, write the form number in the space provided, and include the allowable credit on line 6c.

If the cooperative is required to file Form 3800, General Business Credit, check the Form 3800 box and include the allowable credit on line 6c. If the cooperative is not required to file Form 3800, check the Form(s) box, write the form number in the space provided, and include on line 6c the allowable credit from the applicable form listed below.

Note.   Any excess energy investment credit, work opportunity credit, Indian employment credit, empowerment zone or renewal community credit, employment credit, welfare-to-work credit, or new markets credit not used by the cooperative (because of the tax liability limitation) must be passed through to the patrons. These credits cannot be carried back or over by the cooperative. See Forms 3468, 5884, 8844, 8845, 8861, and 8874 for details.

• Investment Credit (Form 3468).
• Work Opportunity Credit (Form 5884).
• Credit for Alcohol Used as Fuel (Form 6478).
• Credit for Increasing Research Activities (Form 6765).
• Low-Income Housing Credit (Form 8586).
• Orphan Drug Credit (Form 8820).
• Disabled Access Credit (Form 8826).
• Enhanced Oil Recovery Credit (Form 8830).
• Renewable Electricity Production Credit (Form 8835).
• Indian Employment Credit (Form 8845).
• Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips (Form 8846).
• Credit for Contributions to Selected Community Development Corporations (Form 8847).
• Welfare-to-Work Credit (Form 8861).
• New Markets Credit (Form 8874).
• Credit for Small Employer Pension Plan Startup Costs (Form 8881).
• Credit for Employer-Provided Child Care Facilities and Services (Form 8882).

Line 6d. Credit for prior year minimum tax.   To figure the minimum tax credit and any carryforward of that credit, use Form 8827, Credit for Prior Year Minimum Tax - Corporations.

Also see Form 8827 if any of the cooperative's 2001 nonconventional source fuel credit, orphan drug credit, or qualified electric vehicle credit was disallowed solely because of the tentative minimum tax limitation. See section 53(d).

Line 9. Other Taxes

Include any of the following taxes and interest in the total on line 9. Check the appropriate box(es) for the form, if any, used to compute the total.

Recapture of investment credit.   If the cooperative disposed of investment credit property or changed its use before the end of its useful life or recovery period, see Form 4255, Recapture of Investment Credit, for details.

Recapture of low-income housing credit.   If the cooperative disposed of property (or there was a reduction in the qualified basis of the property) for which it took the low-income housing credit, it may owe a tax. See Form 8611, Recapture of Low-Income Housing Credit.

Other.   Additional taxes and interest amounts may be included in the total entered on line 9. Check the box for Other if the cooperative includes any of the taxes and interest discussed below. See How to report, below, for details on reporting these amounts on an attached schedule.

• Recapture of the qualified electric vehicle (QEV) credit. The cooperative must recapture part of the QEV credit claimed in a prior year, if, within 3 years of the date the vehicle was placed in service, it ceases to qualify for the credit. See Regulations section 1.30-1 for details on how to figure the recapture.
• Recapture of the Indian employment credit. Generally, if an employer terminates the employment of a qualified employee less than 1 year after the date of initial employment, any Indian employment credit allowed for a prior tax year because of wages paid or incurred to that employee must be recaptured. For details, see Form 8845 and section 45A.
• Recapture of new markets credit (see Form 8874).
• Interest on deferred tax attributable to (a) installment sales of certain timeshares and residential lots (section 453(l)(3)) and (b) certain nondealer installment obligations (section 453A(c)).
• Interest due on deferred gain (section 1260(b)).

How to report.   If the cooperative checked the Other box, attach a schedule showing the computation of each item included in the total for line 9, identify the applicable Code section and the type of tax or interest.

Line 10. Total Tax.   Include any deferred tax on the termination of a section 1294 election applicable to shareholders in a qualified electing fund in the amount entered on line 10. See Form 8621, Part V and How to report below.

Subtract any deferred tax on the cooperative's share of undistributed earnings of a qualified electing fund (see Form 8621, Part II).

How to report.   If deferring tax, attach a schedule showing the computation of each item included in, or subtracted from, the total for line 10. On the dotted line next to line 10, specify (a) the applicable Code section, (b) the type of tax, and (c) the amount of tax.

Schedule L

Balance Sheets per Books

The balance sheet should agree with the cooperative's books and records. Include certificates of deposit as cash on line 1, Schedule L.

Line 5. Tax-exempt securities.   Include on this line:

1. State and local government obligations, the interest on which is excludable from gross income under section 103(a) and
2. Stock in a mutual fund or other RIC that distributed exempt-interest dividends during the tax year of the cooperative.

Line 24.   Adjustments to shareholders' equity. Some examples of adjustments to report on this line include:

• Unrealized gains and losses on securities held available for sale.
• Foreign currency translation adjustments.
• The excess of additional pension liability over unrecognized prior service cost.
• Guarantees of employee stock (ESOP) debt.
• Compensation related to employee stock award plans.

If the total adjustment to be entered on line 24 is a negative amount, enter the amount in parentheses.

Schedule M-1

Reconciliation of Income (Loss) per Books With Income per Return

Line 5c. Travel and entertainment.   Include on line 5c any of the following:

• Meals and entertainment not deductible under section 274(n).
• Expenses for the use of an entertainment facility.
• The part of business gifts over $25.
• Expenses of an individual in excess of $2,000, which are allocable to conventions on cruise ships.
• Employee achievement awards over $400.
• The cost of entertainment tickets over their face value (also subject to 50% limit under section 274(n)).
• The cost of skyboxes over the face value of nonluxury box seat tickets.
• The part of luxury water travel not deductible under section 274(m).
• Expenses for travel as a form of education.
• Other nondeductible expenses for travel and entertainment.

For more information, see Pub. 542.

Line 7. Tax-exempt interest.   Include as interest on line 7, any exempt-interest dividends received as a shareholder in a mutual fund or other RIC.

Schedule N

Other Information

The following instructions apply to Form 990-C, page 5, Schedule N. Be sure to complete all the items that apply to the cooperative.

Question 13

Foreign financial account.   Check the Yes box if either 1 or 2 below applies to the cooperative. Otherwise, check the No box.

1. At any time during the 2002 calendar year, the cooperative had an interest in or signature or other authority over a bank, securities, or other financial account in a foreign country (see Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts); and
   • The combined value of the accounts was more than $10,000 at any time during the calendar year and
   • The account was not with a U.S. military banking facility operated by a U.S. financial institution.
2. The cooperative owns more than 50% of the stock in any corporation that would answer Yes to item 1 above.

If Yes is checked for this question:

• Enter the name(s) of the foreign country or countries. Attach a separate sheet if more space is needed.
• File Form TD F 90-22.1 by June 30, 2003, with the Department of the Treasury at the address shown on the form. Do not file it with Form 990-C.

You can order Form TD F 90-22.1 by calling 1-800-TAX-FORM (1-800-829-3676) or you can download it from the IRS web site at www.irs.gov.

Question 14

The cooperative may be required to file Form 3520, Annual Return To Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, if:

• It directly or indirectly transferred money or property to a foreign trust. For this purpose, any U.S. person who created a foreign trust is considered a transferor.
• It is treated as the owner of any part of the assets of a foreign trust under the grantor trust rules.
• It received a distribution from a foreign trust.

For more information, see the Instructions for Form 3520.

Note.   An owner of a foreign trust must ensure that the trust files an annual information return on Form 3520-A, Annual Information Return of Foreign Trust with a U.S. Owner. For details, see Form 3520-A.

Item 15

Show any tax-exempt interest income received or accrued. Include any exempt-interest dividends received as a shareholder in a mutual fund or other RIC.

Question 17

Check the Yes box if:

1. The cooperative is a subsidiary in an affiliated group (defined below), but is not filing a consolidated return for the tax year with that group or
2. The cooperative is a subsidiary in a parent-subsidiary controlled group (defined below).

Any cooperative that meets either of the requirements above should check the Yes box. This applies even if the cooperative is a subsidiary member of one group and the parent corporation of another.

Note.   If the cooperative is an excluded member of a controlled group (see section 1563(b)(2)), it is still considered a member of a controlled group for this purpose.

Affiliated group.   The term affiliated group means one or more chains of includible corporations (section 1504(a)) connected through stock ownership with a common parent corporation. The common parent must be an includible corporation and the following requirements must be met:

1. The common parent must directly own stock that represents at least 80% of the total voting power and at least 80% of the total value of the stock of at least one of the other includible cooperatives and
2. Stock that represents at least 80% of the total voting power and at least 80% of the total value of the stock of each of the other corporations (except for the common parent) must be owned directly by one or more of the other includible corporations.

For this purpose, stock generally does not include any stock that (a) is nonvoting, (b) is nonconvertible, (c) is limited and preferred as to dividends and does not participate significantly in corporate growth, and (d) has redemption and liquidation rights that do not exceed the issue price of the stock (except for a reasonable redemption or liquidation premium). See section 1504(a)(4).

Parent-subsidiary controlled group.   The term parent-subsidiary controlled group means one or more chains of cooperatives connected through stock ownership (section 1563(a)(1)). Both of the following requirements must be met:

1. At least 80% of the total combined voting power of all classes of voting stock or at least 80% of the total value of all classes of stock of each cooperative in the group (except the parent) must be owned by one or more of the other cooperatives in the group and
2. The common parent must own at least 80% of the total combined voting power of all classes of stock entitled to vote or at least 80% of the total value of all classes of stock of one or more of the other cooperatives in the group. Stock owned directly by other members of the group is not counted when computing the voting power or value.

See section 1563(d)(1) for the definition of stock for purposes of determining stock ownership above.

Item 19

If the cooperative has an NOL for its 2002 tax year, it may elect under section 172(b)(3) to waive the entire carryback period for the NOL and instead carry the NOL forward to future tax years. To do so, check the box in item 19 and file the return by its due date, including extensions (do not attach the statement described in Temporary Regulations section 301.9100-12T). Once made, the election is irrevocable. See Pub. 542, section 172, and Form 1139 for more details.

Cooperatives filing a consolidated return must check the box and attach the statement required by Regulations section 1.1502-21(b)(3)(i) or (ii).

Item 20

Enter the amount of the NOL carryover to the tax year from prior years, even if some of the loss is used to offset income on this return. The amount to enter is the total of all NOLs generated in prior years but not used to offset income (either as a carryback or carryover) in a tax year prior to 2002. Do not reduce the amount by any NOL deduction reported on line 29a.

Paperwork Reduction Act Notice.

We ask for the information on this form to carry out the Internal Revenue laws of the United States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax.

You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by section 6103.

The time needed to complete and file this form will vary depending on individual circumstances. The estimated average time is:

Recordkeeping	75 hr., 34 min.
Learning about the law or the form	24 hr., 55 min.
Preparing the form	43 hr., 5 min.
Copying, assembling, and sending the form to the IRS	4 hr., 33 min.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be happy to hear from you. You can write to the Tax Forms Committee, Western Area Distribution Center, Rancho Cordova, CA 95743-0001.

Do not send the tax form to this office. Instead, see Where To File on page 2.

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