Instructions for Form 990-C |
2006 Tax Year |
This is archived information that pertains only to the 2006 Tax Year. If you are looking for information for the current tax year, go to the Tax Prep Help Area.
Use Form 990-C, Farmers' Cooperative Association Income Tax Return, to report income, gains, losses, deductions, credits,
and to figure the income
tax liability of the cooperative.
Every farmers' cooperative must file Form 990-C whether or not it has taxable income (Regulations section 1.6012-2(f)).
Generally, a farmers' cooperative is a farmers, fruit growers, or like association organized and operated on a cooperative
basis to:
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Market the products of members or other producers and return to them the proceeds of sales, less necessary marketing expenses,
on the basis
of either the quantity or value of their products; or
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Purchase supplies and equipment for the use of members or other persons and turn over the supplies and equipment to them at
actual cost,
plus necessary expenses.
A member is anyone who shares in the profits of a cooperative association and is entitled to participate in the management
of the association.
A producer is a person who, as owner or tenant, bears the risk of production and receives income based on farm production
rather than fixed
compensation. For example, if a cooperative leases its land to a tenant farmer who agrees to pay a rental fee based on a percentage
of the farm crops
produced, both the landowner and the tenant farmer qualify as producers.
Cooperatives organized and operated for purposes other than those described above should not file Form 990-C. Instead, file
Form 1120,
U.S. Corporation Income Tax Return, or Form 1120-A, U.S. Corporation Short-Form Income Tax Return (if applicable).
A cooperative may file its income tax return by the 15th day of the 9th month after the end of its tax year provided it meets
the requirements of
section 6072(d) prior to filing. Any cooperative not meeting the requirements of section 6072(d) must file its income tax
return by the 15th day of
the 3rd month after the end of its tax year.
If the due date falls on a Saturday, Sunday, or legal holiday, the cooperative can file on the next business day.
Private delivery services.
Cooperatives can use certain private delivery services designated by the IRS to meet the “ timely mailing as timely filing/paying” rule for tax
returns and payments. These private delivery services include only the following.
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DHL Express (DHL): DHL Same Day Service, DHL Next Day 10:30 am, DHL Next Day 12:00 pm, DHL Next Day 3:00 pm, and DHL 2nd Day
Service.
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Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and
FedEx
International First.
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United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A.M., UPS Worldwide
Express Plus,
and UPS Worldwide Express.
The private delivery service can tell you how to get written proof of the mailing date.
Private delivery services cannot deliver items to P.O. boxes. You must use the U.S. Postal Service to mail any item to an
IRS P.O. box address.
Extension of Time to File
File Form 7004, Application for Automatic 6-Month Extension of Time To File Certain Business Income Tax, Information, and
Other Returns, to request
an automatic 6-month extension of time to file. Generally file Form 7004 by the regular due date of the return.
File Form 990-C with the Internal Revenue Service, Ogden, UT 84201-0027.
The return must be signed and dated by:
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The president, vice president, treasurer, assistant treasurer, chief accounting officer or
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Any other cooperative officer (such as tax officer) authorized to sign.
If a return is filed on behalf of a cooperative by a receiver, trustee, or assignee, the fiduciary must sign the return, instead
of the cooperative
officer. Returns and forms signed by a receiver or trustee in bankruptcy on behalf of a cooperative must be accompanied by
a copy of the order or
instructions of the court authorizing signing of the return or form.
If an employee of the cooperative completes Form 990-C, the paid preparer's space should remain blank. Anyone who prepares
Form 990-C but does not
charge the cooperative should not complete that section. Generally, anyone who is paid to prepare the return must sign it
and fill in the “Paid
Preparer's Use Only” area.
The paid preparer must complete the required preparer information and:
Note.
A paid preparer may sign original or amended returns by rubber stamp, mechanical device, or computer software program.
Paid Preparer Authorization
If the cooperative wants to allow the IRS to discuss its 2005 tax return with the paid preparer who signed it, check the “Yes” box in the
signature area of the return. This authorization applies only to the individual whose signature appears in the “Paid Preparer's Use Only” section
of the cooperative's return. It does not apply to the firm, if any, shown in that section.
If the “Yes” box is checked, the cooperative is authorizing the IRS to call the paid preparer to answer any questions that may arise
during
the processing of its return. The cooperative is also authorizing the paid preparer to:
-
Give the IRS any information that is missing from the return,
-
Call the IRS for information about the processing of the return or the status of any related refund or payment(s), and
-
Respond to certain IRS notices about math errors, offsets, and return preparation.
The cooperative is not authorizing the paid preparer to receive any refund check, bind the cooperative to anything (including
any additional tax
liability), or otherwise represent the cooperative before the IRS. If the cooperative wants to expand the paid preparer's
authorization, see Pub. 947,
Practice Before the IRS and Power of Attorney.
The authorization will automatically end no later than the due date (excluding extensions) for filing the cooperative's 2006
tax return.
To ensure that the cooperative's tax return is correctly processed, attach all schedules and other forms after page 5, Form
990-C, in the following
order.
-
Form 8302.
-
Form 4136.
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Form 4626.
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Form 851.
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Additional schedules in alphabetical order.
-
Additional forms in numerical order.
Complete every applicable entry space on Form 990-C. Do not write “See Attached” instead of completing the entry spaces. If more space is
needed on the forms or schedules, attach separate sheets, using the same size and format as the printed forms. If there are
supporting statements and
attachments, arrange them in the same order as the schedules or forms they support and attach them last. Show the totals on
the printed forms. Enter
the cooperative's name and EIN on each supporting statement or attachment.
Figure taxable income using the method of accounting regularly used in keeping the cooperative's books and records. In all
cases, the method used
must clearly show taxable income. Permissible methods include:
See Pub. 538, Accounting Periods and Methods, for more information.
Change in accounting method.
To change its method of accounting used to report taxable income (for income as a whole or for the treatment of any
material item), the cooperative
must file Form 3115, Application for Change in Accounting Method. For more information, see Form 3115, Pub. 538, Accounting
Periods and Methods, and
Pub. 542, Corporations.
A cooperative must figure its taxable income on the basis of a tax year. A tax year is the annual accounting period a cooperative
uses to keep its
records and report its income and expenses. Generally, cooperatives can use a calendar year or a fiscal year.
Change of tax year.
Generally, a cooperative must get the consent of the IRS before changing its tax year by filing Form 1128, Application
to Adopt, Change, or Retain
a Tax Year. However, under certain conditions, a cooperative can change its tax year without getting a consent.
For more information about accounting periods, tax year, and change of tax year, see Form 1128 and Pub. 538.
Rounding Off to Whole Dollars
The cooperative can round off cents to whole dollars on its return and schedules. If the cooperative does round to whole dollars,
it must round all
amounts. To round, drop amounts under 50 cents and increase amounts from 50 to 99 cents to the next dollar (for example, $1.39
becomes $1 and $2.50
becomes $3).
If two or more amounts must be added to figure the amount to enter on a line, include cents when adding the amounts and round
off only the total.
Keep the cooperative's records for as long as they may be needed for the administration of any provision of the Internal Revenue
Code. Usually,
records that support an item of income, deduction, or credit on the return must be kept for 3 years from the date the return
is due or filed,
whichever is later. Keep records that verify the cooperative's basis in property for as long as they are needed to figure
the basis of the original or
replacement property.
The cooperative should also keep copies of all returns. They help in preparing future and amended returns.
Depository Methods of Tax Payment
The cooperative must pay any tax due in full no later than the 15th day of the 9th month after the end of the tax year. The
two methods of
depositing taxes are discussed below.
Electronic Deposit Requirement.
The cooperative must make electronic deposits of all depository taxes (such as employment tax, excise tax, and corporate
income tax) using the
Electronic Federal Tax Payment System (EFTPS) in 2006 if:
-
The total deposits of such taxes in 2004 were more than $200,000 or
-
The cooperative was required to use EFTPS in 2005.
If the cooperative is required to use EFTPS and fails to do so, it may be subject to a 10% penalty. If the cooperative
is not required to use
EFTPS, it can participate voluntarily. To enroll in or get more information about EFTPS, call 1-800-555-4477. To enroll online,
visit
www.eftps.gov.
Depositing on time.
For EFTPS deposits to be made timely, the cooperative must initiate the transaction at least 1 business day before
the date the deposit is due.
Deposit with Form 8109.
If the cooperative does not use EFTPS, deposit cooperative income tax payments (and estimated tax payments) with Form
8109, Federal Tax Deposit
Coupon. If you do not have a preprinted Form 8109, use Form 8109-B to make deposits. You can get this form by calling 1-800-829-4933
or visiting an
IRS taxpayer assistance center. Have your EIN ready when you call or visit.
Do not send deposits directly to an IRS office; otherwise, the cooperative may have to pay a penalty. Mail or deliver
the completed Form 8109 with
the payment to an authorized depositary (a commercial bank or other financial institution authorized to accept federal tax
deposits). Make checks or
money orders payable to the depositary.
If the cooperative prefers, it may mail the coupon and payment to: Financial Agent, Federal Tax Deposit Processing,
P.O. Box 970030, St. Louis, MO
63197. Make the check or money order payable to “ Financial Agent.”
To help ensure proper crediting, enter the cooperative's EIN, the tax period to which the deposit applies, and “ Form 990-C” on the check or
money order. Darken the “ 990-C” box under “ Type of Tax” and the appropriate “ Quarter” box under “ Tax Period” on the coupon.
Records of these deposits will be sent to the IRS. For more information, see “ Marking the Proper Tax Period” in the instructions for Form 8109.
If the cooperative owes tax when it files Form 990-C, do not include the payment with the tax return. Instead, mail or deliver
the payment with
Form 8109 to an authorized depositary or use EFTPS, if applicable.
Generally, the following rules apply to the cooperative's payments of estimated tax.
-
The cooperative must make installment payments of estimated tax if it expects its total tax for the year (less applicable
credits) to be
$500 or more.
-
The installments are due by the 15th day of the 4th, 6th, 9th, and 12th months of the tax year. If any date falls on a Saturday,
Sunday, or
legal holiday, the installment is due on the next regular business day.
-
Use Form 1120-W, Estimated Tax for Corporations, as a worksheet to compute estimated tax.
-
If the cooperative does not use EFTPS, use the deposit coupons (Forms 8109) to make deposits of estimated tax.
-
If the cooperative overpaid estimated tax, it may be able to get a quick refund by filing Form 4466, Corporation Application
for Quick
Refund of Overpayment of Estimated Tax.
See the instructions for lines 32b and 32c, Form 990-C.
Estimated tax penalty.
A cooperative that does not make estimated tax payments when due may be subject to an underpayment penalty for the
period of underpayment.
Generally, a corporation is subject to the penalty if its tax liability is $500 or more and it did not timely pay the smaller
of:
See section 6655 for details and exceptions, including special rules for large corporations.
Use Form 2220, Underpayment of Estimated Tax by Corporations, to see if the cooperative owes a penalty and to figure
the amount of the penalty.
Generally, the cooperative does not have to file this form because the IRS can figure the amount of any penalty and bill the
cooperative for it.
However, even if the cooperative does not owe the penalty, complete and attach Form 2220 if:
-
The annualized income or adjusted seasonal installment method is used, or
-
The cooperative is a large corporation computing its first required installment based on the prior year's tax. See the Instructions
for Form
2220 for the definition of a large corporation.
Also, see the instructions for line 33, Form 990-C.
Interest.
Interest is charged on taxes paid late even if an extension of time to file is granted. Interest is also charged on
penalties imposed for failure
to file, negligence, fraud, substantial valuation misstatements, substantial understatements of tax, and reportable transaction
understatements from
the due date (including extensions) to the date of payment. The interest charge is figured at a rate determined under section
6621.
Penalty for late filing of return.
A cooperative that does not file its tax return by the due date, including extensions, may be penalized 5% of the
unpaid tax for each month or part
of a month the return is late, up to a maximum of 25% of the unpaid tax. The minimum penalty for a return that is over 60
days late is the smaller of
the tax due or $100. The penalty will not be imposed if the cooperative can show that the failure to file on time was due
to reasonable cause.
Cooperatives that file late should attach a statement explaining the reasonable cause.
Penalty for late payment of tax.
A cooperative that does not pay the tax when due generally may be penalized ½ of 1% of the unpaid tax for each month
or part of a
month the tax is not paid, up to a maximum of 25% of the unpaid tax. The penalty will not be imposed if the cooperative can
show that the failure to
pay on time was due to reasonable cause.
Trust fund recovery penalty.
This penalty may apply if certain excise, income, social security, and Medicare taxes that must be collected or withheld
are not collected or
withheld, or these taxes are not paid. These taxes are generally reported on:
-
Form 720, Quarterly Federal Excise Tax Return;
-
Form 941, Employer's Quarterly Federal Tax Return;
-
Form 943, Employer's Annual Federal Tax Return for Agricultural Employees; or
-
Form 945, Annual Return of Withheld Federal Income Tax.
The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to have been responsible for collecting,
accounting
for, and paying over these taxes, and who acted willfully in not doing so. The penalty is equal to the unpaid trust fund tax.
See the Instructions for
Form 720, Pub. 15 (Circular E), Employer's Tax Guide, or Pub. 51 (Circular A), Agricultural Employer's Tax Guide, for details,
including the
definition of responsible persons.
Other penalties.
Other penalties can be imposed for negligence, substantial understatement of tax, reportable transaction understatements,
and fraud. See sections
6662, 6662A, and 6663.
Other Forms and Statements That May Be Required
Reportable transaction disclosure statement.
Disclose information for each reportable transaction in which the cooperative participated. Form 8886, Reportable
Transaction Disclosure Statement,
must be filed for each tax year that the federal income tax liability of the cooperative is affected by its participation
in the transaction. The
cooperative may have to pay a penalty if it is required to file Form 8886 and does not do so. The following are reportable
transactions.
-
Any listed transaction, which is a transaction that is the same as or substantially similar to tax avoidance transactions
identified by the
IRS.
-
Any transaction offered under conditions of confidentiality for which the cooperative paid an advisor a fee of at least
$250,000.
-
Certain transactions for which the cooperative has contractual protection against disallowance of the tax benefits.
-
Certain transactions resulting in a loss of at least $10 million in any single year or $20 million in any combination of years.
-
Certain transactions resulting in a book-tax difference of more than $10 million on a gross basis.
-
Certain transactions resulting in a tax credit of more than $250,000, if the cooperative held the asset generating the credit
for 45 days or
less.
Penalties.
The cooperative may have to pay a penalty if it is required to disclose a reportable transaction under section 6011 and fails
to properly complete
and file Form 8886. The penalty is $50,000 ($200,000 if the reportable transaction is a listed transaction) for each failure
to file Form 8886 with
its return or for failure to provide a copy of Form 8886 to the Office of Tax Shelter Analysis (OTSA). Other penalties, such
as an accuracy-related
penalty under section 6662A, may also apply. See the Instructions for Form 8886 for details.
Reportable transactions by material advisors.
Until further guidance is issued, material advisors who provide material aid, assistance, or advice with respect to
any reportable transaction,
must use Form 8264, Application for Registration of a Tax Shelter, to disclose reportable transactions in accordance with
interim guidance provided in
Notice 2004-80, 2004-50 I.R.B. 963; Notice 2005-17, 2005-8 I.R.B. 606; and Notice 2005-22, 2005-12 I.R.B. 756.
Transfers to a cooperative controlled by the transferor.
If a person receives stock of a cooperative in exchange for property, and no gain or loss is recognized under section
351, the person (transferor)
and the transferee must each attach to their tax returns the information required by Regulations section 1.351-3.
Dual consolidated losses.
If a domestic cooperative incurs a dual consolidated loss (as defined in Regulations section 1.1503-2(c)(5)), the
cooperative (or consolidated
group) may need to attach an elective relief agreement and/or an annual certification as provided in Temporary Regulations
section 1.1503-2T(g)(2).
Election to reduce basis under section 362(e)(2)(C).
The transferor and transferee in certain section 351 transactions can make a joint election under section 362(e)(2)(C)
to limit the transferor's
basis in the stock received instead of the transferee's basis in the transferred property. The transferor and transferee may
make the election by
attaching the statement as provided in Notice 2005-70, 2005-41 I.R.B. 694, to their tax returns filed by the due date (including
extensions) for the
tax year in which the transaction occurred. Once made, the election is irrevocable. See section 362(e)(2)(C) and Notice 2005-70.
Other forms and statements.
See Pub. 542 for a list of other forms and statements that the cooperative may need to file in addition to the forms
and statements discussed
throughout these instructions.
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