Instructions for Form 1028

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Instructions for Form 1028

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Instructions for Form 1028

Department of the Treasury

Internal Revenue Service

(Rev. September 2006)

Application for Recognition of Exemption Under Section 521 of the Internal

Revenue Code

Section references are to the Internal

Revenue Code unless otherwise noted.

General Instructions

Keep a copy of the completed

application form in your permanent

records.

A. Who May Use This Form

Form 1028 may be used by a farmers’

cooperative to apply for recognition of

exempt status under section 521. A

farmers’ cooperative, as defined in

section 521, is an association of farmers,

fruit growers, or persons with similar

occupations that is organized and

operated on a cooperative basis.

B. Where To File

Send the completed application, all

required information, and Form 8718,

User Fee for Exempt Organization

Determination Letter Request, with the

appropriate user’s fee, to the address

shown in the Instructions to Form 8718.

Soon after we receive the application, you

will be advised of the Internal Revenue

Service’s determination and of the annual

returns that the organization will be

required to file.

C. Power of Attorney

If an agent or attorney will represent the

organization, you must file a power of

attorney, specifically authorizing the

representative to act in person or by

correspondence. Send the power of

attorney with the application when you file

it. Use Form 2848, Power of Attorney and

Declaration of Representative, or Form

8821,Tax Information Authorization, for

this purpose.

D. Attachments

F. User Fees for Exempt

Organization Ruling and

Determination Requests

Every attachment should state that it

relates to Form 1028 and identify the

applicable part and line item number. The

attachments should also show the

organization’s name, address, and

employer identification number (EIN), and

be on 81/2’’ x 11’’ paper.

The Internal Revenue Service is required

to collect a fee from any organization

seeking an IRS determination of its

exempt status as an organization

described in section 521. A fee also

applies to any exempt organization’s

request for a private letter ruling.

In addition to the required documents

and statements, include any additional

information citing court decisions, rulings,

opinions, etc., that may help to speed the

processing of the application. Generally,

attachments in the form of tape

recordings are not accepted unless

accompanied by a transcript.

The nonrefundable fee must be

submitted with the application or ruling

request. Otherwise, the request will be

returned without any action being taken

on it.

E. Annual Return

An organization that is recognized as

exempt from income tax under section

521 must file an annual return on Form

1120-C, U.S. Income Tax Return for

Cooperative Associations. An

organization will not be considered

exempt, even though it operates within

the provisions of sections 521 and 1381

through 1388, unless it files this

application or has previously received a

Make sure the application is complete. Remember to...

1.

2.

3.

4.

5.

6.

7.

ruling recognizing its exemption under

section 521 of the Internal Revenue Code

of 1986 or corresponding provisions of

prior law.

Complete all parts of the application.

Show the employer identification number (EIN):

a. If the organization has one, put it on line 1b.

b. If the organization doesn’t have an EIN, you must apply for one (see the Specific

Instructions for Part I, line 1b).

Enclose financial statements (see the Specific Instructions for Part IV):

a. Current year (must include the period that is within 60 days of the application’s filing

date) and 3 preceding years.

b. Detailed breakdown of receipts and expenditures — no lump sums.

Include a conformed copy of the complete organizing instrument and a copy of the

bylaws.

a. An organizing instrument means:

1) Articles of incorporation

a) Signed by the incorporators, and

b) Signed by an appropriate government official, or

2) Constitution of articles of association (signed).

b. A conformed copy is one that agrees with the original and all amendments to it.

Enclose Form 8718 and appropriate user fee (see General Instruction F).

Have the application signed by one of the following:

a. An officer,

b. A director, or

c. A person having power of attorney (submit the power of attorney too).

Give the name and phone number of someone we can call during normal business

hours if we need additional information (Part I, line 3).

Cat. No. 17139Y

The fees are shown in Form 8718,

which is used to transmit both the

appropriate fee and the application or

ruling request. User fees are subject to

change. Check our website at www.irs.

gov and type “User Fee” in the keyword

box, or call Customer Account Services at

1-877-829-5500 for current information.

Specific Instructions

Part I—Identification

Line 1a — Organization’s Name. Enter

the organization’s name as it appears in

its organizing documents, including

amendments. If the organization will be

operated under another name, show that

name in parentheses.

Line 1b — Employer Identification

Number (EIN). Enter the organization’s

EIN. If the organization does not have an

EIN, it must apply for one. An EIN can be

applied for:

• Online — Click on the EIN link at www.

irs.gov/businesses/small. The EIN is

issued immediately once the application

information is validated.

• By telephone at 1-800-829-4933 from

8:00 a.m. to 8:00 p.m. in the local time

zone.

• By mailing or faxing Form SS-4,

Application for Employer Identification

Number.

If the organization has not received its

EIN by the time the return is due, enter

“Applied for” in the space for the EIN. For

more details, see Pub. 583.

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Instructions for Form 1028

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Part II—Type of Entity and

Organizational Documents

One of the basic requirements for

exemption is that the organization be

“organized” for one or more exempt

purposes. If the organization does not

have an organizing instrument, it will not

qualify for exempt status.

None of the documents submitted in

support of this application, including

organizational documents, will be

returned.

Instead of the originals, submit

“conformed” copies of these documents.

A “conformed” copy is one that agrees

with the original document and all of its

amendments. If the copies are not signed,

they must be accompanied by a

declaration signed by an officer

authorized to sign for the organization,

certifying that they are complete and

accurate copies of the original

documents.

Chemically or photographically

reproduced copies of articles of

incorporation showing the certification of

an appropriate government official need

not be accompanied by a declaration.

Part III—Activities and

Operational Information

Lines 17 through 19. The information

requested on lines 17 through 19 must be

completed for the current year and each

of the 3 immediately preceding years (or

for the time the organization has existed if

less than 4 years). The requested

information for the current year must

cover the period beginning on the first day

of your organization’s established annual

accounting period and ending on any day

which is within 60 days of the date of the

application. If the date of the application is

less than 60 days after the first day of the

current accounting period, no information

is required for the current year.

Requested information is required for the

3 preceding years regardless of the

current year requirement. Please note

that if no information is required for the

current year, the preceding year’s

information period can end on any day

which is within 60 days of the date of the

application.

Definitions. The term “producer” means

an individual or corporation engaged in

farming as a business receiving income

based on farm production rather than

fixed compensation. For example, a

corporation 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.

“Current and active” producers are

patrons of a cooperative who market

more than 50% of their products or

purchase more than 50% of their supplies

and equipment through the cooperative

during the cooperative’s tax year.

Part IV—Financial Data

The statement of receipts and

expenditures and the balance sheets

must be completed for the current year

and each of the 3 immediately preceding

years (or for the time the organization has

existed if less than 4 years). We may

request financial data for more than 4

years if circumstances warrant. All

financial information for the current year

must cover the period beginning on the

first day of your organization’s established

annual accounting period and ending on

any day which is within 60 days of the

date of the application. If the date of the

application is less than 60 days after the

first day of the current accounting period,

no financial information is required for the

current year. Financial information is

required for the 3 preceding years

regardless of the current year

requirements. Please note that if no

financial information is required for the

current year, the preceding year’s

financial information can end on any day

which is within 60 days of the date of the

application.

You may reproduce page 4 of the form

and complete the financial data for each

required year. Attach the financial data for

all required years to the application.

The statements should be consistent

with the method of accounting the

organization uses in maintaining its books

and records.

Line 3b — Cost of Goods Sold. Include

per-unit retain allocations paid to patrons

in money, qualified written notices of

allocation, or other property (except

nonqualified per-unit retain certificates)

and the amount paid to patrons in money

or other property (except per-unit retain

certificates) to redeem nonqualified

per-unit retain certificates. (See sections

1382 and 1388.)

Line 15 — Other Expenditures. In the

attached schedule for other expenditures,

include a breakdown for nonpatronage

distributions paid as dividends on capital

stock and nonpatronage distributions

made on a patronage basis. This

breakdown should include only

distributions of earnings derived from

business done for the United States

Government or any of its agencies or

income from sources other than

patronage, but only to the extent such

amounts are paid in the same manner

provided for patronage dividends below.

The term “income from sources other

than patronage” means incidental income

derived from sources not directly related

to the marketing, purchasing, or service

activities of the cooperative association.

For example, income derived from the

-2-

lease of premises, from investment in

securities, or from the sale or exchange of

capital assets constitutes income from

sources other than patronage.

Also include in the schedule the total

amount of per-unit retain allocations other

than those reflected in cost of sales on

line 3b and the total amount of written

notices of allocation other than those

reflected on line 16. (See sections 1382

and 1388.)

Line 16 — Patronage Dividends. In the

attached schedule, show the amount of

patronage dividends paid to patrons in

money, qualified written notices of

allocation, or other property (except

non-qualified written notices of allocation)

and the amount paid to patrons in money

or other property (except written notices

of allocation) to redeem nonqualified

written notices of allocation. (See sections

1382 and 1388 and the related

regulations.)

Paperwork Reduction Act Notice. We

ask for the information on this form to

carry out the Internal Revenue laws of the

United States. If you want your

organization to be recognized as

tax-exempt by the IRS, you are required

to give us this information. We need it to

determine whether the organization

meets the legal requirements for

tax-exempt status.

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 . . . . . . . . .

Learning about the law or

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

Preparing the form . . . . . . .

Copying, assembling, and

sending the form to the IRS

44 hr., 14 min.

1 hr., 44 min.

4 hr., 23 min.

32 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 Internal Revenue Service,

Tax Products Coordinating Committee,

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

Ave. NW, IR-6406, Washington, DC

20224. Do not send the tax form to this

address. Instead, see Where To File on

page 1.