Skip to Main Content
State of California Franchise Tax Board

LEGAL RULING NO. 389

CALIFORNIA FRANCHISE TAX BOARD
Legal Ruling No. 389

March 13, 1975

FRANCHISE -- FARMERS' COOPERATIVE ASSOCIATIONS -- INCOME DEDUCTIBLE -- A FARMERS' COOPERATIVE ASSOCIATION MAY DEDUCT FROM ITS GROSS INCOME ALL INCOME, REGARDLESS OF SOURCE, WHICH IS PROPERLY ALLOCATED

Section 24404 of the Bank and Corporation Tax Law provides to qualified farmers' cooperative associations a special deduction for all income resulting from or arising out of certain business activities, whether or not derived from patronage, allocated to members during the income year.

Advice has been requested whether farmers' cooperative associations may deduct allocated income accruing from activities other than the marketing, purchasing and producing activities described in Section 24404(a) and (b).

The legislative history of the second paragraph of Section 24404, which was enacted in 1959 (Senate Bill No. 886, Chap. 923), suggests that the intent was to tax all income, including income not derived from cooperative activities, of a farmers' cooperative association once, either before allocation at the corporate level, or after allocation when in the hands of the members.

For several years the Franchise Tax Board has acknowledged the amendment to Section 24404 by permitting farmers' cooperative associations to deduct all properly allocated income.

The courts have given "great weight" to administrative construction of statutes, and "will not depart from such construction unless it is clearly erroneous or unauthorized." (Handerly v. Franchise Tax Board, 26 Cal.App. 3d 970,982 (1972); Whittell v. Franchise Tax Board, 231 Cal.App. 2d 278, 286 (1964).)

It cannot be said that the prevailing administrative construction of Section 24404 is clearly erroneous or unauthorized; accordingly, the practice of allowing deductions to farmers' cooperative association based upon the allocation, rather than the source, of the income is affirmed.

Help us improve our website

Don't include social security numbers or other personal/confidential information.



Thank you for your help.

If you need assistance, contact us.

Oops! Something went wrong.

We appreciate your feedback. Please try again later

Chat with an FTB Representative
 

You are leaving ftb.ca.gov

We do not control the destination site and cannot accept any responsibility for its contents, links, or offers. Review the site's security and confidentiality statements before using the site.

If you have any issues or technical problems, contact that site for assistance.

Ahora está saliendo de ftb.ca.gov

Nosotros no controlamos el sitio web al que se destina y no podemos aceptar ninguna responsabilidad por su contenido, enlaces, u ofertas. Revise las declaraciones de seguridad y confidencialidad del sitio antes de usar el sitio. Si tiene algún problema en general o técnico, comuníquese con ese sitio para obtener asistencia.

Si tiene algún problema en general o técnico, comuníquese con ese sitio para obtener asistencia.