[Congressional Record Volume 141, Number 20 (Wednesday, February 1, 1995)]
[Extensions of Remarks]
[Page E247]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


              THE TAX FAIRNESS FOR AGRICULTURE ACT OF 1995

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                             HON. DAVE CAMP

                              of michigan

                    in the house of representatives

                      Wednesday, February 1, 1995
  Mr. CAMP. Mr. Speaker, I rise today with my colleague, Mr. Payne of 
Virginia, to introduce H.R. 783, the Tax Fairness for Agriculture Act 
of 1995, which clarifies the proper application of present tax law to 
membership payments to tax-exempt agricultural and horticultural 
organizations.
  Agricultural and horticultural organizations are dedicated to the 
improvement of agriculture and agricultural conditions, products, and 
efficiency and have been exempt from the Federal income tax since its 
inception. These organizations are typically composed of first, farmer/
rancher members and second, nonfarmer/rancher or associate members. 
Generally speaking, both classes of members pay the same amounts and 
enjoy most of the same rights and privileges of membership. Both 
classes of members pay the same amounts and enjoy most of the same 
rights and privileges of membership. Both classes of members are also 
typically entitled to purchase various goods and services, including 
insurance. The existence of associate members and the availability of 
various benefits to all members have been common practice among 
agricultural and horticultural associations for many decades.
  Last year, the Internal Revenue Service [IRS] issued technical advice 
memorandum [TAM] 9416002 in connection with an audit of a State Farm 
Bureau. The TAM reversed longstanding IRS practice by asserting that 
the associate members of such organizations were not bona fide and 
their membership payments were taxable access payments to purchase 
insurance. Relying principally on the fact that associate members of 
the Farm Bureau had limited voting and office-holding rights, the IRS 
concluded that Farm Bureau's facts were indistinguishable from two 1991 
court decisions involving unions in which associate members received 
absolutely no benefits other than access to an insurance program.
  Mr. Speaker, the TAM conflicts with the longstanding recognized 
practice of agricultural and horticultural organizations and 
contradicts past IRS guidance and practice. At least two prior IRS 
rulings, technical advice memorandums 8302010 and 8302009, under 
materially the same facts now at issue, hold that associate membership 
payments of agricultural organizations are not taxable. These TAMs 
correctly conclude that membership payments were not taxable because, 
despite certain differences, the associate members received largely the 
same rights and benefits as ``regular'' members, whose membership 
payments are clearly not taxable. The availability of insurance to all 
members, associates included, was judged insufficient to taint the 
membership payments generally.
  Mr. Speaker, although the TAM literally applies only to one State 
Farm Bureau, it is now being applied to other agricultural 
organizations around the country. If the TAM is allowed to stand and is 
extended to other entities, most county and State agricultural 
organizations could face potentially huge deficiencies for what has 
until now been unchallenged and appropriate conduct. These deficiencies 
and the costs of contesting them could jeopardize the continued 
economic viability of many agricultural organizations and, thus, the 
important exempt purposes they serve.
  The legislation we introduce today, would effectively restore the 
historical position taken by the IRS, that the membership payments of 
associate members of agricultural and horticultural organizations are 
not taxable. The legislation has two components. First, agricultural 
organizations that reasonably relied on the prior authorities and 
practice I discussed before would be shielded from unwarranted and 
potentially devastating audits. For this purpose, it is recognized that 
the treatment of associate member payments as tax exempt has been the 
longstanding recognized practice of agricultural and horticultural 
organizations and reliance on that practice was reasonable. Also, the 
legislation would establish a prospective safe harbor for annual 
payments by members of agricultural organizations of $100 or less. 
Thus, regardless of whether an organization charged some of its members 
more than $100 or less were not bona fide members and, therefore, that 
their membership payments were taxable. This will preclude wasteful and 
costly disputes in cases involving relatively nominal membership 
payments.


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