What is Form 1028?
Form 1028, Application for Recognition of Exemption Under Section 521 of the Internal Revenue Code, is an IRS form used by a farmers’ cooperative in applying for recognition to exempt its status under Section 521 of the Internal Revenue Code.
According to the Internal Revenue Code, a farmers’ cooperative is an association of farmers, fruit growers, or persons with the same occupations organized and operated on a cooperative basis.
You may download a PDF copy of the 1028 form on the IRS website. But you may electronically fill it out on PDFRun for your convenience.
How to fill out Form 1028?
Provide the necessary information in filling out Form 1028. Read the instructions carefully, and make sure that all information you entered is true, accurate, and correct.
Part I - Identification
Enter the full name of the organization.
Enter the employer identification number.
Enter the number, street, and room or suite number. If the mail couldn’t be delivered to the street address, enter the PO box number.
Enter the city or town, county, state, and ZIP code.
Enter the name and telephone number of the person to be contacted during business hours. Make sure to include the area code.
Enter the date the organization was incorporated or formed.
Enter the month the annual accounting period ends.
Mark “Yes” to determine if the organization has filed federal income tax returns. Otherwise, mark “No.”
If you marked “Yes” on item 6a, enter the form numbers, years film, and the Internal Revenue office where the federal income tax returns were filed.
Part II - Type of Entity and Organizational Documents
Check the applicable box to determine the type of entity, and attach a conformed copy of the organizing and operations documents listed. You may select:
- Corporation - Articles of Incorporation, bylaws
- Other - Constitution or Articles of Association, bylaws
Part III - Activities and Operational Information
There are three columns in this portion, namely: Shares, Aluntm, and Rate of Dividend. Enter the appropriate amounts on the required columns.
Enter the number of shares of each class of capital stock currently outstanding, if any, the value of the consideration for which issued, and the rate of dividend paid:
- A - Preferred stock (voting)
- B - preferred stock (nonvoting)
- C - Common stock (voting)
- D - Common Stock (nonvoting)
Enter the number of shares of capital stock (other than nonvoting preferred) on the “Rate of Dividend” column owned by the following:
- A - Producers
- B - Nonproducers
- C - Current and active producers
- D - Total number of shares
- E - Percentage owned by current and active producers
To get the results of Item 2D, add Items 2A and 2B. For Item 2E, divide Item 2C by Item 2D.
Enter what provision is made for retiring the voting stock held by a nonproducer.
Enter the description of who is accorded voting rights in the cooperative and how many votes one person may have. If a person may be entitled to more than one vote, explain in detail how voting rights are acquired.
Enter the legal rate of interest in the state where the association is located.
This portion states that under you are declaring that you are authorized to sign this application on behalf of the organization, and you examined that the information you entered in this application is true, correct, and complete. Otherwise, you will be penalized for perjury.
Affix your signature.
Title or authority of signer
Enter your title or authority.
Enter the date you signed the form.
Enter the explanation of whether the owners, upon dissolution or liquidation, may participate in the profits of the association beyond fixed dividends, if the association issues any nonvoting preferred stock.
Mark “Yes” to determine if the state law requires the accumulation and maintenance of reserves. Otherwise, mark “No.”
If you marked “Yes” on 7a, enter the name and purposes of the reserves and enter the amount of each.
Mark “Yes” to determine if the association maintains or plans to maintain any reserve or reserves other than those required by the state law. Otherwise, mark “No.”
If you marked “Yes” on Item 8a, enter the names and purposes of the reserves and enter the amount of each.
Mark “Yes” to determine if the association deals or plans to deal with both members and nonmembers. Otherwise, mark “No.”
Mark “Yes” to determine if the association pays or plans to pay patronage dividends. Otherwise, mark “No.”
If you marked “Yes” on Item 10a, mark “Yes” to determine if they paid or will be paid to all patrons, both member and nonmember, on the same basis. Otherwise, mark “No.”
Mark “Yes” to determine if the allocation patronage dividends are based on an obligation in existence before the cooperative received the amounts allocated. Otherwise, mark “No.”
If you marked “Yes” on Item 11a, mark the appropriate box to determine the type of obligation. You may select:
- Organizing document
If you marked “Organizing document,” specify what type of organizing document it is.
Enter the explanation of all of the activities in which the association is or will be engaged.
Enter the explanation of how the distribution is or will be made of the proceeds marketed for members and nonmembers. If the organization operates on a basis of allocated units, enter also the explanation of how losses are or will be treated.
Enter the explanation of how the association charges for supplies and equipment bought for members and nonmembers.
Enter the explanation of the requirements for membership in the association.
Federated cooperatives should answer this item.
Mark “Yes” to determine if all association’s member cooperatives are exempted under Section 521. Otherwise, mark “No.”
If you marked “No” on Item 16a, mark “Yes” to determine if the nonexempt member cooperative has the same annual accounting period as the association. Otherwise, mark “No.”
If you marked “No” on 16b, check the appropriate box to determine the method the association used or will use, to provide a common or comparable unit of time for analyzing and evaluating its operations and those of its members. You may select:
- Method 1 - The association uses the operations of members for those months that correspond to the months that make up its tax year.
- Method 2 - The association uses the tax years of members that end within its tax year.
- Method other than 1 or 2 above
If you checked “Method other than 1 or 2 above,” explain the type of method the association uses.
Take note that the methods listed do not apply to the filing of returns or how operating results are reported by a federated cooperative and its members.
Enter the value of agricultural products marketed or handle for the following:
- Actually produced by members
- Not actually produced by members but marketed by them through the association
- Actually produced by nonmembers
- Not actually produced by nonmembers but marketed by the through the association
- Nonproducers (purchased from nonproducers for marketing by the association)
Enter the value of supplies and equipment purchased for or sold to the following:
- Members who were producers
- Nonmembers who were producers
- Members and nonmembers who were not producers
Enter the amount of business done with the United States Government or any of its agencies.
For items 17 to 19, there are four columns, namely:
- Current tax year
- 3 prior tax years
- (b) From and To
- (c) From and To
- (d) From and To
Enter the appropriate amounts in the respective columns.
Mark “Yes” to determine if the association plans to do business with the United States Government or any of its agencies in the future. Otherwise, mark “No.”
Mark “Yes” to determine if all of the net earnings (after payment of dividends, if any, on capital stock), for the years shown on Items 17 to 19 are distributed as patronage dividends. Otherwise, mark “No.”
If you marked 21b “No,” mark “Yes” to determine if there were undistributed net earnings apportioned on the records to all patrons on a patronage basis. Otherwise, mark “No.”
Mark “Yes” to determine if the organization operated in a manner consistent with the information given since the date formed. Otherwise, mark “No.”
If you marked 22b “No,” enter the changes that have occurred and the dates of the changes.
Part IV - Financial Data
Statement of Receipts and Expenditures
Enter the period ending for the association’s statement of receipts and expenditures.
Enter the gross dues and assessments from members.
Enter the gross dues and assessments from affiliated organizations.
Enter the gross amount derived from activities related to the organization’s exempt purpose.
Enter the less cost of goods sold.
Enter the gross amount from other business activities.
Enter the less cost of goods sold.
Enter the gross amount received from the sale of assets, excluding inventory items.
Enter the less cost or other basis and sales expense of assets sold.
Enter the interest, dividends, rents, and loyalties.
Enter other receipts.
Enter the total receipts by adding Items 1 to 7.
Entre the compensation of officers, directors, and trustees.
Enter other salaries and wages.
Enter the interest.
Enter the rent.
Enter the depreciation and depletion.
Enter the dues and assessments to affiliated organizations.
Enter other expenditures.
Enter patronage dividends.
Enter the total expenditures by adding items 9 to 16.
Enter the excess of receipts over expenditures.
Enter the beginning date and ending dates on the right column. Make sure to enter the amounts in both columns.
Enter the amount of cash.
Enter the trade notes and accounts receivable.
Enter the inventories.
Enter the investments.
Enter other current assets.
Enter depreciable and depletable assets.
Enter land (net of any amortization).
Enter other assets.
Enter the total assets.
Liabilities and Capital
Enter accounts payable.
Enter mortgages, notes, and bonds payable in less than one year.
Enter other current liabilities.
Enter mortgages, notes, bonds payable in one year or more.
Enter other liabilities.
Enter patronage dividends allocated in non-cash form, other than capital stock and interest-bearing obligations.
Enter per-unit retains allocated in non-cash form.
Enter the capital stock in numbers and end of the year.
From Items 35a to 35d, there are three more columns, namely: number of shareholders, number of shares issued for money, and issued as patronage benefits. Enter the appropriate amounts in the respective columns.
Enter the voting preferred stock.
Enter the nonvoting preferred stock.
Enter the voting common stock.
Enter the nonvoting common stock.
Enter the paid-in capital or capital surplus.
Enter the retained earnings.
Enter the less costs of treasury stock.
Enter the total liabilities and capital.
How to file Form 1028?
File the completed Form 1028 IRS, along with all required information and Form 8718, User Fee for Exempt Organization Determination Letter Request, to the address indicated in the Instructions of Form 8718.