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IRS denies tax-exempt status for “food co-op”

IRS denies tax-exempt status for “food co-op”

The IRS today publicly released a final adverse determination letter in which it was concluded that an entity functioning like a “food co-op” did not qualify for tax-exempt status pursuant to section 521, as available for eligible cooperatives.


Related content

Read LTR 201835010 [PDF 1.18 MB] (released August 31, 2018, and dated June 5, 2018). 


An entity was formed in part to provide local food producers and consumers with a year-round market for buying and selling goods and services. The entity requested exemption from federal income tax as a cooperative.

In issuing a final adverse determination, the IRS noted among the following items:

  • The entity did not market its members' products in a cooperative manner.
  • The entity did not cooperatively purchase supplies or equipment for the members. 
  • The members of the entity were "largely consumers" and not farmers "or the like." 
  • The producer members were to sell non-crop items, and surplus funds were allowed to be held. 
  • There was no distribution of profits to the members cooperatively.

Based on these and other factors, the IRS concluded the entity was not a farmers' cooperative pursuant to the rules under section 521.


For more information, contact KPMG’s National Director of Cooperative Tax Services:

David Antoni | +1 (267) 256-1627 |


Or Associate National Director of KPMG’s Cooperative Tax Services:

Brett Huston | +1 (916) 554-1654 |

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