73d C ONGRESS . SESS . II. CH. 277 . MAY 10, 1934 . (9) Clubs organized and operated exclusively for pleasure, recreation, and other nonprofitable purposes, no part of the net earnings of which inures to the benefit of any private shareholder ; (10) Benevolent life insurance associations of a purely local character, mutual ditch or irrigation companies, mutual or cooper- ative telephone companies, or like organizations ; but only if 85 per centum or more of the income consists of amounts collected from me mbers for th e sole purpo se of meeting losse s and expens es ; (11) Farmers' or other mutual hail, cyclone, casualty, or fire insurance companies or associations (including interinsurers and reciprocal underwriters) the income of which is used or held for the purpose of paying losses or expenses ; (12) Farmers', fruit growers', or like associations organized and operated on a cooperative basis (a) for the purpose of mar- keting the products of members or other producers, and turning back to them the proceeds of sales, less the necessary marketing expenses, on the basis of either the quantity or the value of the products furnished by them, or (b) for the purpose of purchasing supplies and equipment for the use of members or other persons, and turning over such supplies and equipment to them at actual cost, plus necessary expenses . Exemption shall not be denied any such association because it has capital stock, if the dividend rate of such stock is fixed at not to exceed the legal rate of interest in the State of incorporation or 8 per centum per annum, whichever is grea ter, o n the value of the consi deratio n for which the st ock was issued, and if substantially all such stock (other than non- voting preferred stock, the owners of which are not entitled or permitted to participate, directly or indirectly, in the profits of the association, upon dissolution or otherwise, beyond the fixed dividends) is owned by producers who market their products or purch ase t heir supp lies and e quip ment throu gh th e as socia tion ; nor shall exemption be denied any such association because there is accumulated and maintained by it a reserve required by State law or a reasonable reserve for any necessary purpose . Such an association may market the products of nonmembers in an amount the value of which does not exceed the value of the products marketed for members, and may purchase supplies and equipment for nonmembers in an amount the value of which does not exceed the value of the supplies and equipment purchased for members, provided the value of the purchases made for persons who are neither members nor producers does not exceed 15 per centum of the value of all its purchases . Business done for the United States or any of it s agen cies s hall b e disre garded in de termin ing the right to exemption under this paragraph ; (133 Corporations organized b an asso ciation exempt under the provisions of paragraph (1 2), or members thereof, for the purpose of fi nancin g the ordina ry cro p opera tions of suc h memb ers or other producers, and operated in conjunction with such associa- tion . Exemption shall not be denied any such corporation because it has capital stock, if the dividend rate of such stock is fixed at not to exceed the legal rate of interest in the State of incorpora- tion or 8 per centum per annum, whichever is greater, on the value of the consideration for which the stock was issued, and if substantially all such stock (other than nonvoting preferred stock, the owners of which are not entitled or permitted to partici- pate, dir ectly or indirectl y, in the profits of the co rporation , upon diss oluti on or othe rwis e, be yond the fixed divi dend s) is owne d by such association, or members thereof ; nor shall exemption be 701 INCOME TAX . RATES OF TAX- Contd . Pleasure, etc ., clubs . Local life ins urance, mut ual ditch, et c- companies . Farmers' mutual casualty insurance companies . Farmers' cooperative associations . Marke ting pro ducts of nonmembers and making purchases for . Limit . Fede ral b usin ess d is- regarded . Exempt corporations financing crop opera- tions of membe rs .
