Alabama Administrative Code
Title 810 - ALABAMA DEPARTMENT OF REVENUE
Chapter 810-3-32 - EXEMPTION OF CERTAIN ORGANIZATIONS, ASSOCIATIONS, ETC
Section 810-3-32-.01 - Exempt Organizations
Universal Citation: AL Admin Code R 810-3-32-.01
Current through Register Vol. 42, No. 11, August 30, 2024
(1) The following organizations are exempt from taxation as provided by § 40-18-32:
(a) Labor, agricultural or horticultural
organizations. In order to be exempt, these organizations must have no net
earnings inuring to the benefit of any member, and have as their object the
betterment of the conditions of those engaged in such pursuits, the improvement
of the grade of their products, and the development of a higher degree of
efficiency in their respective organizations. These organizations, otherwise
exempt, are taxable on their unrelated business taxable income.
(b) Fraternal beneficiary societies, orders,
or associations. A fraternal beneficiary society is exempt from tax only if
operated under the "lodge system" or for the exclusive benefit of the members
so operating. "Operating under the lodge system" means carrying on its
activities under a form of organization that comprises local branches,
chartered by a parent organization and largely self-governing, called lodges,
chapters, or the like. In order to be exempt it is also necessary that the
society have an established system for the payment to its members or their
dependents of life, sick, accident, or other benefits.
1. To be exempt a fraternal beneficiary
society must be operated in furtherance of its fraternal purposes and may not
engage in business activities of a kind carried on for profit, except that the
carrying on of activities which raise revenues from members and their guests,
will not deprive the society of its exemption.
(c) Business league, chambers of commerce or
boards of trade, not organized for profit, and no part of the net earnings of
which inures to the benefit of any private stockholder or individual. A
business league is an association of persons having some common business
interest, the purpose of which is to promote such common interest and not to
engage in a regular business of a kind ordinarily carried on for profit. It is
an organization of the same general class as a chamber of commerce or board of
trade. Thus, its activities should be directed to the improvement of business
conditions of one or more lines of business as distinguished from the
performance of particular services for individual persons. These organizations,
otherwise exempt, are taxable upon their unrelated business taxable
income.
(d) A civic league or
organization may be exempt as an organization if it is not organized or
operated for profit, and it is operated exclusively for the promotion of social
welfare. An organization is operated exclusively for the promotion of social
welfare if it is primarily engaged in promoting in some way the common good and
general welfare of the people of the community.
1. Clubs organized and operated exclusively
for pleasure, recreation and other nonprofitable purposes, no part of the
earnings of which inures to the benefit of any private stockholder or members.
In general, this exemption extends to social and recreation clubs which are
supported solely by membership fees, dues, and assessments. However, a club
otherwise entitled to exemption will not be disqualified because it raises
revenue from members through the use of club facilities or in connection with
club activities. A club which engages in business, such as making its social
and recreational facilities available to the general public or by selling real
estate (other than an incidental sale of property), timber, or other products,
is not exempt.
(e)
Farmers, and other mutual hail, cyclone or fire insurance companies, mutual
ditch or irrigation companies, or like organizations of a purely local
character, the income of which consists solely of assessments, dues and fees
collected from members for the sole purpose of meeting expenses. An
organization of a purely local character is one whose business activities are
confined to a particular community, place, or district, irrespective, however,
of political subdivisions. If the activities of an organization are limited
only by the borders of a state, it cannot be considered to be purely local in
character.
(f) Cooperative
associations engaged in the marketing of farm products for farmers, fruit
growers, livestock growers, dairymen, etc., and turning back to the producers
the proceeds of the sales of their products less the necessary operating
expenses, on the basis of either the quantity or the value of the products
furnished by them, are exempt from income tax. If the proceeds of the business
are distributed in any other way than on such a proportionate basis, the
association does not meet the requirements of the Code and is not exempt. In
order to show its cooperative nature and to establish compliance with the
requirement of the Code that the proceeds of sales, less necessary expenses, be
turned back to all producers on the basis of either the quantity or the value
of the products furnished by then, it is necessary for such an association to
keep permanent records of the business done both with members and
nonmembers.
(g) Federal land banks
and national farm loan associations as provided in §26 of the Act of
Congress approved July 17, 1916, entitled "An act to provide for agricultural
development, to create standard forms of investment based upon farm mortgages,
to equalize rates of interest upon farm loans, to furnish a market for United
States bonds, to create government depositories and financial agent for the
United States, and for other purposes."
(h) All national banks and national banking
associations and all corporations engaged in the business of banking and of
conducting a financial business employing moneyed capital coming into
competition with the business of national banks during and for the periods
during which such national banks and corporations are subject to an excise tax
imposed by this state on or with respect to their respective incomes.
(i) Building and loan associations,
substantially all the business of which is confined to making loans to
members.
(j) Insurance companies
upon which the statutes of Alabama impose a tax upon their premium
income.
(k) Code §
40-18-25 and
regulations thereunder, provide that certain trusts are exempt from taxation
under this chapter.
Authors: Fred H. Pritchard, John H. Burgess
Statutory Authority: Code of Ala. 1975, § 40-18-32.
Disclaimer: These regulations may not be the most recent version. Alabama may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
This site is protected by reCAPTCHA and the Google
Privacy Policy and
Terms of Service apply.