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;

This same provision was included in the Revenue Act of 1928,26 and in the Revenue Act of 1932.27

The Revenue Act of 1934 28 added the following words to this provision: "Business done for the United States or any of its agencies shall be disregarded in determining the right to exemption under this paragraph;" and with this addition the language of the 1926 statute appears in the Revenue Acts of 1936,29 1938,30 and 1939.31

It should be observed that the right to exemption from Federal income tax has usually carried with it a right to exemption from the documentary stamp tax on stocks, bonds, and certificates of indebtedness issued by farmers' cooperative associations 32 and likewise exemption from the payment of capital stock taxes.33

In 1926, the following provision was added to the statute under which dealers in leaf tobacco were required to register and render various reports and accounts to the Collector of Internal Revenue of their districts regarding the sale of leaf tobacco:

* * * a farmer or grower of tobacco or a tobacco growers' cooperative association shall not be regarded as a dealer in leaf tobacco in respect to the leaf tobacco produced by him or handled by such association: Provided, That such cooperative associations shall be required to keep available records of all purchases and sales of tobacco, such records to be open to inspection by the agents of the Government. As used in this subsection the term "tobacco growers' cooperative association" means an association of farmers or growers of tobacco organized and operated as sales agent for the purpose of marketing the tobacco produced by its members and turning back to them the proceeds of sales, less the necessary selling expenses, on the basis of the quantity and quality of tobacco furnished by them.34

In 1935 the Social Security Act, providing Federal old-age and survivors' insurance benefits and unemployment compensation and levying taxes therefor on employers and employees was enacted.35

By an amendment enacted in 1939 36 certain exceptions were made under which agricultural cooperative associations may qualify for partial or complete exemption from the payment of such taxes.

Statutes Providing Credit Facilities

87

The War Finance Corporation Act was enacted in 1918. In an amendment of 1921,38 there was the following reference to cooperative associations:

SEC. 24. Whenever in the opinion of the Board of Directors of the Corporation the public interest may require it, the Corporation shall be authorized and empowered to make advances upon such terms not inconsistent with this Act as it may determine to any bank, banker, or trust company in the United States or to any cooperative association of producers in the United States which may have made advances for agricultural purposes, including the breeding, raising, fattening, and marketing of live stock, or may have discounted or rediscounted notes, drafts, bills of exchange or other negotiable instruments issued for such purposes. Such advance or advances may be made upon promissory note or notes, or other instrument or instruments, in such form as to impose on the borrowing bank, banker, trust company, or cooperative association a primary and unconditional obligation to repay the advance at maturity with interest as stipulated therein, and shall be fully and adequately secured in each instance by indorsement, guaranty, pledge, or otherwise. Such advances may be made for a period not exceeding one year and the Corporation may from time to time extend the time of payment of any such advance through renewals, substitution of new obligations or otherwise, but the time for the payment of any such advance shall not be extended beyond three years from the date upon which such advance was originally made. The aggregate of advances made to any bank, banker, trust company, cr cooperative association shall not exceed the amount remaining unpaid of the advances made by such bank, banker, trust company, or cooperative association for purposes herein described.

39

The Federal Reserve Act, as originally enacted in 1913 in section 13 authorized any Federal reserve bank, subject to certain conditions, to discount "notes, drafts, and bills of exchange issued or drawn for agricultural *

* *

purposes."

1

In 1923 40 the provisions with reference to agricultural paper were amended, and there was added a further amendment (section 13a) which provided that:

Notes, drafts, bills of exchange or acceptances issued or drawn by cooperative marketing associations composed of producers of agricultural products shall be deemed to have been issued or drawn for an agricultural purpose, within the meaning of this section, if the proceeds thereof have been or are to be advanced

36 53 Stat. 1373, 42 U. S. C. A. 409.

37 40 Stat. 506, 12 U. S. C. A. 82.

38 42 Stat. 181, 182, 15 U. S. C. A. 348.

39 38 Stat. 251, 12 U. S. C. A. 1.

40 42 Stat. 1479, 1480, 12 U. S. C. A. 351.

by such association to any members thereof for an agricultural purpose, or have been or are to be used by such association in making payments to any meinbers thereof on account of agricultural products delivered by such members to the association, or if such proceeds have been or are to be used by such association to meet expenditures incurred or to be incurred by the association in connection with the grading, processing, packing, preparation for market or marketing of any agricultural product handled by such association for any of its members: Provided, That the express enumeration in this paragraph of certain classes of paper of cooperative marketing associations as eligible for rediscount shall not be construed as rendering ineligible any other class of paper of such associations which is now eligible for rediscount.

Congress also enacted in 1923 a statute providing for the incorporation of twelve institutions to be known as the "Federal Intermediate Credit Banks." 41 These banks were authorized to make loans, subject to certain conditions and restrictions, on staple agricultural products and on livestock, to cooperative associations.

The Agricultural Marketing Act was passed in 1929.42 It created the Federal Farm Board and authorized that board to make loans to cooperative associations of farmers. Section 1 of that act provides:

That it is hereby declared to be the policy of Congress to promote the effective merchandising of agricultural commodities in interstate and foreign commerce, so that the industry of agriculture will be placed on a basis of economic equality with other industries, and to that end to protect, control, and stabilize the currents of interstate and foreign commerce in the marketing of agricultural commodities and their food products

* **

(3) by encouraging the organization of producers into effective associations or corporations under their own control for greater unity of effort in marketing and by promoting the establishment and financing of a farm marketing system of producer-owned and producer-controlled cooperative associations and other agencies.

The act also authorized the Federal Farm Board to encourage "the organization, improvement in methods, and development of effective cooperative associations."

The Farm Credit Act of 1933 43 authorized the organization of 12 regional banks for cooperatives and the Central Bank for Cooperatives, for the purpose of making loans to cooperative associations meeting the definition of such associations, as contained in Section 15 (a) of the Agricultural Marketing Act, as amended, which definition" reads as follows:

As used in this act, the term "cooperative association" means any association in which farmers act together in processing, preparing for market, handling, and/or marketing the farm products of persons so engaged, and also means any association in which farmers act together in purchasing, testing, grading,

processing, distributing, and/or furnishing farm supplies and/or farm business services: Provided, however, That such associations are operated for the mutual benefit of the members thereof as such producers or purchasers and conform to one or both of the following requirements:

First. That no member of the association is allowed more than one vote because of the amount of stock or membership capital he may own therein; and

Second. That the association does not pay dividends on stock or membership capital in excess of 8 per centum per annum.

And in any case to the following:

Third. That the association shall not deal in farm products, farm supplies, and farm business services with or for nonmembers in an amount greater in value than the total amount of such business transacted by it with or for members. All business transacted by any cooperative association for or on behalf of the United States or any agency or instrumentality thereof shall be disregarded in determining the volume of member and nonmember business transacted by such association.

The Rural Electrification Act of 1936 45 contains the following reference to cooperative associations:

The Administrator is authorized and empowered, from the sums herein before authorized, to make loans to persons, corporations, States, Territories, and subdivisions and agencies thereof, municipalities, peoples utility districts and cooperative nonprofit, or limited-dividend associations organized under the laws of any State or Territory of the United States, for the purpose of financing the construction and operation of generating plants, electric transmission and distribution lines or systems for the furnishing of electric energy to persons in rural areas who are not receiving central station service: Provided, however, That the Administrator, in making such loans, shall give preference to States, Territories, and subdivisions and agencies thereof, municipalities, peoples' utility districts, and cooperative, nonprofit, or limited dividend associations, the projects of which comply with the requirements of this Act.

*

Antitrust and Related Statutes

The Clayton Act was enacted in 1914. Section 6 of that act purported to give agricultural associations, which met certain conditions, immunity under the antitrust laws.17

The appropriations acts for the Department of Justice beginning with the fiscal year ending June 30, 1914,48 and up to and including the appropriation for the fiscal year ending June 30, 1928,49 contained the following provision relative to cooperative associations: Enforcement of antitrust laws. For the enforcement of antitrust laws * provided further, that no part of this appropriation shall

549 Stat. 1363, 1365, 7 U. S. C. A. 901, 904.

46 38 Stat. 730, 15 U. S. C. A. 12.

"See p. 211 for a discussion of sec. 6 of the Clayton Act.

48 38 Stat. 53.

49 44 Stat. 1194.

be expended for the prosecution of producers of farm products and associa tions of farmers who cooperate and organize in an effort to and for the purpose to obtain and maintain a fair and reasonable price for their products.

The Capper-Volstead Act became a law in 1922.50 The object of this law was to permit cooperative associations of farmers, corporate or otherwise, and formed with or without capital stock, that met the conditions prescribed therein, to organize and operate in a normal manner without rendering themselves liable under the antitrust statutes as combinations in restraint of trade.51

The Robinson-Patman Act,52 enacted in 1936, relating to price discrimination between purchasers, provides in section 4 thereof that:

Nothing in this Act shall prevent a cooperative association from returning to its members, producers, or consumers the whole, or any part of, the net earnings or surplus resulting from its trading operations, in proportion to their purchases or sales from, to, or through the association.

Regulatory Statutes

Section 26 of a statute enacted in 1917 entitled, "An Act To provide further for the national security and defense by encouraging the production, conserving the supply, and controlling the distribution of food products and fuel" 58 prohibited the hoarding of food and contained provisos reading as follows:

Provided, That any storing or holding by any farmer, gardener, or other person of the products of any farm, garden, or other land cultivated by him shall not be deemed to be a storing or holding within the meaning of this Act: Provided further, That farmers and fruit growers, cooperative and other exchanges, or societies of a similar character shall not be included within the provisions of this section."

The Packers and Stockyards Act,55 was enacted in 1921. By this act Congress gave the Secretary of Agriculture a certain degree of regulatory authority over stockyards and those doing business therein. Section 306 (f) of that act provides that persons carrying on the

50 42 Stat. 388, 7 U. S. C. A. 291.

51 For construction of the Capper-Volstead Act, see United States v. Borden Company, 308 U. S. 188, 60 S. Ct. 182, 84 L. Ed. 181, reversing 28 F. Supp. 177. See also discussion of the Capper-Volstead Act on p. 213.

52 49 Stat. 1526, 1528, 15 U. S. C. A. 13.

53

54

40 Stat. 276, 286.

This was a war measure and sec. 24 (p. 283) provided: "That the provisions of this Act shall cease to be in effect when the existing state of war between the United States and Germany shall have terminated, and the fact and date of such termination shall be ascertained and proclaimed by the President;"

55 42 Stat. 159, 165, 7 U. S. C. A. 181. The Supreme Court held this act constitutional in the case of Stafford v. Wallace, 258 U. S. 495, 42 S. Ct. 397, 66 L. Ed. 735, 23 A. L. R. 229.