Rev. Proc. 62-36

The following guidelines apply to cooperative organizations subject to the provisions of subchapter T, chapter 1 of the Internal Revenue Code of 1954, as added by section 17 of the Revenue Act of 1962, Public Law 87-834, approved October 16, 1962, C.B. 1962-3, page 111. The new subchapter T is effective for taxable years of cooperative organizations beginning after December 31, 1962, and is applicable to distributions made by such organizations attributable to patronage occurring during such taxable years. The guidelines relate to the notification which such cooperatives must furnish their members in cases where section 1388(c)(2)(B) (also added by section 17 of the Revenue Act of 1962) is applicable.

Section 1388(c)(2)(B) provides that one method by which a patron may consent to take the stated dollar amount of a written notice of allocation into account as provided in the new section 1385 is by becoming, or continuing as, a member of the cooperative association after such association has adopted a bylaw, after October 16, 1962, which provides that membership constitutes such consent. However, in order for such consent to be effective, the member, or prospective member, must be furnished a written notice which informs him that the bylaw has been adopted and of its significance. In addition, he must be furnished a copy of the bylaw. This form of consent is effective only with respect to patronage occurring after the bylaw has been adopted and members have been notified and furnished a copy of the bylaw.

The written notice and the copy of the bylaw must be given to each individual separately and thus may not be a notice which is published in a newspaper or posted at the cooperative's place of business. The notice and copy of the bylaw may by sent by ordinary mail to the patron's last known address.

¹ Based on Technical Information Release 418, dated November 23, 1962.