28 DEPARTMENT OF AGRICULTURE

 5. Patronage records must be maintained and
 permanently preserved.
 6. Purchasing or farm supply associations must
 not sell supplies to nonmembers who are
 also nonproducers (not farmers) in excess
 of 15 percent of the total volume of business.
 7. Financial reserves must have a necessary
 purpose and must be reasonable in amount.
 8. The legal structure of the association must
 be co-operative in principle.
 Many of the difficulties between coopera-
tives and the Bureau of Internal Revenue come from
failure to answer correspondence and make prompt re-
ports. When farmers go into business, they must be
business-like. Officers and employees should be instructed
to reply to all important mail.

 38. Q. HOW MAY A COOPERATIVE CLAIM
 EXEMPTION FROM FEDERAL INCOME
 TAXES?
 A. While cooperatives meeting these require-
ments are eligible for exemption from federal income
taxes, this exemption must in all cases be sought. Appli-
cation for this exemption is made on a special Treasury
Department Form, a copy of which may be obtained
from the Collector of Internal Revenue, Jacksonville,
Florida. This form is a questionnaire which should be
completed and sent to the nearest Collector of Internal
Revenue. Determination will then be made whether
the association is exempt.

 39. Q. MUST EVERY COOPERATIVE FILE A
 FEDERAL INCOME TAX RETURN FOR
 EACH TAXABLE YEAR?
 A. Yes, a return must now be filed each and every
year on special forms provided for the purpose by every