114 DEPARTMENT OF AGRICULTURE

profit corporation engaged in rural electrification exempt
from taxation under Section 101 (101 or (11) or in the
case of any corporation subject to a tax imposed by
supplement G."
 Id) EFECTIVE DATE-The amendments made by
 subsection la) and (b) of this section shall be applicable
 only with respect to taxable years beginning after Decem-
 ber 31, 1951. The amendment made by subsection (c) shall
 be applicable to the calendar year 1951 and subsequent
 years.


 STATE LAWS

 Whereas the Federal acts exempt cooperative associa-
 tions, when they have comped with certain regulations,
 from paying income taxes and from being viewed as
 operating in restraint of trade, State acts deal primarily
 with methods of control, property rights, restrictions of
 transfer of certificates of membership or capital stock,
 rights to make specific kinds of contracts between the
 association and its members, as well as operation in
 restraint of trade within the state.
 Before there was any Federal legislation favoring co-
operative associations many of the states had provided
special acts for the benefit of cooperative associations.
The need for special legislation for cooperative associa-
tions was apparent because it was difficult under the
general corporation laws of the various states to operate
an association primarily for the benefit of its users. There
are three reasons why this was true. First, cooperative
associations could not restrict the transfer of stock to
non-patrons. Second, they could not limit the amount
of stock held by one person. Third, no method of control
was provided other than on a share basis. Consequently
stock often drifted into the hands of a few who were
more interested in operating the association for profit
than for rendering service to the patrons.