1120-C Instructions for Form 1120-C

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2018

Instructions for Form 1120-C

Department of the Treasury
Internal Revenue Service

U.S. Income Tax Return for Cooperative Associations

Future Developments

DRAFT AS OF
November 5, 2018

Section references are to the Internal
Revenue Code unless otherwise noted.

Contents

Future Developments . . . . . . . .
What’s New . . . . . . . . . . . . . . .
Photographs of Missing Children .
The Taxpayer Advocate Service . .
How To Make a Contribution To
Reduce Debt Held by the
Public . . . . . . . . . . . . . . . .
How To Get Forms and
Publications . . . . . . . . . . . .
General Instructions . . . . . . . . . .
Purpose of Form . . . . . . . . . . . .
Who Must File . . . . . . . . . . . . .
Where To File . . . . . . . . . . . . . .
When To File . . . . . . . . . . . . . .
Who Must Sign . . . . . . . . . . . . .
Assembling the Return . . . . . . . .
Tax Payments . . . . . . . . . . . . .
Estimated Tax Payments . . . . . .
Interest and Penalties . . . . . . . . .
Accounting Methods . . . . . . . . .
Accounting Period . . . . . . . . . . .
Rounding Off To Whole Dollars . .
Recordkeeping . . . . . . . . . . . . .
Other Forms and Statements That
May Be Required . . . . . . . .
Specific Instructions . . . . . . . . . .
Period Covered . . . . . . . . . . . .
Name and Address . . . . . . . . . .
Item A. Identifying Information . . .
Item B. Employer Identification
Number (EIN) . . . . . . . . . . .
Item C. Type of Cooperative . . . .
Item D. Initial Return, Final Return,
Name Change, Address
Change, or Amended Return .
Income . . . . . . . . . . . . . . . . . .
Deductions . . . . . . . . . . . . . . .
Tax, Refundable Credits, and
Payments . . . . . . . . . . . . .
Schedule C. Dividends, Inclusions,
and Special Deductions . . . .
Schedule G. Allocation of
Patronage and Nonpatronage
Income and Deductions . . . .
Schedule H. Deductions and
Adjustments Under Section
1382 . . . . . . . . . . . . . . . .
Schedule J. Tax Computation . . .
Schedule K. Other Information . . .
Schedule L. Balance Sheets per
Books . . . . . . . . . . . . . . . .
Schedule M-1. Reconciliation of
Income (Loss) per Books With
Income per Return . . . . . . . .
Index . . . . . . . . . . . . . . . . . . .

Nov 05, 2018

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For the latest information about
developments related to Form 1120-C
and its instructions, such as
legislation enacted after they were
published, go to IRS.gov/Form1120c.

What’s New

Tax rates. For tax years beginning
after December 31, 2017, P.L. 115-97
replaced the graduated corporate tax
structure with a flat 21% corporate tax
rate and repealed the corporate
alternative minimum tax (AMT). See
the instructions for Schedule J, line 2.

Base erosion minimum tax. If the
cooperative had gross receipts of at
least $500 million in any one of the 3
tax years preceding the current tax
year, complete Form 8991. See
section 59A and the Instructions for
Form 8991. Also see the instructions
for Schedule J, line 3, and the
instructions for Schedule K, question
16.
Small business taxpayers. Effective
for tax years beginning after
December 31, 2017, P.L. 115-97
expanded the eligibility of small
business taxpayers to use the cash
method. See Nonaccrual experience
method for service providers, later.
Limitation on business interest
expense. For tax years beginning
after December 31, 2017, taxpayers
who deduct business interest are
required to file Form 8990, Limitation
on Business Interest Expense Under
Section 163(j), unless an exception
for filing is met. See the instructions
for Schedule K, Questions 17 and 18.
Also see Form 8990 and the
Instructions for Form 8990.
Deduction for foreign-source
portion of dividends received by
domestic corporations from
specified 10%-owned foreign
corporations. Certain domestic
corporations that are U.S.
shareholders of specified 10%-owned
foreign corporations are allowed a
100% deduction ("participation
Cat. No. 17211X

exemption DRD") for the
foreign-source portion of dividends
received from the foreign corporation.
This applies to distributions after
December 31, 2017. See new section
245A.
Treatment of deferred foreign
income upon transition to
participation exemption system of
taxation. U.S. shareholders of
specified foreign corporations (as
defined under section 965(e), as
amended by P.L. 115-97) may have
an inclusion under section 965 based
on the post-1986 deferred foreign
income of the specified foreign
corporations determined as of
November 2, 2017 or December 31,
2017. The U.S shareholders may
elect to pay the liability under section
965 on the post-1986 deferred foreign
income in eight installments. See
section 965, as amended. Also, for
further guidance see Pub. 5292.
Inclusion of Global Intangible
Low-Taxed Income ("GILTI").
Public Law 115-97 enacted new
section 951A, which requires certain
domestic corporations that are U.S.
shareholders of controlled foreign
corporations to determine and include
their GILTI in taxable income every
year. Section 951A is effective for tax
years of foreign corporations
beginning after December 31, 2017,
and to tax years of U.S. shareholders
in which or with which such tax years
of foreign corporations end. Use Form
8992 to figure the domestic
corporation's GILTI and attach it to
Form 1120-C. See section 951A for
more information.
Foreign-Derived Intangible Income
(“FDII”). New section 250, which
allows a domestic corporation a
deduction for the eligible percentage
of FDII and GILTI. Section 250 is
effective for tax years beginning after
December 31, 2017. Use Form 8993
to figure the amount of the eligible
deduction for FDII and GILTI under
section 250 and attach it to Form
1120-C. See section 250 for more
information.

Domestic Production Activities
Deduction (DPAD). The DPAD is
repealed for tax years beginning after
2017, with limited exceptions. See the
instructions for line 22.
Net operating loss. The general
2-year net operating loss (NOL)
carryback rule does not apply to
NOLs arising in tax years ending after
December 31, 2017. Exceptions apply
to certain farming losses and NOLs of
insurance companies other than life
insurance companies. See Net
operating loss (NOL), later.

the corporation understand these
rights.
TAS has offices in every state, the
District of Columbia, and Puerto Rico.
The cooperative's local advocate's
number is in its local directory and at
TaxpayerAdvocate.IRSgov. The
cooperative can also call TAS at
1-877-777-4778.

Tax forms and publications. The
cooperative can download or print all
of the forms and publications it may
need on IRS.gov/FormsPubs.
Otherwise, the cooperative can go to
IRS.gov/OrderForms to place an
order and have forms mailed to it.
The cooperative should receive its
order within 10 business days.

DRAFT AS OF
November 5, 2018

At the time these instructions
went to print, several credits
CAUTION and deductions available to
corporations expired December 31,
2017. To find out if legislation
extended the credits and deductions
and made them available for 2018, go
to IRS.gov/Extenders.

!

Photographs of Missing
Children

The Internal Revenue Service is a
proud partner with the National Center
for Missing & Exploited Children®
(NCMEC). Photographs of missing
children selected by the Center may
appear in instructions on pages that
would otherwise be blank. You can
help bring these children home by
looking at the photographs and calling
1-800-THE-LOST (1-800-843-5678) if
you recognize a child.

The Taxpayer Advocate
Service

The Taxpayer Advocate Service
(TAS) is an independent
organization within the IRS that helps
taxpayers and protects taxpayer
rights. TAS's job is to ensure that
every taxpayer is treated fairly and
knows and understands their rights
under the Taxpayer Bill of Rights.

As a taxpayer, the cooperative has
rights that the IRS must abide by in its
dealings with the cooperative. TAS
can help the cooperative if:
• Problems are causing financial
difficulty for the business.
• The business is facing an
immediate threat of adverse action.
• The cooperative has tried
repeatedly to contact the IRS but no
one has responded, or the IRS hasn't
responded by the date promised.
The TAS tax toolkit at
TaxpayerAdvocate.IRSgov can help

TAS also works to resolve
large-scale or systemic problems that
affect many taxpayers. If the
cooperative knows of one of these
broad issues, please report it to TAS
through the Systemic Advocacy
Management System at IRS.gov/
Sams.
For more information go to
IRS.gov/Advocate.

How To Make a
Contribution To Reduce
Debt Held by the Public

To help reduce debt held by the
public, make a check payable to
“Bureau of the Public Debt.” Send it
to:
Bureau of the Public Debt
Department G
P.O. Box 2188
Parkersburg, WV 26106-2188
Or the cooperative can enclose a
check with its income tax return. Do
not add the contributions to any tax
the cooperative may owe.
Contributions to reduce debt held by
the public are deductible subject to
the rules and limitations for charitable
contributions.

How To Get Forms
and Publications
Internet. You can access the IRS
website 24 hours a day, 7 days a
week, at IRS.gov to:
• Download forms, instructions, and
publications;
• Order IRS products online;
• Research your tax questions online;
• Search publications online by topic
or keyword;
• Use the online Internal Revenue
Code, regulations, or other official
guidance;
• View Internal Revenue Bulletins
(IRBs) published in the last few years;
and
• Sign up to receive local and
national tax news by email.
-2-

General Instructions

Purpose of Form

Use Form 1120-C, U.S. Income Tax
Return for Cooperative Associations,
to report income, gains, losses,
deductions, credits, and to figure the
income tax liability of the cooperative.

Who Must File

Any corporation operating on a
cooperative basis under IRC section
1381 and allocating amounts to
patrons on the basis of business done
with or for such patrons should file
Form 1120-C (including farmers'
cooperatives under section 521
whether or not it has taxable income).
Exceptions. This does not apply to
organizations which are:
• Exempt from income tax under
chapter 1 (other than exempt farmers'
cooperatives under section 521);
• Subject to Part II (section 591 and
following), subchapter H, chapter 1
(relating to mutual savings banks);
• Subject to subchapter L (section
801 and following), chapter 1 (relating
to insurance companies); or
• Engaged in generating,
transmitting, or otherwise furnishing
electric energy or providing telephone
service to persons in rural areas.

Where To File

If the cooperative's principal business,
office, or agency is located in the
United States, file Form 1120-C at the
following address:
Department of the Treasury
Internal Revenue Service Center
Ogden, UT 84201-0012

If the cooperative's principal
business, office, or agency is located
in a foreign country or a U.S.
possession, file Form 1120-C at the
following address:

Internal Revenue Service Center
P.O. Box 409101
Ogden, UT 84409

When To File

A cooperative described in section
6072(d) generally must file its income
tax return by the 15th day of the 9th
month after the end of its tax year.

• The president, vice president,
treasurer, assistant treasurer, chief
accounting officer; or
• Any other cooperative officer (such
as tax officer) authorized to sign.
If a return is filed on behalf of a
cooperative by a receiver, trustee, or
assignee, the fiduciary must sign the
return, instead of the cooperative
officer. Returns and forms signed by a
receiver or trustee in bankruptcy on
behalf of a cooperative must be
accompanied by a copy of the order
or instructions of the court authorizing
signing of the return or form.

• Respond to certain IRS notices
about math errors, offsets, and return
preparation.
The cooperative is not authorizing
the paid preparer to receive any
refund check, bind the cooperative to
anything (including any additional tax
liability), or otherwise represent the
cooperative before the IRS.

DRAFT AS OF
November 5, 2018

Any cooperative not described in
section 6072(d) must generally file its
tax return by the 15th day of the 4th
month after the end of its tax year.
However, a cooperative with a fiscal
tax year ending June 30 must file by
the 15th day of the 3rd month after the
end of its tax year. A cooperative with
a short tax year ending anytime in
June will be treated as if the short year
ended on June 30, and must file by
the 15th day of the 3rd month after the
end of its tax year.
If the due date falls on a Saturday,
Sunday, or legal holiday, the
cooperative can file on the next
business day.

Private Delivery Services

Cooperatives can use certain private
delivery services (PDS) designated by
the IRS to meet the “timely mailing as
timely filing” rule for tax returns. Go to
IRS.gov/PDS for the current list of
designated services.
The PDS can tell you how to get
written proof of the mailing date.
For the IRS mailing address to use
if you’re using PDS, go to IRS.gov/
PDSStreetAddresses.
Private delivery services can't
deliver items to P.O. boxes.
CAUTION You must use the U.S. Postal
Service to mail any item to an IRS
P.O. box address.

!

Extension of Time To File

File Form 7004, Application for
Automatic Extension of Time To File
Certain Business Income Tax,
Information, and Other Returns, to
request an extension of time to file.
Generally, the cooperative must file
Form 7004 by the regular due date of
the return. See the Instructions for
Form 7004.

Who Must Sign

The return must be signed and dated
by:

If an employee of the cooperative
completes Form 1120-C, the paid
preparer space should remain blank.
Anyone who prepares Form 1120-C
but does not charge the cooperative
should not complete that section.
Generally, anyone who is paid to
prepare the return must sign it and fill
in the “Paid Preparer Use Only” area.

The paid preparer must complete
the required preparer information and:
• Sign the return in the space
provided for the preparer's signature.
• Give a copy of the return to the
taxpayer.
A paid preparer may sign

TIP original or amended returns

by rubber stamp, mechanical
device, or computer software
program.

Paid Preparer Authorization

If the cooperative wants to allow the
IRS to discuss its 2018 tax return with
the paid preparer who signed it, check
the “Yes” box in the signature area of
the return. This authorization applies
only to the individual whose signature
appears in the “Paid Preparer Use
Only” section of the cooperative's
return. It does not apply to the firm, if
any, shown in that section.
If the “Yes” box is checked, the
cooperative is authorizing the IRS to
call the paid preparer to answer any
questions that may arise during the
processing of its return. The
cooperative is also authorizing the
paid preparer to:
• Give the IRS any information that is
missing from the return,
• Call the IRS for information about
the processing of the return or the
status of any related refund or
payment(s), and
-3-

The authorization will automatically
end no later than the due date
(excluding extensions) for filing the
cooperative's 2018 tax return. If the
cooperative wants to expand the paid
preparer's authorization or revoke the
authorization before it ends, see Pub.
947, Practice Before the IRS and
Power of Attorney.

Assembling the Return

To ensure that the cooperative's tax
return is correctly processed, attach
all schedules and other forms after
Form 1120-C, page 5, in the following
order.
1. Schedule N (Form 1120).
2. Schedule D (Form 1120).
3. Schedule O (Form 1120).
4. Form 8050.
5. Form 1125-A.
6. Form 4136.
7. Form 8941.
8. Form 3800.
9. Additional schedules in
alphabetical order.
10. Additional forms in numerical
order.
11. Supporting statements and
attachments.
Complete every applicable entry
space on Form 1120-C. Do not enter
“See Attached” or “Available Upon
Request” instead of completing the
entry spaces. If more space is needed
on the forms or schedules, attach
separate sheets using the same size
and format as the printed forms.
If there are supporting statements
and attachments, arrange them in the
same order as the schedules or forms
they support and attach them last.
Show the totals on the printed forms.
Enter the cooperative's name and EIN
on each supporting statement or
attachment.

Tax Payments

Generally, the cooperative must pay
any tax due in full no later than the

due date for filing its return (not
including extensions). If the due date
falls on a Saturday, Sunday, or legal
holiday, the payment is due on the
next day that isn't a Saturday,
Sunday, or legal holiday. See the
instructions for line 32.

Electronic Deposit
Requirement

same-day wire payment, go to
IRS.gov/SameDayWire.

Estimated Tax Payments

Generally, the following rules apply to
the cooperative's payments of
estimated tax.
• The cooperative must make
installment payments of estimated tax
if it expects its total tax for the year
(less applicable credits) to be $500 or
more.
• The installments are due by the
15th day of the 4th, 6th, 9th, and 12th
months of the tax year. If any due date
falls on a Saturday, Sunday, or legal
holiday, the payment of the
installment is due on the next regular
business day.
• The cooperative must use
electronic funds transfer to make
installment payments of estimated
tax.
• Use Form 1120-W as a worksheet
to compute estimated tax. See the
Instructions for Form 1120-W.
• Penalties may apply if the
cooperative does not make required
estimated tax payment deposits. See
Estimated tax penalty below.
• If the cooperative overpaid
estimated tax, it may be able to get a
quick refund by filing Form 4466,
Corporation Application for Quick
Refund of Overpayment of Estimated
Tax.

Interest and Penalties
If the cooperative receives a
notice about penalties after it
CAUTION files its return, send the IRS
an explanation and we will determine
if the cooperative meets reasonable
cause criteria. Do not attach an
explanation when the cooperative's
return is filed.

!

DRAFT AS OF
November 5, 2018

Cooperatives must use electronic
funds transfer to make all federal tax
deposits (such as deposits of
employment, excise, and corporate
income tax). Generally, electronic
funds transfers are made using the
Electronic Federal Tax Payment
System (EFTPS). However, if the
cooperative does not want to use
EFTPS, it can arrange for its tax
professional, financial institution,
payroll service, or other trusted third
party to make deposits on its behalf.
Also, it may arrange for its financial
institution to submit a same-day wire
payment (discussed below) on its
behalf. EFTPS is a free service
provided by the Department of the
Treasury. Services provided by a tax
professional, financial institution,
payroll service, or other third party
may have a fee.

To get more information about
EFTPS or to enroll in EFTPS, visit
www.eftps.gov or call 1-800-555-4477
(TTY/TDD 1-800-733-4829).
Depositing on time. For deposits
made by EFTPS to be on time, the
cooperative must submit the deposit
by 8 p.m. Eastern time the day before
the date the deposit is due. If the
cooperative uses a third party to make
deposits on its behalf, they may have
different cutoff times.
Same-day wire payment option. If
the cooperative fails to submit a
deposit transaction on EFTPS by 8
p.m. Eastern time the day before the
date a deposit is due, it can still make
the deposit on time by using the
Federal Tax Collection Service
(FTCS). To use the same-day wire
payment method, the cooperative will
need to make arrangements with its
financial institution ahead of time
regarding availability, deadlines, and
costs. The cooperative's financial
institution may charge a fee for
payments made this way. To learn
more about the information the
cooperative will need to provide to its
financial institution to make a

See the instructions for lines 30b
and 30c.
Estimated tax penalty. A
cooperative that does not make
estimated tax payments when due
may be subject to an underpayment
penalty for the period of
underpayment. Generally, a
cooperative is subject to the penalty if
its tax liability is $500 or more and it
did not timely pay at least the smaller
of:
• Its tax liability for the current year,
or
• Its prior year's tax.
Use Form 2220, Underpayment of
Estimated Tax by Corporations, to
see if the cooperative owes a penalty
and to figure the amount of the
penalty. If Form 2220 is completed,
enter the penalty on line 31. See the
instructions for line 31.

-4-

Interest. Interest is charged on taxes
paid late even if an extension of time
to file is granted. Interest is also
charged on penalties imposed for
failure to file, negligence, fraud,
substantial valuation misstatements,
substantial understatements of tax,
and reportable transaction
understatements from the due date
(including extensions) to the date of
payment. The interest charge is
figured at a rate determined under
section 6621.

Late filing of return. A cooperative
that does not file its tax return by the
due date, including extensions, may
be penalized 5% of the unpaid tax for
each month or part of a month the
return is late, up to a maximum of 25%
of the unpaid tax. The minimum
penalty for a return that is over 60
days late is the smaller of the tax due
or $210. The penalty will not be
imposed if the cooperative can show
that the failure to file on time was due
to reasonable cause. See Caution
above.
Late payment of tax. A cooperative
that does not pay the tax when due
generally may be penalized 1/2 of 1%
of the unpaid tax for each month or
part of a month the tax is not paid, up
to a maximum of 25% of the unpaid
tax. See Caution above.
Trust fund recovery penalty. This
penalty may apply if certain excise,
income, social security, and Medicare
taxes that must be collected or
withheld are not collected or withheld,
or these taxes are not paid. These
taxes are generally reported on:
• Form 720, Quarterly Federal Excise
Tax Return;
• Form 941, Employer's
QUARTERLY Federal Tax Return;
• Form 943, Employer's Annual
Federal Tax Return for Agricultural
Employees;
• Form 944, Employer's ANNUAL
Federal Tax Return; or

• Form 945, Annual Return of
Withheld Federal Income Tax.
The trust fund recovery penalty
may be imposed on all persons who
are determined by the IRS to have
been responsible for collecting,
accounting for, or paying over these
taxes, and who acted willfully in not
doing so. The penalty is equal to the
unpaid trust fund tax. See the
Instructions for Form 720, Pub. 15
(Circular E), Employer's Tax Guide; or
Pub. 51 (Circular A), Agricultural
Employer's Tax Guide, for details,
including the definition of responsible
persons.

years for a net positive adjustment.
However, in some cases, a
cooperative can elect to modify the
section 481(a) adjustment period. The
cooperative may have to complete the
appropriate lines of Form 3115 to
make an election. See the Instructions
for Form 3115 for more information
and exceptions.
If the net section 481(a) adjustment
is positive, report it on Form 1120-C,
line 9, as other income. If the net
section 481(a) adjustment is negative,
report it on Form 1120-C, line 23, as a
deduction.

property for as long as they are
needed to figure the basis of the
original or replacement property.
The cooperative should keep
copies of all filed returns. They help in
preparing future and amended returns
and in the calculation of earnings and
profits.

DRAFT AS OF
November 5, 2018

Other penalties. Other penalties can
be imposed for negligence,
substantial understatement of tax,
reportable transaction
understatements, and fraud. See
sections 6662, 6662A, and 6663.

Accounting Methods

Figure taxable income using the
method of accounting regularly used
in keeping the cooperative's books
and records. In all cases, the method
used must clearly show taxable
income. Permissible methods include:
• Cash,
• Accrual, or
• Any other method authorized by the
Internal Revenue Code.
See Pub. 538, Accounting Periods
and Methods, for more information.
Change in accounting method.
Generally, the cooperative must get
IRS consent to change either an
overall method of accounting or the
accounting treatment of any material
item. To do so, the cooperative
generally must file Form 3115,
Application for Change in Accounting
Method. See the Instructions for Form
3115 and Pub. 538 for more
information and exceptions. Also see
Rev. Proc. 2018-31, 2018-22 I.R.B.
637, or any successor.
Section 481(a) adjustment. If the
cooperative's taxable income for the
current tax year is figured under a
method of accounting different from
the method used in the preceding tax
year, the cooperative may have to
make an adjustment under section
481(a) to prevent amounts of income
or expense from being duplicated or
omitted. The section 481(a)
adjustment period is generally 1 year
for a net negative adjustment and 4

Accounting Period

A cooperative must figure its taxable
income on the basis of a tax year. A
tax year is the annual accounting
period a cooperative uses to keep its
records and report its income and
expenses. Generally, cooperatives
can use a calendar year or a fiscal
year.

Change of tax year. Generally, a
cooperative must get the consent of
the IRS before changing its tax year
by filing Form 1128, Application to
Adopt, Change, or Retain a Tax Year.
However, under certain conditions,
exceptions may apply. See the
Instructions for Form 1128 and Pub.
538 for more information.

Rounding Off To
Whole Dollars

The cooperative can round off cents
to whole dollars on its return and
schedules. If the cooperative does
round to whole dollars, it must round
all amounts. To round, drop amounts
under 50 cents and increase amounts
from 50 to 99 cents to the next dollar.
For example, $1.39 becomes $1 and
$2.50 becomes $3.
If two or more amounts must be
added to figure the amount to enter on
a line, include cents when adding the
amounts and round off only the total.

Recordkeeping

Keep the cooperative's records for as
long as they may be needed for the
administration of any provision of the
Internal Revenue Code. Usually,
records that support an item of
income, deduction, or credit on the
return must be kept for 3 years from
the date the return is due or filed,
whichever is later. Keep records that
verify the cooperative's basis in
-5-

Other Forms and
Statements That May
Be Required

Reportable transaction disclosure
statement. Disclose information for
each reportable transaction in which
the cooperative participated. Form
8886, Reportable Transaction
Disclosure Statement, must be filed
for each tax year that the federal
income tax liability of the cooperative
is affected by its participation in the
transaction. The following are
reportable transactions.
1. Any listed transaction, which is
a transaction that is the same as or
substantially similar to one of the
types of transactions that the IRS has
determined to be a tax avoidance
transaction and identified by notice,
regulation, or other published
guidance as a listed transaction.
2. Any transaction offered under
conditions of confidentiality for which
the cooperative (or a related party)
paid an advisor a fee of at least
$250,000.
3. Certain transactions for which
the cooperative (or a related party)
has contractual protection against
disallowance of the tax benefits.
4. Certain transactions resulting in
a loss of at least $10 million in any
single year or $20 million in any
combination of years.
5. Any transaction identified by the
IRS by notice, regulation, or other
published guidance as a “transaction
of interest.”
For more information, see
Regulations section 1.6011-4. Also
see the Instructions for Form 8886.
Penalties. The cooperative may
have to pay a penalty if it is required to
disclose a reportable transaction
under section 6011 and fails to
properly complete and file Form 8886.
Penalties may also apply under
section 6707A if the cooperative fails
to file Form 8886 with its cooperative
return, fails to provide a copy of Form

8886 to the Office of Tax Shelter
Analysis (OTSA), or files a form that
fails to include all the information
required (or includes incorrect
information). Other penalties, such as
an accuracy-related penalty under
section 6662A, may also apply. See
the Instructions for Form 8886 for
details on these and other penalties.

accordance with Regulations section
1.362-4(d)(3).
Annual information statement for
elections under section 108(i). If
the cooperative made an election in
2009 or 2010 to defer income from
cancellation of debt (COD) in
connection with the reacquisition of an
applicable debt instrument, the
cooperative must attach a statement
to its return beginning with the tax
year following the tax year for which
the cooperative made the election,
and ending the first tax year all
income deferred has been included in
income. In addition, the cooperative
must annually include a copy of the
election statement it filed to make the
election to defer the income. For more
information on reporting the deferred
income, see the instructions for line 9.

office does not deliver mail to the
street address and the cooperative
has a P.O. box, show the box number
instead.
Note. Do not use the address of the
registered agent for the state in which
the cooperative is incorporated. For
example, if the cooperative is
incorporated in Delaware or Nevada
and the cooperative's principal office
is located in Little Rock, AR, the
cooperative should enter the Little
Rock address.

DRAFT AS OF
November 5, 2018

Reportable transactions by material advisors. Material advisors to any
reportable transaction must disclose
certain information about the
reportable transaction by filing Form
8918, Material Advisor Disclosure
Statement, with the IRS. For details,
see the Instructions for Form 8918.

Transfers to a cooperative controlled by the transferor. Every
significant transferor (as defined in
Regulations section 1.351-3(d)) that
receives stock of a cooperative in
exchange for property in a
nonrecognition event must include the
statement required by Regulations
section 1.351-3(a) on or with the
transferor's tax return for the tax year
of the exchange. The transferee
cooperative must include the
statement required by Regulations
section 1.351-3(b) on or with its return
for the tax year of the exchange,
unless all the required information is
included in any statement(s) provided
by a significant transferor that is
attached to the same return for the
same section 351 exchange.
Dual consolidated losses. If a
cooperative incurs a dual
consolidated loss (as defined in
Regulations section 1.1503-2(c)(5)),
the cooperative (or consolidated
group) may need to attach an elective
relief agreement and/or annual
certification as provided in
Regulations section 1.1503-2(g)(2).

Election to reduce basis under
section 362(e)(2)(C). If property is
transferred to a cooperative in
transfers subject to section 362(e)(2),
the transferor and the acquiring
cooperative may elect, under section
362(e)(2)(C), to reduce the
transferor's basis in the stock received
instead of reducing the acquiring
corporation's basis in the property
transferred. Once made, the election
is irrevocable. For more information,
see section 362(e)(2) and Regulations
section 1.362-4. If an election is
made, a statement must be filed in

Other forms and statements. See
Pub. 542, Corporations, for a list of
other forms and statements that a
cooperative may need to file in
addition to the forms and statements
discussed throughout these
instructions.

Specific Instructions
Period Covered

File the 2018 return for calendar year
2018 and fiscal years that begin in
2018 and end in 2019. For a fiscal or
short tax year return, fill in the tax year
space at the top of the form.
The 2018 Form 1120-C can also be
used if:
• The cooperative has a tax year of
less than 12 months that begins and
ends in 2019, and
• The 2019 Form 1120-C isn’t
available at the time the cooperative is
required to file its return.
The cooperative must show its
2019 tax year on the 2018 Form
1120-C and take into account any tax
law changes that are effective for tax
years beginning after December 31,
2018.

Name and Address

Enter the cooperative's true name (as
set forth in the charter or other legal
document creating it), address, and
EIN on the appropriate lines. Enter the
address of the cooperative's principal
office or place of business. Include
the suite, room, or other unit number
after the street address. If the post
-6-

If the cooperative receives its mail
in care of a third party (such as an
accountant or an attorney), enter on
the street address line “C/O” followed
by the third party's name and street
address or P.O. box.

If the cooperative has a foreign
address, include the city or town,
state or province, country, and foreign
postal code. Do not abbreviate the
country name. Follow the country's
practice for entering the name of the
state or province and postal code.

Item A. Identifying
Information
Consolidated return. Cooperatives
filing a consolidated return must
check box 1 and attach Form 851,
Affiliations Schedule, and other
supporting statements to the return.
Also, for the first year a subsidiary
cooperative is being included in a
consolidated return, attach Form
1122, Authorization and Consent of
Subsidiary Corporation To Be
Included in a Consolidated Income
Tax Return, to the parent's
consolidated return. Attach a separate
Form 1122 for each new subsidiary
being included in the consolidated
return.
If the cooperative is a farmers'
tax exempt cooperative and
CAUTION checked Item C, box 1, it
cannot file a consolidated return.

!

File supporting statements for each
cooperative/corporation included in
the consolidated return. Do not use
Form 1120-C as a supporting
statement. On the supporting
statement, use columns to show the
following, both before and after
adjustments.
1. Items of gross income and
deductions.

2. A computation of taxable
income.
3. Balance sheets as of the
beginning and end of the tax year.
4. A reconciliation of income per
books with income per return.
5. A reconciliation of retained
earnings.

Schedule M-3 (Form 1120). If the
cooperative chooses to complete
Schedule M-1 instead of completing
Parts II and III of Schedule M-3, the
amount on Schedule M-1, line 1, must
equal the amount on Schedule M-3,
Part I, line 11. See the Instructions for
Schedule M-3 for more details. Also,
see the instructions for Schedule M-1,
later.
If you are filing Schedule M-3,
check Item A, box 2, to indicate that
Schedule M-3 is attached.

If the cooperative has submitted
Form 1028, Application for
Recognition of Exemption, but has not
received a determination letter from
the IRS, enter “Application Pending”
on Form 1120-C, at the top of page 1.

Form 1120 filed previous year.
Check box 3 if the cooperative filed
Form 1120 in a prior year as a
subchapter T cooperative.

Item D. Initial Return, Final
Return, Name Change,
Address Change, or
Amended Return

Nonexempt cooperative. All other
subchapter T cooperatives including
farmers' cooperatives without section
521 exempt status, organized and
operated as described under Who
Must File, earlier, should check the
“Nonexempt cooperative” box.

DRAFT AS OF
November 5, 2018

Enter on Form 1120-C the totals for
each item of income, gain, loss,
expense, or deduction, net of
eliminating entries for intercompany
transactions between cooperatives/
corporations within the consolidated
group. Attach consolidated balance
sheets and a reconciliation of
consolidated retained earnings.
The cooperative does not

TIP have to provide the

information requested in (3),
(4), and (5) above, if its total receipts
(page 1, lines 1a plus lines 4 through
9) and its total assets at the end of the
tax year (Schedule L, line 13(d)) are
less than $250,000. See Schedule K,
Question 14.
For more information on
consolidated returns, see the
regulations under section 1502.
Schedule M-3 (Form 1120). A
cooperative with total assets
(non-consolidated or consolidated for
all cooperatives/corporations included
with the tax consolidation group) of
$10 million or more on the last day of
the tax year must file Schedule M-3
(Form 1120), Net Income (Loss)
Reconciliation for Corporations With
Total Assets of $10 Million or More,
instead of Form 1120-C,
Schedule M-1. A cooperative or group
of cooperatives that completes Parts II
and III of Schedule M-3 is not required
to complete Form 1120-C,
Schedule M-1, Reconciliation of
Income (Loss) per Books With Income
per Return.
For cooperatives that (a) are
required to file Schedule M-3 (Form
1120) and have less than $50 million
total assets at the end of the tax year,
or (b) are not required to file
Schedule M-3 (Form 1120) and
voluntarily file Schedule M-3 (Form
1120), must either (i) complete
Schedule M-3 (Form 1120) entirely or
(ii) complete Schedule M-3 (Form
1120) through Part I, and complete
Form 1120-C, Schedule M-1, instead
of completing Parts II and III of

Item B. Employer
Identification Number
(EIN)

Enter the cooperative's EIN. If the
cooperative does not have an EIN, it
must apply for one. An EIN can be
applied for:
• Online. Go toIRS.gov/EIN. The EIN
is issued immediately once the
application information is validated.
• By faxing or mailing Form SS-4,
Application for Employer Identification
Number.
Cooperatives located in the
United States or U.S.
CAUTION possessions can use the
online application. Foreign
corporations should call
1-267-941-1099 (not a toll-free
number) for more information on
obtaining an EIN. See the Instructions
for Form SS-4.

!

EIN applied for, but not received. If
the cooperative has not received its
EIN by the time the return is due,
enter “Applied for” and the date you
applied in the space for the EIN.
For more information, see the
Instructions for Form SS-4.

Item C. Type of
Cooperative
Farmers' tax exempt cooperative.
Check the “Farmers' tax exempt
cooperative” box if the cooperative
applied for and received status as a
tax-exempt farmers', fruit growers', or
like association, organized and
operated on a cooperative basis as
described in section 521.

-7-

• If this is the cooperative's first
return, check the “Initial return” box.
• If this is the cooperative's final
return and it will no longer exist, file
Form 1120-C and check the “Final
return” box.
• If the cooperative changed its name
since it last filed a return, check the
“Name change” box. Generally, a
cooperative also must have amended
its articles of incorporation and filed
the amendment with the state in which
it was incorporated.
• If the cooperative has changed its
address since it last filed a return
(including a change to an “in care of”
address), check the “Address
change” box.
• If the cooperative must change its
originally filed return for any year, it
should file a new return including any
required attachments. Use the
revision of the form applicable to the
year being amended. The amended
return must provide all the information
called for by the form and instructions,
not just the new or corrected
information. Check the “Amended
return” box.
Note. If a change in address or
responsible party occurs after the
return is filed, use Form 8822-B,
Change of Address or Responsible
Party—Business, to notify the IRS of
the new address. For more
information, see the instructions for
Form 8822-B.

Income

Except as otherwise provided in the
Internal Revenue Code, gross income

includes all income from whatever
source derived.
Exception for income from qualifying shipping activities. Gross
income does not include income from
qualifying shipping activities if the
cooperative makes an election under
section 1354 to be taxed on its
notional shipping income (as defined
in section 1353) at the highest
corporate rate. If the election is made,
the cooperative generally may not
claim any loss, deduction, or credit
with respect to qualifying shipping
activities. A cooperative making this
election also may elect to defer gain
on the disposition of a qualifying
vessel.
Use Form 8902, Alternative Tax on
Qualifying Shipping Activities, to
figure the tax. Include the alternative
tax on Schedule J, line 8.

disposes of personal property of the
same type on the installment plan or
(b) real property held for sale to
customers in the ordinary course of
the taxpayer's trade or business.
The restrictions on using the
installment method do not apply to the
following.
• Dispositions of property used or
produced in the trade or business of
farming.
• Certain dispositions of timeshares
and residential lots reported under the
installment method for which the
corporation elects to pay interest
under section 453(l)(3).
Enter on line 1a (and carry to
line 3), the gross profit on collections
from installment sales. Attach a
statement showing the following
information for the current and the 3
preceding years: (a) gross sales, (b)
cost of goods sold, (c) gross profits,
(d) percentage of gross profits to
gross sales, (e) amount collected, and
(f) gross profit on the amount
collected.
For sales of timeshares and
residential lots reported under the
installment method, if the cooperative
elects to pay interest under section
453(l)(3), the cooperative's income
tax is increased by the interest
payable under section 453(l)(3).
Report this addition to tax on
Schedule J, line 8.

cooperatives that use the nonaccrual
experience method of accounting, see
Rev. Proc. 2011-46, 2011-42 I.R.B.
518, as modified by Rev. Proc.
2016-29, 2016-21 I.R.B. 880. Also,
see the Instructions for Form 3115 for
procedures to obtain automatic
consent to change to this method or
make certain changes within this
method.
Cooperatives that qualify to use the
nonaccrual experience method should
attach a statement showing total
gross receipts, the amount not
accrued as a result of the application
of section 448(d)(5) and the net
amount accrued. Enter the net
amount on line 1a.

DRAFT AS OF
November 5, 2018

Line 1. Gross Receipts or Sales

Enter gross receipts or sales from all
business operations except those that
must be reported on lines 4
through 9. Special rules apply to
certain income as discussed below.
Advance payments. In general,
advance payments are reported in the
year of receipt. For exceptions to this
general rule for cooperatives that use
the accrual method of accounting, see
the following.
• To report income from long-term
contracts, see section 460.
• For special rules for reporting
certain advance payments for goods
and long-term contracts, see
Regulations section 1.451-5.
• For rules that allow a limited
deferral of advance payments beyond
the current tax year, see Rev. Proc.
2004-34, 2004-22 I.R.B. 991, and
Notice 2018-35, 2018-18 I.R.B. 520,
or any successor. For rules for the
deferral of advance payments from
the sale of certain gift cards, see Pub.
535.
• For information on adopting or
changing to a permissible method for
reporting certain advance payments
for services and certain goods by an
accrual method cooperative, see the
Instructions for Form 3115.
Installment sales. Generally, the
installment method cannot be used for
dealer dispositions of property. A
“dealer disposition” is any disposition
of: (a) personal property by a person
who regularly sells or otherwise

Nonaccrual experience method for
service providers. Cooperatives are
not required to accrue certain
amounts to be received from the
performance of services that, based
on their experience, will not be
collected, if:
• The services are in the fields of
health, law, engineering, architecture,
accounting, actuarial science,
performing arts, or consulting; or
• The cooperative's average annual
gross receipts for any prior 3 tax-year
period does not exceed $25 million.
For more details, see section 448(d)
(5).
This provision does not apply to
any amount if interest is required to be
paid on the amount or if there is any
penalty for failure to timely pay the
amount. See Regulations section
1.448-2 for information on the
nonaccrual experience method,
including information on safe harbor
methods. For information on a book
safe harbor method of accounting for
-8-

Line 2. Cost of Goods Sold

Complete and attach Form 1125-A,
Cost of Goods Sold, if applicable.
Enter on Form 1120-C, line 2, the
amount from Form 1125-A, line 8. See
Form 1125-A and its instructions.

Line 4. Dividends

See the instructions for Schedule C,
later. Then, complete Schedule C and
enter on line 4, the amount from
Schedule C, line 19.
Note. Do not report patronage
dividends received on Schedule C.
Report income from patronage
dividends and per-unit retain
allocations on line 9.

Line 5. Interest

Enter taxable interest on U.S.
obligations and on loans, notes,
mortgages, bonds, bank deposits,
corporate bonds, tax refunds, etc. Do
not offset interest expense against
interest income. Special rules apply to
interest income from certain
below-market-rate loans. See section
7872 for details.
Note. Report tax-exempt interest
income on Schedule K, Item 10. Also,
if required, include the same amount
on Schedule M-1, line 7, or
Schedule M-3 (Form 1120), Part II,
line 13, if applicable.

Line 6. Gross Rents and
Royalties

Enter the gross amount received from
the rental of property and royalties.
Deduct expenses such as repairs,
interest, taxes, and depreciation on
the applicable lines.

Line 9. Other Income

Enter any other taxable income not
reported on lines 1 through 8. List the
type and amount of income on an
attached statement. If the cooperative
has only one item of other income,
describe it in parentheses on line 9.

6. Per-unit retain allocations
received (except nonqualified per-unit
retain certificates). See section 1385.
Note. Payments from the Commodity
Credit Corporation to a farmers'
cooperative for certain expenses of
the co-op's farmers-producers under
a “reseal” program of the U.S.
Department of Agriculture are
patronage-source income that may
give rise to patronage dividends under
section 1382(b)(1).

for details. Form 8925, Report of
Employer-Owned Life Insurance
Contracts, may also be required. See
Form 8925 and its instructions.
• Income from cancellation of debt
(COD) for the repurchase of a debt
instrument for less than its adjusted
issue price.
• Any COD income deferred from
2009 or 2010 that is includible in
income in 2018. See section 108(i)
and Rev. Proc. 2009-37. If the
cooperative is a direct or indirect
partner in a partnership, other special
rules apply. See Regulations section
1.108(i)-2.
• The cooperative's share of the
following income from Form 8621,
Information Return by a Shareholder
of a Passive Foreign Investment
Company or Qualified Electing Fund.
1. Ordinary earnings of a qualified
electing fund (QEF).
2. Gain or loss from marking
passive foreign investment company
(PFIC) stock to market.
3. Gain or loss from sale or other
disposition of section 1296 stock.
4. Excess distributions from a
section 1291 fund allocated to the
current year and pre-PFIC years, if
any.

DRAFT AS OF
November 5, 2018

Patronage dividends and per-unit
retain allocations. Include on line 9
the patronage dividends and per-unit
retain allocations listed below. Attach
a statement listing the name of each
declaring association from which the
cooperative received income from
patronage dividends and per-unit
retain allocations, and the total
amount received from each
association.
Include the items listed below.
1. Patronage dividends received
in:
• Money,
• Qualified written notices of
allocation, or
• Other property (except nonqualified
written notices of allocation).
2. Nonpatronage distributions
received on a patronage basis from
tax-exempt farmers' cooperatives in:
• Money,
• Qualified written notices of
allocation, or
• Other property (except nonqualified
written notices of allocation), based
on earnings of that cooperative either
from business done with or for the
United States or any of its agencies
(or from sources other than
patronage, such as investment
income).
3. Qualified written notices of
allocation at their stated dollar
amounts and property at its fair
market value (FMV).
4. Amounts received on the
redemption, sale, or other disposition
of nonqualified written notices of
allocation.
Generally, patronage dividends
from purchases of capital assets or
depreciable property are not
includible in income but must be used
to reduce the basis of the assets. See
section 1385(b) and the related
regulations.
5. Amounts received (or the stated
dollar value of qualified per-unit retain
certificates received) from the sale or
redemption of nonqualified per-unit
retain certificates.

Other. Examples of other income to
report on line 9 include the following.
• Recoveries of bad debts deducted
in prior years under the specific
charge-off method.
• The amount included in income
from Form 6478, Biofuel Producer
Credit, if applicable.
• The amount included in income
from Form 8864, Biodiesel and
Renewable Diesel Fuels Credit, if
applicable.
• Refunds of taxes deducted in prior
years to the extent they reduced the
amount of tax imposed. See section
111 and the related regulations. Do
not offset current year taxes against
any tax refunds.
• Ordinary income from trade or
business activities of a partnership
(from Schedule K-1 (Form 1065 or
1065-B)). Do not offset ordinary
losses against ordinary income.
Instead, include the losses on line 23.
Show the partnership's name,
address, and EIN on a separate
statement attached to this return. If
the amount entered is from more than
one partnership, identify the amount
from each partnership.
• The transferred loss amount
identified as "Section 91 Transferred
Loss Amount," which is required to be
recognized when substantially all the
assets of a foreign branch (within the
meaning of section 367(a)(3)(C), as in
effect before its repeal) is transferred
to a foreign corporation with respect to
which the corporation was a U.S.
shareholder immediately after the
transfer. Under section 91(d), such
transferred loss amounts recognized
are treated as derived from sources
within the United States.
• Any net positive section 481(a)
adjustment.
• Part or all of the proceeds received
from certain cooperative-owned life
insurance contracts issued after
August 17, 2006. See section 101(j)
-9-

See Form 8621 and the
Instructions for Form 8621 for details.

Deductions
Limitations on Deductions
Section 263A uniform capitalization rules. The uniform capitalization
(UNICAP) rules of section 263A
generally require cooperatives to
capitalize, or include in inventory,
certain costs.
Cooperatives subject to the section
263A uniform capitalization rules are
required to capitalize:
1. Direct costs of assets produced
or acquired for resale, and
2. An allocable part of most
indirect costs (including taxes) that
are properly allocable to property
produced or acquired for resale.
The costs required to be
capitalized under section 263A are
not deductible until the property (to
which the costs relate) is sold, used,
or otherwise disposed of by the
cooperative. The cooperative
recovers these costs through

depreciation, amortization, or costs of
goods sold.
For more details, including
exceptions to the uniform
capitalization rules, see Pub. 538.
Also see Regulations sections
1.263A-1 through 1.263A-3. See
Regulations section 1.263A-4 and
Pub. 225, Farmer's Tax Guide, for
rules for property produced in a
farming business.

in which the active trade or business
begins. However, for start-up or
organizational costs paid or incurred
before September 9, 2008, the
cooperative is required to attach a
statement to its return to elect to
deduct such costs. For more details,
including special rules for costs paid
or incurred before September 9, 2008,
see the Instructions for Form 4562.
Also see Pub. 535, Business
Expenses.
If the cooperative timely filed its
return for the year without making an
election, it can still make an election
by filing an amended return within 6
months of the due date of the return
(excluding extensions). Clearly
indicate the election on the amended
return and write “Filed pursuant to
section 301.9100-2” at the top of the
amended return. File the amended
return at the same address the
cooperative filed its original return.
The election applies when figuring
taxable income for the current tax year
and all subsequent years.
The cooperative can choose to
forgo the elections above by
affirmatively electing to capitalize its
start-up or organizational costs on its
income tax return filed by the due date
(including extensions) for the tax year
in which the active trade or business
begins.

For exceptions, see Form 8810,
Corporate Passive Activity Loss and
Credit Limitations, and its related
instructions.
Cooperatives subject to the
passive activity limitations must
complete Form 8810 to compute their
allowable passive activity loss and
credit. Before completing Form 8810,
see Temporary Regulations section
1.163-8T, which provides rules for
allocating interest expense among
activities. If a passive activity is also
subject to the earnings stripping rules
of section 163(j), the at-risk rules of
section 465, or the tax-exempt use
loss rules of section 470, those rules
apply before the passive loss rules.
For more information, see section
469, the related regulations, and Pub.
925, Passive Activity and At-Risk
Rules.

DRAFT AS OF
November 5, 2018

Note. A small business taxpayer (see
section 471(c)) is not required to
capitalize costs under section 263A. A
small business taxpayer that wants to
discontinue capitalizing costs under
section 263A must change its method
of accounting. See the Instructions for
Form 3115. Also see Pub. 538.
Transactions between related taxpayers. Generally, an accrual basis
taxpayer can only deduct business
expenses and interest owed to a
related party in the year payment is
included in the income of the related
party. See sections 163(e)(3), 163(j),
and 267(a)(2) for the limitations on
deductions for unpaid interest and
expenses.
Limitations on business interest
expense. Business interest expense
is limited for tax years beginning after
December 31, 2017. See
section163(j) and Form 8990. Also
see Form 1120-C, Schedule K,
Questions 17 and 18.
Section 291 limitations.
Cooperatives may be required to
adjust deductions for depletion of iron
ore and coal, intangible drilling,
exploration and development costs,
and the amortizable basis of pollution
control facilities. See section 291 to
determine the amount of the
adjustment.
Election to deduct business
start-up and organizational costs.
A cooperative can elect to deduct a
limited amount of start-up and
organizational costs it paid or
incurred. Any remaining costs
generally must be amortized over an
180-month period. See sections 195
and 248 and the related regulations.

Time for making an election.
The cooperative generally elects to
deduct start-up or organizational costs
by claiming the deduction on its
income tax return filed by the due date
(including extensions) for the tax year

Note. The election to either amortize
or capitalize start-up costs is
irrevocable and applies to all start-up
costs that are related to the trade or
business.
Report the deductible amount of
start-up and organizational costs and
any amortization on line 23. For
amortization that begins during the
current tax year, complete and attach
Form 4562, Depreciation and
Amortization.
Passive activity limitations.
Limitations on passive activity losses
and credits under section 469 apply to
closely held cooperatives (defined
later).
Generally, the two kinds of passive
activities are:
• Trade or business activities in
which the cooperative did not
materially participate for the tax year,
and
• Rental activities, regardless of its
participation.
-10-

Closely held cooperatives. A
cooperative is “closely held” (as
defined in section 469(j)(1)) if at any
time during the last half of the tax year
more than 50% in value of its
outstanding stock is owned, directly or
indirectly, by or for not more than five
individuals.
Certain organizations are treated
as individuals for purposes of this test.
See section 542(a)(2). For rules for
determining stock ownership, see
section 544 (as modified by section
465(a)(3)).
Reducing certain expenses for
which credits are allowable. If the
cooperative claims certain credits, it
may need to reduce the otherwise
allowable deductions for expenses
used to figure the credit. This applies
to credits such as the following.
• Work opportunity credit (Form
5884).
• Credit for increasing research
activities (Form 6765).
• Orphan drug credit (Form 8820).
• Disabled access credit
(Form 8826).
• Empowerment zone employment
credit (Form 8844), if applicable.
• Indian employment credit (Form
8845), if applicable.
• Credit for employer social security
and Medicare taxes paid on certain
employee tips (Form 8846).
• Credit for small employer pension
plan start-up costs (Form 8881).
• Credit for employer-provided
childcare facilities and services
(Form 8882).

• Low sulfur diesel fuel production
credit (Form 8896).
• Mine rescue team training credit
(Form 8923), if applicable.
• Credit for employer differential
wage payments (Form 8932).
• Credit for small employer health
insurance premiums (Form 8941).
• Employer credit for paid family and
medical leave (Form 8994).
If the cooperative has any of these
credits, figure the current year credit
before figuring the deduction for
expenses on which the credit is
based. If the cooperative capitalized
any costs on which it figured the
credit, it may need to reduce the
amount capitalized by the credit
attributable to these costs.
See the instructions for the form
used to figure the applicable credit for
more details.

compensation, cost of goods sold,
elective contributions to a section
401(k) cash or deferred arrangement,
or amounts contributed under a salary
reduction SEP agreement or a
SIMPLE IRA plan.

Limitations on deductions related
to property leased to tax-exempt
entities. If a cooperative leases
property to a governmental or other
tax-exempt entity, the cooperative
cannot claim deductions related to the
property to the extent that they
exceed the cooperative's income from
the lease payments. This disallowed
tax-exempt use loss can be carried
over to the next tax year and treated
as a deduction with respect to the
property for that tax year. See section
470(d) for exceptions.

Enter the total debts that became
worthless in whole or in part during
the tax year. A cooperative that uses
the cash method of accounting cannot
claim a bad debt deduction unless the
amount was previously included in
income.

If the cooperative provided taxable
fringe benefits to its employees, such
as personal use of a car, do not
deduct as wages the amount
allocated for depreciation and other
expenses claimed on lines 18 and 23.

And the
vehicle's FMV
on the first day
of the lease
exceeded:

The lease term began:
Cars (excluding Trucks
and Vans)
After 12/31/17 but before
1/1/19 . . . . . . . . . . .

.

$50,000

After 12/31/12 but before
1/1/18 . . . . . . . . . . .

.

$19,000

After 12/31/07 but before
1/1/13 . . . . . . . . . . .

.

$18,500

After 12/31/17 but before
1/1/19 . . . . . . . . . . .

.

$50,000

After 12/31/13 but before
1/1/18 . . . . . . . . . . .

.

$19,500

After 12/31/09 but before
1/1/14 . . . . . . . . . . .

.

$19,000

DRAFT AS OF
November 5, 2018

Line 11. Compensation of
Officers

Enter deductible officers'
compensation on line 11. Do not
include compensation deductible
elsewhere on the return, such as
amounts included in cost of goods
sold, elective contributions to a
section 401(k) cash or deferred
arrangement, or amounts contributed
under a salary reduction SEP
agreement or a SIMPLE IRA plan.

If the cooperative claims a
credit for any wages paid or
CAUTION incurred, it may need to
reduce any corresponding deduction
for officers' compensation and
salaries and wages. See Reducing
certain expenses for which credits are
allowable, earlier.

Trucks and Vans

Line 13. Bad Debts

After 12/31/08 but before
1/1/10 . . . . . . . . . . .

.

$18,500

After 12/31/07 but before
1/1/09 . . . . . . . . . . .

.

$19,000

!

Line 14. Rents

If the cooperative rented or leased a
vehicle, enter the total annual rent or
lease expense paid or incurred during
the year. Also complete Form 4562,
Part V. If the cooperative leased a
vehicle for a term of 30 days or more,
the deduction for vehicle lease
expense may have to be reduced by
an amount includible in income called
the inclusion amount. The cooperative
may have an inclusion amount if:

If the cooperative's total receipts
(line 1a plus lines 4 through 9) are
$500,000 or more, complete Form
1125-E, Compensation of Officers. On
Form 1120-C, enter on line 11 the
amount from Form 1125-E, line 4.

Line 12. Salaries and Wages

See Pub. 463, Travel,
Entertainment, Gift, and Car
Expenses, for instructions on figuring
the inclusion amount. The inclusion
amount for lease terms beginning in
2019 will be published in the Internal
Revenue Bulletin in early 2019.

Line 15. Taxes and Licenses

Enter taxes paid or accrued during the
tax year, but do not include the
following.
• Federal income taxes.
• Foreign or U.S. possession income
taxes if a foreign tax credit is claimed.
• Taxes not imposed on the
cooperative.
• Taxes, including state or local sales
taxes, that are paid or incurred in
connection with an acquisition or
disposition of property (these taxes
must be treated as part of the cost of
the acquired property, or in the case
of a disposition, as a reduction in the
amount realized on the disposition).
• Taxes assessed against local
benefits that increase the value of the
property assessed (such as for
paving, etc.).
• Taxes deducted elsewhere on the
return, such as those reflected in cost
of goods sold.
See section 164(d) for the rule on
apportionment of taxes on real
property between the seller and
purchaser.

Enter the total salaries and wages
paid for the tax year. Do not include
salaries and wages deductible
elsewhere on the return, such as
amounts included in officers'
-11-

Line 16. Interest
Note. Do not offset interest income
against interest expense.
The cooperative must make an
interest allocation if the proceeds of a
loan were used for more than one
purpose (for example, to purchase a
portfolio investment and to acquire an
interest in a passive activity). See
Temporary Regulations section
1.163-8T for the interest allocation
rules.

2008, and before January 1, 2011.
See section 163(e)(5)(F). Also see
Notice 2010-11, 2010-4 I.R.B. 326.
• Interest which is allocable to
unborrowed policy cash values of life
insurance, endowment, or annuity
contracts issued after June 8, 1997.
See section 264(f). Attach a
statement showing the computation of
the deduction.
• Section 108(i) OID deduction. If the
cooperative issued a debt instrument
with OID that is subject to section
108(i)(2) because of an election to
defer the income from COD, the
interest deduction for this OID is
deferred until the COD is includible in
income. The accrued OID is allowed
as a deduction ratably over the 5-year
period that the income from COD is
includible in income. The deduction is
limited to the amount of COD subject
to the section 108(i) election.

• Any capital loss carryback to the tax
year under section 1212(a)(1).
Carryover. Charitable contributions
over the 10% limitation cannot be
deducted for the tax year but can be
carried over to the next 5 tax years.
See the exception below for farmers
and ranchers and certain Native
Corporations.
Special rules apply if the
cooperative has an NOL carryover to
the tax year. In figuring the charitable
contributions deduction for the current
tax year, the 10% limit is applied using
the taxable income after taking into
account any deduction for the NOL.
To figure the amount of any
remaining NOL carryover to later
years, taxable income must be
modified (see section 172(b)). To the
extent that contributions are used to
reduce taxable income for this
purpose and increase an NOL
carryover, a contributions carryover is
not allowed. See section 170(d)(2)(B).

DRAFT AS OF
November 5, 2018

Do not deduct the following
interest.
• Interest on indebtedness incurred
or continued to purchase or carry
obligations if the interest is wholly
exempt from income tax. For
exceptions, see section 265(b).
• For cash basis taxpayers, prepaid
interest allocable to years following
the current tax year. For example, a
cash basis calendar year taxpayer
who in 2018 prepaid interest allocable
to any period after 2018 can deduct
only the amount allocable to 2018.
• Interest and carrying charges on
straddles. Generally, these amounts
must be capitalized. See section
263(g).
• Interest on debt allocable to the
production of designated property by
a cooperative for its own use or for
sale. The cooperative must capitalize
this interest. Also capitalize any
interest on debt allocable to an asset
used to produce the property. See
section 263A(f) and Regulations
sections 1.263A-8 through 1.263A-15
for definitions and more information.
• Interest paid or incurred on any
portion of an underpayment of tax that
is attributable to an understatement
arising from an undisclosed listed
transaction or an undisclosed
reportable avoidance transaction
(other than a listed transaction)
entered into in tax years beginning
after October 22, 2004.
Special rules apply to:
• Forgone interest on certain
below-market-rate loans (see section
7872).
• OID on certain high yield discount
obligations. See section 163(e)(5) to
determine the amount of the
deduction for OID that is deferred and
the amount that is disallowed on a
high yield discount obligation. The
rules under section 163(e)(5) do not
apply to certain high yield discount
obligations issued after August 31,

Line 17. Charitable
Contributions

Enter contributions or gifts actually
paid within the tax year to or for the
use of charitable and governmental
organizations described in section
170(c) and any unused contributions
carried over from prior years. Special
rules and limits apply to contributions
to organizations conducting lobbying
activities. See section 170(f)(9).
Cooperatives reporting taxable
income on the accrual method can
elect to treat as paid during the tax
year any contributions paid by the due
date for filing the cooperative’s return
(not including extensions), if the
contributions were authorized by the
board of directors during the tax year.
Attach a declaration to the return
stating that the resolution authorizing
the contributions was adopted by the
board of directors during the tax year.
The declaration must include the date
the resolution was adopted.

Limitation on deduction. The total
amount claimed cannot be more than
10% of taxable income (line 27)
computed without regard to the
following.
• Any deduction for contributions.
• The special deductions on line 26b.
• The limitation under section 249 on
the deduction for bond premium.
• The domestic production activities
deduction under section 199.
• Any net operating loss (NOL)
carryback to the tax year under
section 172.
-12-

Suspension of 10% limitation for
farmers and ranchers and certain
Native Corporations. Certain
cooperatives can deduct contributions
of qualified conservation property
without regard to the general 10%
limit. This applies to:
• A qualified farmer or rancher (as
defined in section 170(b)(1)(E)(v))
that does not have publicly traded
stock; and
• A Native Corporation (as defined in
section 170(b)(2)(C)(iii)) that
contributes property which was land
conveyed under the Alaska Native
Claims Settlement Act.
The total amount of the contribution
claimed for the qualified conservation
property cannot exceed 100% of the
excess of the cooperative's taxable
income (as computed above
substituting “100%” for “10%”) over all
other allowable charitable
contributions. Any excess qualified
conservation contributions can be
carried over to the next 15 years,
subject to the 100% limitation. See
section 170(b)(2)(B) and (C).
Temporary suspension of 10% limitation for certain disaster-related
contributions. A cooperative may
elect to deduct qualified cash
contributions without regard to the
10% taxable income limit. Qualified
contributions are contributions that
were made after October 7, 2017, and

before January 1, 2019, to a qualified
charitable organization (other than
certain private foundations described
in section 509(a)(3) or donor-advised
funds described in section 4966(d)
(2)), for relief efforts in the California
wildfire disaster area. The cooperative
must obtain contemporaneous written
acknowledgment (within the meaning
of section 170(f)(8)) from the qualified
charitable organization that the
contribution was used or is to be used
for disaster relief efforts.
The total amount of the contribution
claimed for disaster relief efforts
cannot exceed 100% of the excess of
the cooperative's taxable income (as
computed above substituting “100%”
for “10%” ) over all other allowable
charitable contributions. Any excess
qualified contributions are carried over
to the next 5 years. See Pub. 976.

Charitable Contributions, for
contributions of property (other than
money) if the total claimed deduction
for all property contributed was more
than $5,000. Special rules apply to the
contribution of certain property. See
the Instructions for Form 8283.
Qualified conservation
contributions. Special rules apply to
qualified conservation contributions,
including contributions of certain
easements on buildings located in a
registered historic district. See section
170(h) and Pub. 526, Charitable
Contributions.

Form 5500. Annual Return/Report of
Employee Benefit Plan.
Form 5500-SF. Short Form Annual
Return/Report of Small Employee
Benefit Plan. File this form instead of
Form 5500, generally if there were
under 100 participants at the
beginning of the plan year.

DRAFT AS OF
November 5, 2018

Cash contributions. For
contributions of cash, check, or other
monetary gifts (regardless of the
amount), the cooperative must
maintain a bank record, or a receipt,
letter, or other written communication
from the donee organization indicating
the name of the organization, the date
of the contribution, and the amount of
the contribution.
Contributions of $250 or more. A
cooperative can deduct a contribution
of $250 or more only if it gets a written
acknowledgment from the donee
organization that shows the amount of
cash contributed, describes any
property contributed (but not its
value), and either gives a description
and a good faith estimate of the value
of any goods or services provided in
return for the contribution or states
that no goods or services were
provided in return for the contribution.
The acknowledgment must be
obtained by the due date (including
extensions) of the cooperative's
return, or, if earlier, the date the return
is filed. Do not attach the
acknowledgment to the tax return, but
keep it with the cooperative's records.
Contributions of property other
than cash. If a cooperative
contributes property other than cash
and claims over a $500 deduction for
the property, it must attach a
statement to the return describing the
kind of property contributed and the
method used to determine its fair
market value (FMV). Complete and
attach Form 8283, Noncash

Other special rules. The
cooperative must reduce its deduction
for contributions of certain capital gain
property. See sections 170(e)(1) and
170(e)(5).
A larger deduction is allowed for
certain contributions. See sections
170(e)(3) and (4).
For more information on charitable
contributions, including substantiation
and recordkeeping requirements, see
section 170 and the related
regulations, and Pub. 526. For special
rules that apply to corporations, see
Pub. 542.

Line 18. Depreciation

Include on line 18 depreciation and
the cost of certain property that the
cooperative elected to expense under
section 179 from Form 4562. Include
amounts not claimed on Form 1125-A
or elsewhere on the return. See Form
4562 and the Instructions for Form
4562.

Line 20. Pension,
Profit-Sharing, etc., Plans

Enter the deduction for contributions
to qualified pension, profit-sharing, or
other funded deferred compensation
plans. Employers who maintain such
a plan generally must file one of the
forms listed below unless exempt
from filing under regulations or other
applicable guidance, even if the plan
is not a qualified plan under the
Internal Revenue Code. The filing
requirement applies even if the
cooperative does not claim a
deduction for the current tax year.
There are penalties for failure to file
these forms timely and for overstating
the pension plan deduction. See
sections 6652(e) and 6662(f). Also
see the instructions for the applicable
form.
-13-

Note. Form 5500 and Form 5500-SF
must be filed electronically under the
computerized ERISA Filing
Acceptance System (EFAST2). For
more information, see the EFAST2
website at www.efast.dol.gov.
Form 5500-EZ. Annual Return of
One-Participant (Owners and Their
Spouses) Retirement Plan. File this
form for a plan that only covers the
owner (or the owner and his or her
spouse) but only if the owner (or the
owner and his or her spouse) owns
the entire business.

Line 21. Employee Benefit
Programs

Enter contributions to employee
benefit programs not claimed
elsewhere on the return (for example,
insurance or health and welfare
programs) that are not an incidental
part of a pension, profit-sharing, etc.,
plan included on line 20.

Line 22. Domestic Production
Activities Deduction (DPAD)

Public law 115-97 (as amended by the
Consolidated Appropriations Act,
2018, P.L. 115-141, §101(c), 131
Stat. 350, 1151, 1156), repealed the
DPAD for tax years beginning after
December 31, 2017. However, if the
cooperative's tax year begins after
December 31, 2017, and the
cooperative is a recipient of the DPAD
from a flow- through entity
(partnership, estate, trust or
cooperative) with a tax year beginning
before January 1, 2018, the DPAD
can be taken in limited circumstances.
Cooperatives described in section
1381 are required to calculate the
DPAD on Form 8903, Domestic
Production Activities Deduction, and
file it with Form 1120-C. Special rules
apply to certain cooperatives with
both patronage and nonpatronage
income and losses. See Form 8903
and the Instructions for Form 8903.

Line 23. Other Deductions

Attach a statement, listing by type and
amount, all allowable deductions that
are not deductible elsewhere on Form
1120-C. Enter the total on
line 23.
See Special Rules, later, for limits
on certain other deductions. Also, see
Pub. 535 for details on other
deductions that may apply to
cooperatives.

cost depletion purposes or be
deducted ratably over a 10-year
period. See sections 263(i), 616, and
617 for details.
See Pub. 535 for more information
on depletion.
• Insurance premiums.
• Legal and professional fees.
• Repairs and maintenance
(discussed later).
• Supplies used and consumed in the
business.
• Travel, meals, and entertainment
expenses. Special rules apply
(discussed later).
• Utilities.
• Ordinary losses from trade or
business activities of a partnership
(from Schedule K-1 (Form 1065 or
1065-B)). Do not offset ordinary
income against ordinary losses.
Instead, include the income on line 9.
Show the partnership's name,
address, and EIN on a separate
statement attached to this return. If
the amount entered is from more than
one partnership, identify the amount
from each partnership.
• Any extraterritorial income
exclusion (from Form 8873).
• Any net negative section 481(a)
adjustment. See the instructions for
line 9.
• Dividends paid in cash on stock
held by an employee stock ownership
plan.
However, a deduction can only be
taken for the dividends above if,
according to the plan, the dividends
are:
1. Paid in cash directly to the plan
participants or beneficiaries;
2. Paid to the plan, which
distributes them in cash to the plan
participants or their beneficiaries no
later than 90 days after the end of the
plan year in which the dividends are
paid;
3. At the election of such
participants or their beneficiaries (a)
payable as provided under (1) or (2)
above, or (b) paid to the plan and
reinvested in qualifying employer
securities; or
4. Used to make payments on a
loan described in section 404(a)(9).

• Fines or penalties paid to a
government for violating any law.
However, exceptions apply for certain
amounts paid or incurred after
December 21, 2017. See section
162(f), as amended by P.L. 115-97,
section 13306.
• Any amount that is allocable to a
class of exempt income. See section
265(b) for exceptions.
• Lobbying expenses. However, see
exceptions (discussed later).
• Amounts paid or incurred after
December 22, 2017, for any
settlement, payout, or attorney fees
related to sexual harassment or
sexual abuse, if such payments are
subject to a nondisclosure agreement.
See new section 162(q).

DRAFT AS OF
November 5, 2018

Examples of other deductions
include the following.
• Amortization. See Form 4562, Part
VI.
• Certain business start-up and
organizational costs (discussed
earlier under Election to deduct
business start-up and organizational
costs).
• Certain costs of a qualified film,
television, or live theatrical production
commencing before January 1, 2018
(after December 31, 2015, and before
January 1, 2018, for a live theatrical
production), if the aggregate cost of
the production does not exceed $15
million. There is a higher dollar
limitation for productions in certain
areas. See section 181 and the
related regulations.
Note. Certain film, television, or live
theatrical productions acquired and
placed in service after September 27,
2017 (for which a deduction would
have been allowable under section
181 without regard to the dollar
limitation), are qualified property
eligible for the special depreciation
allowance under section 168(k). See
the Instructions for Form 4562.
• Reforestation costs. The
cooperative can elect to deduct up to
$10,000 of qualifying reforestation
expenses for each qualified timber
property. The cooperative can elect to
amortize over 84 months any amount
not deducted. See Pub. 535.
• Depletion.
1. See sections 613 and 613A for
percentage depletion rates applicable
to natural deposits. Also see section
291 for the limitation on the depletion
deduction for iron ore and coal
(including lignite).
2. Attach Form T (Timber), Forest
Activities Schedule, if a deduction for
depletion of timber is taken.
3. Foreign intangible drilling costs
and foreign exploration and
development costs must either be
added to the cooperative's basis for

See section 404(k) for more details
and the limitation on certain
dividends.
Do not deduct the following.
-14-

Special Rules
Repairs and maintenance. Include
the cost of repairs and maintenance
not claimed elsewhere on the return,
such as labor and supplies, that do
not add to the value of the property or
appreciably prolong its life. See
Regulations section 1.162-4. The
cooperative may elect to capitalize
certain repair and maintenance costs
consistent with its books and records.
See Regulations section 1.263(a)-3(n)
for information on how to make the
election.
New buildings, machinery, or
permanent improvements that
increase the value of the property are
not deductible. They must be
depreciated or amortized. However,
amounts paid for routine maintenance
on property, including buildings, may
be deductible. See Regulations
section 1.263(a)-3(i).
Travel, meals, and entertainment.
Subject to limitations and restrictions
discussed below, a cooperative can
deduct ordinary and necessary travel,
meals, and non-entertainment
expenses paid or incurred in its trade
or business. Generally, entertainment
expenses, membership dues, and
facilities used in connection with these
activities cannot be deducted. Also,
special rules apply to deductions for
gifts, and convention expenses. See
section 274 and Pub. 463 for details.
Travel. The cooperative cannot
deduct travel expenses of any
individual accompanying a
cooperative officer or employee,

including a spouse or dependent of
the officer or employee, unless:
• That individual is an employee of
the cooperative, and
• His or her travel is for a bona fide
business purpose and would
otherwise be deductible by that
individual.

are treated as compensation to the
recipient and reported on Form W-2,
Wage and Tax Statement, for an
employee or on Form 1099-MISC,
Miscellaneous Income, for an
independent contractor.
However, if the recipient is an
officer, director, beneficial owner
(directly or indirectly), or other
“specified individual” (as defined in
section 274(e)(2)(B) and Regulations
section 1.274-9(b)), special rules
apply. See section 274(e)(2) and
Regulations sections 1.274-9 and
1.274-10.

• Any qualifying business of a
qualified cooperative under section
465(c)(7).
However, the at-risk rules do apply
to the holding of mineral property.
If the at-risk rules apply, adjust the
amount on this line for any section
465(d) losses. These losses are
limited to the amount for which the
cooperative is at risk for each
separate activity at the close of the tax
year. If the cooperative is involved in
one or more activities, any of which
incurs a loss for the year, report the
losses for each activity separately.
Attach Form 6198, At-Risk
Limitations, showing the amount at
risk and gross income and deductions
for the activities with the losses.
If the cooperative sells or otherwise
disposes of an asset or its interest
(either total or partial) in an activity to
which the at-risk rules apply,
determine the net profit or loss from
the activity by combining the gain or
loss on the sale or disposition with the
profit or loss from the activity. If the
cooperative has a net loss, the loss
may be limited because of the at-risk
rules.
Treat any loss from an activity not
allowed for the current tax year as a
deduction allocable to the activity in
the next tax year.
Cooperatives are required to
allocate income and deductions
between patronage and
nonpatronage-related business.
Cooperatives with gross receipts and
assets of $250,000 or more must
complete Schedule G. See the
instructions for Schedule G.

DRAFT AS OF
November 5, 2018

Meals. Generally, the cooperative
can deduct only 50% of the amount
otherwise allowable for
non-entertainment related meal
expenses. Entertainment-related
meals generally are not deductible. In
addition (subject to exceptions under
section 274(k)(2)):
• Meals must not be lavish or
extravagant; and
• An employee of the cooperative
must be present at the meal.
See section 274(n)(3) for a special
rule that applies to expenses for
meals consumed by individuals
subject to the hours of service limits of
the Department of Transportation.
Membership dues. The
cooperative can deduct amounts paid
or incurred for membership dues in
civic or public service organizations,
professional organizations (such as
bar and medical associations),
business leagues, trade associations,
chambers of commerce, boards of
trade, and real estate boards.
However, no deduction is allowed if a
principal purpose of the organization
is to entertain, or provide
entertainment facilities for members
or their guests. In addition,
cooperatives cannot deduct
membership dues in any club
organized for business, pleasure,
recreation, or other social purpose.
This includes country clubs, golf and
athletic clubs, airline and hotel clubs,
and clubs operated to provide meals
under conditions favorable to
business discussion.

Entertainment facilities. The
cooperative cannot deduct an
expense paid or incurred for a facility
(such as a yacht or hunting lodge)
used for an activity usually considered
entertainment, amusement, or
recreation.
Amounts treated as
compensation. Generally, the
cooperative may be able to deduct
otherwise nondeductible
entertainment, amusement, or
recreation expenses if the amounts

Lobbying expenses. Generally,
lobbying expenses are not deductible.
These expenses include amounts
paid or incurred in connection with:
• Influencing federal or state
legislation, or
• Any communication with certain
federal executive branch officials in an
attempt to influence the official actions
or positions of the officials. See
Regulations section 1.162-29 for the
definition of “influencing legislation.”
Dues and other similar amounts
paid to certain tax-exempt
organizations may not be deductible.
If certain in-house expenditures do
not exceed $2,000, they are
deductible. See section 162(e)(5)(B).

Line 25a. Taxable Income
Before Adjustments and
Special Deductions
At-risk rules. Generally, special
at-risk rules under section 465 apply
to closely held cooperatives (see
Passive activity limitations, earlier)
engaged in any activity as a trade or
business or for the production of
income. These cooperatives may
have to adjust the amount on line 25a.
(See below.)
A taxpayer is generally considered
“at-risk” for an amount equal to his or
her investment in the entity. That
investment consists of money and
other property contributed to the entity
and amounts borrowed on behalf of
the entity.
The at-risk rules do not apply to:
• Holding real property placed in
service by the cooperative before
1987;
• Equipment leasing under sections
465(c)(4), (5), and (6); or

-15-

Line 25b. Deductions and
Adjustments From
Schedule H

Complete Schedule H. Enter on
line 25b the amount from Schedule H,
line 5. See the instructions for
Schedule H.

Line 25c. Taxable Income
Before Net Operating Loss and
Special Deductions
Subtract line 25b from line 25a and
enter the result on line 25c.

Line 26a. Net Operating Loss
Deduction

The cooperative must attach a
statement separately accounting for

patronage and nonpatronage-sourced
NOLs.
Note. Patronage-sourced NOLs
cannot be used to reduce
nonpatronage-sourced taxable
income.

attributable to the qualifying shipping
activities to the extent that the loss is
carried forward from a tax year
preceding the first tax year for which
the alternative tax election was made.
See section 1358(b)(2).
For more details on the NOL
deduction, see section 172 and
Instructions for Form 1139.

Note. The NOL is limited to 80% of
taxable income (determined without
regard to net operating losses) for
losses arising in taxable years
beginning after December 31, 2017.
Merchant Marine capital construction fund. To take a deduction for
amounts contributed to a capital
construction fund (CCF), reduce the
amount that would otherwise be
entered on line 27 by the amount of
the deduction. On the dotted line next
to the entry space, enter “CCF” and
the amount of the deduction. For more
information, see section 7518.

DRAFT AS OF
November 5, 2018

A cooperative can use the NOL
incurred in one tax year to reduce its
taxable income in another tax year.
Enter on line 26a the total NOL
carryovers from other tax years, but
do not enter more than the
cooperative's taxable income (after
special deductions). Attach a
statement showing the computation of
the NOL deduction. Also complete
Schedule K, Item 12, if applicable.

The following special rules apply.
• If an ownership change (described
in section 382(g)) occurs, the amount
of the taxable income of a loss
cooperative that may be offset by the
pre-change NOL carryovers may be
limited. See section 382 and the
related regulations. A loss cooperative
must include the information
statement as provided in Regulations
section 1.382-11(a) with its income
tax return for each tax year that it is a
loss cooperative in which an
ownership shift, equity structures shift,
or other transaction described in
Temporary Regulations section
1.382-2T(a)(2)(i) occurs. If the
cooperative makes the
closing-of-the-books election, see
Regulations section 1.382-6(b).
The limitations under section 382
do not apply to certain ownership
changes after February 17, 2009,
made according to a restructuring
plan under the Emergency Economic
Stabilization Act of 2008. See section
382(n).
For guidance in applying section
382 to loss cooperatives whose
instruments were acquired by
Treasury under certain programs
under the Emergency Economic
Stabilization Act of 2008, see Notice
2010-2, 2010-2 I.R.B. 251.
• If a cooperative acquires control of
another cooperative (or acquires its
assets in a reorganization), the
amount of pre-acquisition losses that
may offset recognized built-in gain
may be limited (see section 384).
• If a cooperative elects the
alternative tax on qualifying shipping
activities under section 1354, no
deduction is allowed for an NOL

Line 26b. Special Deductions

See the instructions for Schedule C.
Then, complete Schedule C and enter
on line 26b, the amount from
Schedule C, line 24.

Line 26c. Total NOL and Special
Deductions

Combine lines 26a and 26b and enter
the result on line 26c.

Tax, Refundable Credits,
and Payments
Line 27. Taxable Income

See Schedule K, Question 14, to
determine if the cooperative needs to
complete Schedule G. Taxable
income reported on page 1, line 27,
cannot be less than the nonpatronage
taxable income shown on
Schedule G, line 10, column b.
Patronage source losses
cannot be used to offset
CAUTION nonpatronage income. See
the instructions for Schedule G.

!

Minimum taxable income. The
cooperative's taxable income cannot
be less than the inversion gain of the
cooperative for the tax year, if the
cooperative is an expatriated entity or
a partner in an expatriated entity. See
section 7874(a).
Net operating loss (NOL). If line 27
(figured without regard to the
minimum taxable income rule stated
above) is zero or less, the cooperative
may have an NOL that can be carried
back or forward as a deduction to
other tax years.
Generally, a cooperative first
carries back an NOL, attributable to
farming losses 2 tax years. However,
the cooperative can elect to waive the
carryback period and instead carry
the NOL forward to future tax years.
To make the election, see the
instructions for Schedule K, Item 12,
later.
See the Instructions for Form 1139
for other special rules and elections.
-16-

Line 29.

Enter the amount of the section 965
net tax liability installment from Form
965-B, Part II, total of column (k).

Line 30a. 2017 Overpayment
Credited to 2018

Enter amount of overpayment
credited to 2018 from the tax return
filed for 2017.

Line 30b. Estimated Tax
Payments

Enter any estimated tax payments the
cooperative made for the tax year.
Beneficiaries of trusts. If the
cooperative is the beneficiary of a
trust, and the trust makes a section
643(g) election to credit its estimated
tax payments to its beneficiaries,
include the cooperative's share of the
payment in the total for line 30b. Enter
“T” and the amount of the payment in
the shaded space beside line 30b.

Line 30c. Overpaid Estimated
Tax

If the cooperative overpaid estimated
tax, it may be able to get a quick
refund by filing Form 4466. The
overpayment must be at least 10% of
the cooperative's expected income
tax liability and at least $500. File
Form 4466 after the end of the
cooperative's tax year, and no later
than the due date for filing the
cooperative’s tax return. Form 4466
must be filed before the cooperative
files its tax return. See the instructions
for Form 4466.

Line 30d. Net Tax Payments

Combine lines 30a through 30c and
enter the result on line 30d.

Line 30f.
Credit from Form 2439. Enter any
credit from Form 2439, Notice to
Shareholder of Undistributed
Long-Term Capital Gains, for the
cooperative's share of the tax paid by
a regulated investment company
(RIC) or a real estate investment trust
(REIT) on undistributed long-term
capital gains included in the
cooperative's income. Attach Form
2439.

include the amount withheld in the
total for line 30j. Enter the amount
withheld and the words “Backup
withholding” in the blank space above
line 30j.

Line 31. Estimated Tax Penalty

Generally, the cooperative does not
have to file Form 2220 because the
IRS can figure the penalty amount, if
any, and bill the cooperative.
However, even if the cooperative
does not owe the penalty, it must
complete and attach Form 2220 if:
• The annualized income or adjusted
seasonal installment method is used,
or
• The cooperative is a large
corporation (as defined in the
Instructions for Form 2220) computing
its first required installment based on
the prior year's tax. See the
Instructions for Form 2220.

cooperative's 2018 estimated tax
cannot be changed at a later date.
Direct deposit of refund. If the
cooperative has a refund of $1 million
or more and wants it directly
deposited into its checking or savings
account at any U.S. bank or other
financial institution instead of having a
check sent to the cooperative,
complete Form 8302 and attach it to
the cooperative's tax return.

DRAFT AS OF
November 5, 2018

Credit for federal tax on fuels.
Enter the total income tax credit
claimed on Form 4136, Credit for
Federal Tax Paid on Fuels. Attach
Form 4136.

Credit for tax on ozone-depleting
chemicals. Include on line 30f any
credit the cooperative is claiming
under section 4682(g)(2) for tax on
ozone-depleting chemicals. Enter
“ODC” next to the entry space.

Line 30g. Refundable Credits
From Form 8827

Enter on line 30g the amounts from
Form 8827, line 8c. See the
instructions for Form 8827.

Line 30h. Section 1383
Adjustment

If the cooperative would pay less total
tax by claiming the deduction for the
redemption of nonqualified written
notices of allocation or nonqualified
per-unit retain certificates in the issue
year versus the current tax year,
refigure the tax for the years the
nonqualified written notices or
certificates were originally issued
(deducting them in the issue year),
then enter the amount of the reduction
in the issue years' taxes on this line.
Attach a statement showing how the
adjustment was figured. This
adjustment is treated as a payment,
and any amount that is more than the
tax on line 28 will be refunded.

Line 30j. Total Payments,
Refundable Credits, Section
1383 Adjustments, and Net 965
Tax Liability

Add the amounts on lines 30d through
30h and enter the total on line 30i.
Backup withholding. If the
cooperative had federal income tax
withheld from any payments it
received because, for example, it
failed to give the payer its correct EIN,

If Form 2220 is attached, check the
box on line 31, and enter any penalty
on this line.

Line 32. Amount Owed

If the cooperative cannot pay the full
amount of tax owed, it can apply for
an installment agreement online. The
cooperative can apply for an
installment agreement online if:
• It cannot pay the full amount shown
on line 32,
• The total amount owed is $25,000
or less, and
• The cooperative can pay the liability
in full in 24 months.
To apply using the Online Payment
Agreement Application, go to IRS.gov/
OPA. Under an installment
agreement, the cooperative can pay
what it owes in monthly installments.
There are certain conditions that must
be met to enter into and maintain an
installment agreement, such as
paying the liability within 24 months
and making all required deposits and
timely filing tax returns during the
length of the agreement. If the
installment agreement is accepted,
the cooperative will be charged a fee
and it will be subject to penalties and
interest on the amount of tax not paid
by the due date of the return.

Line 34. Refund

Enter the amount of any overpayment
that should be refunded or applied to
next year's estimated tax.

Note. This election to apply some or
all of the overpayment amount to the
-17-

Schedule C.
Dividends, Inclusions, and
Special Deductions
Note. Do not report income from
patronage dividends on Schedule C.
Report income from patronage
dividends and per-unit retain
allocations on page 1, line 9.
For purposes of the 20% ownership
test on lines 1 through 7, the
percentage of stock owned by the
cooperative is based on voting power
and value of the stock. Preferred
stock described in section 1504(a)(4)
is not taken into account.
Consolidated returns.
Cooperatives filing a consolidated
return should see Regulations
sections 1.1502-13, 1.1502-26, and
1.1502-27 before completing
Schedule C.
Cooperatives filing a consolidated
return must not report as dividends on
Schedule C any amounts received
from corporations within the tax
consolidation group. Such dividends
are eliminated in consolidation rather
than offset by the dividends-received
deduction.

Line 1, Column (a)

Enter dividends (except those
received on certain debt-financed
stock acquired after July 18, 1984—
see section 246A) that are:
• Received from
less-than-20%-owned domestic
corporations subject to income tax,
and
• Qualified for the 50% deduction
under section 243(a)(1).
Also include in line 1 the following.

• Taxable distributions from an

interest charge domestic international
sales corporation (IC-DISC) or former
domestic international sales
corporation (former DISC) that are
designated as eligible for the 50%

deduction and certain dividends of
Federal Home Loan Banks. See
section 246(a)(2).
• Dividends (except those received
on debt-financed stock acquired after
July 18, 1984) from a regulated
investment company (RIC). The
amount of dividends eligible for the
dividends-received deduction under
section 243 is limited by section
854(b). The cooperative should
receive a notice from the RIC
specifying the amount of dividends
that qualify for the deduction.

a percentage that is related to the
amount of debt incurred to acquire the
stock. See section 246A. Also see
section 245(a) before making this
computation for an additional
limitation that applies to certain
dividends received from foreign
corporations. Attach a statement to
Form 1120-C showing how the
amount on line 3, column (c), was
figured.

• Qualify for the 80% deduction
under sections 245(a) and 243.
Also include dividends received
from a 20%-or-more-owned FSC that:
• Are attributable to income treated
as effectively connected with the
conduct of a trade or business within
the United States (excluding foreign
trade income), and
• Qualify for the 65% deduction
under section 245(c)(1)(B).

DRAFT AS OF
November 5, 2018

Report so-called dividends or
earnings received from mutual
savings banks, etc., as interest. Do
not treat them as dividends.

Line 2, Column (a)

Enter on line 2:
• Dividends (except those received
on certain debt-financed stock
acquired after July 18, 1984) that are
received from 20%-or-more-owned
domestic corporations subject to
income tax and that are subject to the
65% deduction under section 243(c),
and
• Taxable distributions from an
IC-DISC or former DISC that are
considered eligible for the 65%
deduction.

Line 3, Column (a)

Enter the following:
• Dividends received on certain
debt-financed stock acquired after
July 18, 1984, from domestic and
foreign corporations subject to income
tax that would otherwise be subject to
the dividends-received deduction
under section 243(a)(1), 243(c), or
245(a). Generally, debt-financed
stock is stock that the cooperative
acquired by incurring a debt (for
example, it borrowed money to buy
the stock).
• Dividends received from a RIC on
debt-financed stock. The amount of
dividends eligible for the
dividends-received deduction is
limited by section 854(b). The
cooperative should receive a notice
from the RIC specifying the amount of
dividends that qualify for the
deduction.

Line 3, Columns (b) and (c)

Dividends received on debt-financed
stock acquired after July 18, 1984, are
not entitled to the full 50% or 65%
dividends-received deduction. The
50% or 65% deduction is reduced by

Line 4, Column (a)

Enter dividends received on preferred
stock of a less-than-20%-owned
public utility that is subject to income
tax and is allowed the 23.3%
deduction provided in sections 244
and section 247 (as affected by P.L.
113-295, Div. A, section 221(a)(41)
(A), Dec. 19, 2014, 128 Stat. 4043) for
dividends paid.

Line 5, Column (a)

Enter dividends received on preferred
stock of a 20%-or-more-owned public
utility that is subject to income tax and
is allowed the 26.7% deduction
provided in sections 244 and section
247 (as affected by P.L. 113-295, Div.
A, section 221(a)(41)(A), Dec. 19,
2014, 128 Stat. 4043) for dividends
paid.

Line 6, Column (a)

Enter the U.S.-source portion of
dividends that:
• Are received from
less-than-20%-owned foreign
corporations, and
• Qualify for the 50% deduction
under section 245(a). To qualify for
the 50% deduction, the cooperative
must own at least 10% of the stock of
the foreign corporation by vote and
value.
Also include dividends received
from a less-than-20%-owned foreign
sales corporation (FSC) that:
• Are attributable to income treated
as effectively connected with the
conduct of a trade or business within
the United States (excluding foreign
trade income), and
• Qualify for the 50% deduction
under section 245(c)(1)(B).

Line 7, Column (a)

Enter the U.S.-source portion of
dividends that:
• Are received from
20%-or-more-owned foreign
corporations, and
-18-

Line 8, Column (a)

Enter dividends received from wholly
owned foreign subsidiaries that are
eligible for the 100% deduction under
section 245(b).

In general, the deduction under
section 245(b) applies to dividends
paid out of the earnings and profits of
a foreign corporation for a tax year
during which:
• All of its outstanding stock is
directly or indirectly owned by the
domestic cooperative receiving the
dividends, and
• All of its gross income from all
sources is effectively connected with
the conduct of a trade or business
within the United States.

Line 9, Column (c)

Generally, line 9, column (c), cannot
exceed the amount from the
worksheet below. However, in a year
in which an NOL occurs, this limitation
does not apply even if the loss is
created by the dividends-received
deduction. See sections 172(d) and
246(b).

Worksheet for Schedule C, line 9
(keep for your records)
1. Refigure Form 1120-C, page
1, line 25a, without any
domestic production activities
deduction, any adjustment
under section 1059, and
without any capital loss
carryback to the tax year
under section 1212(a)
(1) . . . . . . . . . . . . . . .
2. Complete lines 10 through 13,
column (c) and enter the
total . . . . . . . . . . . . . .
3. Subtract line 2 from
line 1 . . . . . . . . . . . . .
4. Multiply line 3 by 65%
(0.65) . . . . . . . . . . . . .
5. Add lines 2, 5, 7, and 8,
column (c) and the part of the
deduction on line 3, column
(c), that is attributable to
dividends received from
20%-or-more-owned
corporations . . . . . . . . .
6. Enter the smaller of line 4 or
line 5. If line 5 is greater than
line 4, stop here; enter the
amount from line 6 on line 9,
column (c). Do not complete
the rest of this
worksheet . . . . . . . . . .
7. Enter the total amount of
dividends received from
20%-or-more-owned
corporations that are included
on lines 2, 3, 5, 7, and 8,
column (a) . . . . . . . . . .
8. Subtract line 7 from
line 3 . . . . . . . . . . . . .
9. Multiply line 8 by 50%
(0.50) . . . . . . . . . . . . .
10. Subtract line 5 from line 9,
column (c) . . . . . . . . . .
11. Enter the smaller of line 9 or
line 10 . . . . . . . . . . . . .
12. Dividends-received
deduction after limitation
(section 246(b)). Add lines 6
and 11. Enter the result here
and on line 9, column
(c) . . . . . . . . . . . . . . .

Investment Act of 1958 at the time it
received the dividends.

Line 11, Columns (a) and (c)

Enter only dividends that qualify under
section 243(b) for the 100%
dividends-received deduction
described in section 243(a)(3).
Cooperatives taking this deduction
are subject to the provisions of section
1561.

war profits, or excess profits taxes
imposed by any foreign country or
possession of the U.S.
• Also include on line 14 the
cooperative's share of distributions
from a section 1291 fund from Form
8621, to the extent that the amounts
are taxed as dividends under section
301. See Form 8621 and the
Instructions for Form 8621.

DRAFT AS OF
November 5, 2018

Line 10, Columns (a) and (c)

Small business investment
companies operating under the Small
Business Investment Act of 1958 (see
15 U.S.C. 661 and following) must
enter dividends that are received from
domestic corporations subject to
income tax even though a deduction
is allowed for the entire amount of
those dividends. To claim the 100%
deduction on line 10, column (c), the
cooperative must file with its return a
statement that it was a federal
licensee under the Small Business

The 100% deduction does not
apply to affiliated group members that
are joining in the filing of a
consolidated return.

Line 12, Columns (a) and (b)

Enter in column (a) dividends from
FSCs that are attributable to foreign
trade income and that are eligible for
the 100% deduction provided in
section 245(c)(1)(A).

For cooperatives described in
section 1381 that are engaged in the
marketing of agricultural or
horticultural products and are
shareholders in a FSC, multiply the
total dividends reported in column (a)
by 16/23 or (0.6957), for the exempt
portion of the dividends that are
attributable to foreign trade income,
and enter the amount in column (c).
See sections 245(c)(2) (repealed) and
923(a)(4)(repealed) for additional
information.

Line 13, Column (a)

Enter the foreign-source portion of
dividends that:
• Are received from a specified
10%-owned foreign corporations (as
defined in section 245A(b)), including
gain from the sale of stock of a foreign
corporation that is treated as a
dividend for purposes of applying
section 245A under section 1248(a)
and (j); and
• Qualify for the 100% deduction
under section 245A excluding any
hybrid dividends (see the instructions
for Line 14).

Line 14, Column (a)

Enter foreign dividends not reportable
on lines 3, 6, 7, 8, 12, or 13 of column
(a).
• Include on line 14 any hybrid
dividends from a controlled foreign
corporation (CFC). Hybrid dividends
are generally dividends received from
a CFC that would otherwise be
reported on line 13 except the CFC
receives a deduction (or other tax
benefit) with respect to any income,
-19-

Line 15, Column (a)

Enter the section 965(a) inclusion
amount from Form 965, line 3.
Complete and attach Form 965 and
any applicable schedules. Also
complete and attach Form 965-B.

Line 15, Column (c)

Enter in column (c) the section 965(c)
deduction amount from Form 965,
line 17.

Lines 16a, 16b, and 16c,
Column (a)

• Line 16a: Enter the foreign-source
portion of any subpart F inclusions
attributable to the sale or exchange by
a CFC of stock in another foreign
corporation described in section
964(e)(4). This should equal the U.S.
shareholder's pro rata share of the
amount reported on line 1a,
Schedule I of the Information
Return(s) of U.S. Person with Respect
to Certain Foreign Corporation (Form
5471).
• Line 16b: Enter the pro rata share
of subpart F inclusions attributable to
hybrid dividends of tiered corporations
under section 245A(e)(2). This should
equal the U.S. shareholder's pro rata
share of the amount reported on Form
5471, Schedule I, line 1b.
• Line 16c: Enter all other amounts
included in income under section 951,
which should equal the U.S.
shareholder's pro rata share of the
sum of the amounts on Form 5471,
Schedule I, lines 1(c), 2, 3, and 4.
Line 17, Column (a)

Enter amounts included in income
under section 951A. See Form 8992,
Part II, line 3, and the Instructions for
Form 8992. Also, if applicable, attach
Form(s) 5471.

Line 18, Column (a)

Include gross-up for taxes deemed
paid under sections 902 (for dividends
paid in pre-2018 taxable years of
foreign corporations) and 960.

Line 19, Column (a)

Enter taxable distributions from an
IC-DISC or former DISC that are
designated as not eligible for a
dividends-received deduction.
No deduction is allowed under
section 243 for a dividend from an
IC-DISC or former DISC (as defined in
section 992(a)) to the extent the
dividend:
• Is paid out of the cooperative's
accumulated IC-DISC income or
previously taxed income, or
• Is a deemed distribution under
section 995(b)(1).

are subject to the 46-day holding
period rule above.
c. Dividends on any share of stock
to the extent the cooperative is under
an obligation (including a short sale)
to make related payments with
respect to positions in substantially
similar or related property.
5. Any other taxable dividend
income not properly reported
elsewhere on Schedule C.

Cooperatives may elect to net
earnings against losses under section
1388(j) and still be eligible for
tax-exempt treatment.

Line 6

For agricultural and horticultural
cooperatives only, special rules apply
in determining and reporting the
domestic production activities
deduction (DPAD). See the
instructions for page 1, line 22. Also
see the instructions for Form 8903.

DRAFT AS OF
November 5, 2018

Line 20, Column (a)

Include the following:
1. Dividends (other than capital
gain distributions reported on
Schedule D (Form 1120) and
exempt-interest dividends) that are
received from RICs and that are not
subject to the 50% deduction.
2. Dividends from tax-exempt
organizations.
3. Dividends (other than capital
gain distributions) received from a
REIT that, for the tax year of the trust
in which the dividends are paid,
qualifies under sections 856 through
860.
4. Dividends not eligible for a
dividends-received deduction, which
include the following.
a. Dividends received on any
share of stock held for less than 46
days during the 91-day period
beginning 45 days before the
ex-dividend date. When counting the
number of days the cooperative held
the stock, you cannot count certain
days during which the cooperative's
risk of loss was diminished. See
section 246(c)(4) and Regulations
section 1.246-5 for more details.
b. Dividends attributable to
periods totaling more than 366 days
that the cooperative received on any
share of preferred stock held for less
than 91 days during the 181-day
period that began 90 days before the
ex-dividend date. When counting the
number of days the cooperative held
the stock, you cannot count certain
days during which the cooperative's
risk of loss was diminished. See
section 246(c)(4) and Regulations
section 1.246-5 for more details.
Preferred dividends attributable to
periods totaling less than 367 days

Line 21, Column (c)

Section 247 (as affected by P.L.
113-295, Div. A, section 221(a)(41)
(A), Dec. 19, 2014, 128 Stat. 4043)
allows public utilities a deduction of
40% of the smaller of (a) dividends
paid on their preferred stock during
the tax year, or (b) taxable income
computed without regard to this
deduction. In a year in which an NOL
occurs, compute the deduction
without regard to section 247(a)(1)(B).

Line 22, Column (c)

Enter the section 250 deduction
claimed for FDII and GILTI. This
should equal the sum of Form 8993,
Part IV, lines 8 and 9.

Schedule G.
Allocation of Patronage
and Nonpatronage Income
and Deductions

If the cooperative's total receipts
(page 1, line 1a plus lines 4 through 9)
for the tax year and its total assets at
the end of the tax year are less than
$250,000, the cooperative is not
required to complete Schedule G. See
Schedule K, Question 14.
Cooperatives are required to
allocate income and deductions
between patronage and
nonpatronage business. If the
transaction producing the income
merely enhances the overall
profitability of the cooperative, being
merely incidental to the cooperative's
operation, the income is from a
nonpatronage source. But if the
source of income or loss is from an
activity that is an integral part of the
cooperative's business (such as
inventory), then the source may be
patronage.

Special rules also apply if a
cooperative has acquired the assets
of another cooperative under a
section 381(a) transaction.
-20-

Line 8 (columns a and b)

Complete Schedule H before entering
an amount on this line. Allocate the
amount on Schedule H, line 5,
between patronage and
nonpatronage. Only farmers'
cooperatives exempt under section
521 are allowed to take a deduction in
column (b) for nonpatronage
distributions under section 1382(c).

Line 9a (columns a and b)

Compute and carry back or carry over
patronage and nonpatronage NOLs
separately. Under section 1388(j)(1),
cooperatives can use losses from one
or more allocation units to offset
earnings of one or more other
allocation units, as permitted by their
bylaws, but only to the extent that the
earnings and losses are from
business done with or for patrons. If a
cooperative exercises this option, it
must provide the information specified
in section 1388(j)(3) in a written notice
to its patrons.

Line 9b (columns a and b)

Allocate the amount of total special
deductions reported on Schedule C,
line 20, between patronage and
nonpatronage business.

Line 10 (columns a and b)

The taxable income reported on
page 1, line 27, may not be less than
the nonpatronage taxable income
shown on Schedule G, line 10
(column b).

Line 11 (column a)

Combine lines 10(a) and 10(b).
Note. Any patronage source losses
(line 10, column (a)) cannot be used
to offset nonpatronage income
(line 10, column (b)).

Line 12 (column a)

Enter any unused patronage loss from
line 10, column (a).

Line 13 (column b)

Enter any unused nonpatronage loss
from line 10, column (b).

Schedule H.
Deductions and
Adjustments Under
Section 1382

The amounts must be paid during
the payment period that begins on the
first day of the tax year and ends on
the 15th day of the 9th month after the
end of the tax year in which the
income was earned.
Nonpatronage income.
Nonpatronage income includes
incidental income from sources not
directly related to:
• Marketing,
• Purchasing,
• Service activities of the
cooperative, or
• Income from business done with or
for the U.S. Government, or any of its
agencies.
See the instructions for line 3b
below for a definition of “qualified
written notice of allocation.” See
section 1382(c)(2)(B) for deductibility
of amounts paid in redemption of
nonqualified written notices of
allocation. See section 1388(d) for a
definition of a nonqualified written
notice of allocation.

Patronage dividends may be paid
in:
• Money,
• Qualified written notices of
allocation, or
• Other property (except nonqualified
written notices of allocation).
Line 3b. Qualified written notices
of allocation. A written notice of
allocation means:
• Any capital stock,
• Revolving fund certificate,
• Retain certificate,
• Certificate of indebtedness,
• Letter of advice, or
• Other written notice, which states
the dollar amount allocated to the
patron by the cooperative and the
part, if any, which is a patronage
dividend.
In general, a qualified written notice
of allocation is a written notice of
allocation that is:
• Paid as part of a patronage
dividend, in money or by qualified
check equal to at least 20% of the
patronage dividend, and
• One of the following conditions is
met:
1. The patron must have at least
90 days from the date the written
notice of allocation is paid to redeem it
in cash, and must receive written
notice of the right of redemption at the
time the patron receives the
allocation; or
2. The patron must agree to have
the allocation treated as constructively
received and reinvested in the
cooperative. See section 1388(c)(2)
and the related regulations for
information on how this consent must
be made.

DRAFT AS OF
November 5, 2018

Note. Cooperatives engaged in the
marketing of agricultural or
horticultural products may be eligible
to exclude applicable extraterritorial
income if the cooperative sells
qualifying foreign trade property. No
deduction is allowed for patronage
dividends, per-unit retain allocations,
and nonpatronage distributions
related to the excluded foreign trade
income. Any patronage dividends or
per-unit retain allocations that are
allocated to qualifying foreign trade
income of the cooperative may be
treated as qualifying foreign trade
income of the patron. In order to
qualify, the amount must be
designated by the cooperative in a
written notice mailed to its patrons not
later than the 15th day of the 9th
month following the close of the tax
year.

Line 1. Dividends Paid on
Capital Stock (Section 521
Cooperatives Only)

Enter the amount actually or
constructively paid as dividends
during the tax year on:
• Common stock (whether voting or
nonvoting),
• Preferred stock,
• Capital retain certificates,
• Revolving fund certificates,
• Letters of advice, or
• Other documentary evidence of a
proprietary interest in the cooperative
association.
See Regulations section
1.1382-3(b) for more information.

Line 2. Nonpatronage Income
Allocated to Patrons (Section
521 Cooperatives Only)

Enter nonpatronage income allocated
to patrons. Payment may be in:
• Money,
• Qualified written notices of
allocation, or
• Other property (except nonqualified
written notices of allocation).

Line 3. Patronage Dividends

To be deductible, patronage
dividends must be paid during the
payment period that begins on the first
day of the tax year in which the
patronage occurs and ends on the
15th day of the 9th month after the
end of that tax year.

See sections 1382(e) and (f) for
special rules for the time when
patronage occurs if products are
marketed under a pooling
arrangement, or if earnings are
includible in the gross income of the
cooperative for a tax year after the
year in which the patronage occurred.
Patronage dividends include any
amount paid to a patron by a
cooperative based on the quantity or
value of business done with or for that
patron under a pre-existing obligation
to pay that amount. The amount is
determined by reference to the net
earnings of the organization from
business done with or for its patrons.
Note. Net earnings are not reduced
by dividends paid on capital stock of
the organization if there is a legally
enforceable agreement that such
dividends are in addition to amounts
otherwise payable to patrons derived
from business done with or for
patrons.
-21-

Line 3d. Nonqualified written notices of allocation If a written notice
of allocation does not qualify, no
deduction is allowable at the time it is
issued. However, the cooperative is
entitled to a deduction or refund of tax
when the nonqualified written notice
of allocation is finally redeemed, if that
notice was paid as a patronage
dividend during the payment period
for the tax year during which the
patronage occurred. The deduction or
refund is allowed, but only to the
extent that amounts paid to redeem
the nonqualified written notices of
allocation are paid in money or other
property (other than written notices of
allocation) which do not exceed the

stated dollar amounts of the
nonqualified written notices of
allocation. See section 1382(b),
Regulations section 1.1382-2, and
section 1383.
See section 1383 for special rules
for figuring the cooperative's tax in the
year nonqualified written notices of
allocation are redeemed. The
cooperative is entitled to:
1. A deduction in the tax year the
nonqualified written notices of
allocation are redeemed (if permitted
under section 1382(b)(2) or (4) or
section 1382(c)(2)(B)), or
2. A tax credit based on a
recomputation of tax for the year(s)
the nonqualified written notices of
allocation were issued. See the
instructions for page 1, line 29h.

amounts reported on this schedule.
Marketing cooperatives that distribute
patronage as per-unit retain
allocations must attach a statement
showing the amount of the section
199(a) deduction attributable to the
per-unit retain allocations.

tax to a foreign country or U.S.
possession, see Form 1118, Foreign
Tax Credit—Corporations.

Line 5b. Qualified Electric
Vehicle Credit

Enter any qualified electric vehicle
passive activity credits from prior
years allowed for the current tax year
from Form 8834, Qualified Electric
Vehicle Credit, line 7. Attach Form
8834.

DRAFT AS OF
November 5, 2018

Amounts paid to patrons are not
patronage dividends if paid:
1. Out of earnings not from
business done with or for patrons;
2. Out of earnings from business
done with or for other patrons to
whom no amounts or smaller amounts
are paid for substantially identical
transactions;
3. To redeem capital stock,
certificates of indebtedness, revolving
fund certificates, retain certificates,
letters of advice, or other similar
documents; or
4. Without reference to the net
earnings of the cooperative
organization from business done with
or for its patrons.
Line 4. Domestic production activities deduction allocation (section
199). For agricultural and horticultural
cooperatives only, cooperatives
engaged in the marketing of
agricultural or horticultural products
may be eligible to compute a
domestic production activities
deduction. See the instructions for
page 1, line 22. Also see the
instructions for Form 8903.
An agricultural or horticultural
cooperative (as defined in
Regulations section 1.199-6(f)) must
reduce its section 1382 deduction by
the amount of the domestic
production activities deduction that
was allocated to patrons.
Note. Only include on line 4 the
portion of the domestic production
activities deduction attributable to the

Schedule J.
Tax Computation

Line 1. Members of a Controlled
Group
If the cooperative is a member of a
controlled group, check the box on
line 1. Complete and attach
Schedule O (Form 1120), Consent
Plan and Apportionment Schedule for
a Controlled Group. Component
members of a controlled group must
use Schedule O to report the
apportionment of certain tax benefits
between the members of the group.
See Schedule O and the Instructions
for Schedule O for more information.

Line 2. Income Tax

Cooperatives figure their tax by
multiplying taxable income by 21%.
Enter this amount on line 2.
Deferred tax under section 1291. If
the cooperative was a shareholder in
a PFIC and received an excess
distribution or disposed of its
investment in the PFIC during the
year, it must include the increase in
taxes due under section 1291(c)(2)
(from Form 8621) in the total for line 2.
On the dotted line next to line 2, enter
“Section 1291” and the amount.
Do not include on line 2 any
interest due under section 1291(c)(3).
Instead, include the amount of interest
owed on Schedule J, line 8, as other
interest.
For more information on reporting
the deferred tax and interest, see the
Instructions for Form 8621.

Line 3. Base Erosion Minimum
Tax

If the cooperative had gross receipts
of at least $500 million in any one of
the three preceding tax years, see
section 59A and the instructions for
Form 8991 for further guidance on the
determination of the base erosion
minimum tax amount.

Line 5a. Foreign Tax Credit

To find out when a cooperative can
take the credit for payment of income
-22-

Line 5c. General Business
Credit

Enter on line 5c the allowable credit
from Form 3800, Part II, line 38.

The cooperative is required to file
Form 3800 to claim any of the
business credits. See the Instructions
for Form 3800 for exceptions. For a
list of allowable credits, see Form
3800. Also, see the applicable credit
form and its instructions.
Elective allocations to patrons of
subchapter T cooperatives. The
cooperative may elect to allocate any
or all of certain credits among the
patrons based on the quantity or value
of business done with or for such
patrons. This includes the following, if
applicable:
• Biofuel producer credit (Form
6478);
• Renewable electricity, refined coal,
and Indian coal production credit
(Form 8835);
• Biodiesel and renewable diesel
fuels credit (Form 8864); and
• Low sulfur diesel fuel production
credit (Form 8896).
For the allocation to take effect, the
cooperative must designate the
apportionment in a written notice
mailed to its patrons before the due
date of the cooperative's return. The
credit amount allocated to patrons
cannot be included on line 5c. Once
made, the election cannot be revoked.
For more information, see the
instructions for the applicable credit
form. Also, see the Instructions for
Form 3800. For tax associated with a
decrease in the credit allocated to
patrons, see Other Taxes, later.
Required allocations to patrons of
subchapter T cooperatives. Any
excess of the certain credits that are
not used by the cooperative because
of the tax liability limitation must be
passed through to the patrons. This

includes the following credits, if
applicable.
• Work opportunity credit (Form
5884).
• Empowerment zone employment
credit (Form 8844).
• Indian employment credit (Form
8845).
• Energy efficient appliance credit
(Form 8909).
• Credit for employer differential
wage payments (Form 8932).
• Credit for small employer health
insurance premiums (Form 8941).
These credits cannot be carried back
or over by the cooperative. See the
applicable form and related
instructions for details. For tax
associated with a recapture of credit,
see Other Taxes, later.

Alternative tax on qualifying shipping activities. Enter any alternative
tax on qualifying shipping activities
from Form 8902. Check the box for
Form 8902.
Other. Check the box for “Other” if
the cooperative includes any
additional taxes and interest such as
the items discussed below. If the
cooperative checked the “Other” box,
attach a statement showing the
computation of each item included in
the total for line 8 and identify the
applicable Code section and the type
of tax or interest.
• Recapture of Indian employment
credit. Generally, if an employer
terminates the employment of a
qualified employee less than 1 year
after the date of initial employment,
any Indian employment credit allowed
for a prior tax year because of wages
paid or incurred to that employee
must be recaptured. For details, see
Form 8845 and section 45A.
• Recapture of new markets credit
(see Form 8874, New Markets Credit,
and Form 8874-B, Notice of
Recapture Event for New Markets
Credit).
• Recapture of employer-provided
childcare facilities and services credit
(see Form 8882).
• Interest on deferred tax attributable
to (a) installment sales of certain
timeshares and residential lots
(section 453(l)(3)) and (b) certain
nondealer installment obligations
(section 453A(c)).
• Interest due on deferred gain
(section 1260(b)).
• Interest due under section 1291(c)
(3). See Form 8621 and the
Instructions for Form 8621.

For details on the recapture of the
credits, see the instructions for the
applicable form.
Recapture of required excess
credit allocated to patrons. If the
cooperative allocated excess credit to
patrons, any credit recapture applies
as if the cooperative had claimed the
entire credit. For details, see section
46(h) (as in effect prior to enactment
of the Revenue Reconciliation Act of
1990). This applies to the following
credits.
• Investment credit (Form 3468).
• Work opportunity credit (Form
5884).
• Empowerment zone employment
credit (Form 8844).
• Indian employment credit (Form
8845).
• Energy efficient appliance credit
(Form 8909).
• Credit for small employer health
insurance premiums (Form 8941).
• Credit for employer differential
wage payments (Form 8932).

DRAFT AS OF
November 5, 2018

Line 5d. Credit for Prior Year
Minimum Tax

To figure the minimum tax credit and
any carryforward of that credit, use
Form 8827.

Line 5e. Bond Credits

Enter allowable credits from Form
8912, Credit to Holders of Tax Credit
Bonds, line 12.

Line 6. Total Credits

Add lines 5a through 5e and enter the
total on line 6.

Line 8. Other Taxes

Include any of the following taxes and
interest in the total on line 8. Check
the appropriate box(es) for the form, if
any, used to compute the total.

Recapture of investment credit. If
the cooperative disposed of
investment credit property or changed
its use before the end of its useful life
or recovery period, or is required to
recapture a qualifying therapeutic
discovery project grant, enter the
increase in tax from Form 4255,
Recapture of Investment Credit. See
the Instructions for Form 4255.
Recapture of low-income housing
credit. If the cooperative disposed of
property (or there was a reduction in
the qualified basis of the property) for
which it took the low-income housing
credit and the cooperative did not
follow the procedures that would have
prevented recapture of the credit, it
may owe a tax. See Form 8611,
Recapture of Low-Income Housing
Credit.

Recapture of elective allocation
of credit to patrons. If the amount of
any of the following elective credits
apportioned to any patron is
decreased, there is a tax imposed on
the cooperative, not the patron.
• Biofuel producer credit (Form
6478). See section 40(g)(6)(B)(iii).
• Renewable electricity, refined coal,
and Indian coal production credit
(Form 8835). See section 45(e)(11)
(C).
• Biodiesel and renewable diesel
fuels credit (Form 8864). See section
40A(e)(6)(B)(iii).
• Low sulfur diesel fuel production
credit (Form 8896). See section
45H(f)(3).
-23-

Line 9. Total Tax

Include any deferred tax on the
termination of a section 1294 election
applicable to shareholders in a
qualified electing fund in the amount
entered on line 9. See the Instructions
for Form 8621.
Subtract any deferred tax on the
cooperative's share of undistributed
earnings of a qualified electing fund.
See the Instructions for Form 8621.
How to report. If deferring tax,
attach a statement showing the
computation of each item included in,
or subtracted from, the total for line 9.
On the dotted line next to line 9,
specify (a) the applicable Code
section, (b) the type of tax, and (c) the
amount of tax.

Schedule K.
Other Information

Complete all items and questions that
apply to the cooperative.

Item 2

See the list of Principal Business
Activity Codes, later. Using the list of
codes and activities, determine from
which activity the cooperative derives
the highest percentage of its total
receipts. Enter on lines 2a, 2b, and 2c
the principal business activity code
number, the cooperative's business
activity, and a description of the

principal product or service of the
cooperative.

Question 5

Check the “Yes” box for Question 5 if:
1. The cooperative is a subsidiary
in an affiliated group (defined later),
but is not filing a consolidated return
for the tax year with that group, or
2. The cooperative is a subsidiary
in a parent-subsidiary controlled
group. For a definition of a
parent-subsidiary controlled group,
see the Instructions for Schedule O
(Form 1120).

Item 7

Enter the cooperative's total assets
(as determined by the accounting
method regularly used in keeping the
cooperative's books and records) at
the end of the tax year. If there are no
assets at the end of the tax year,
enter -0-.

Owner's country. For individuals,
the term “owner's country” means the
country of residence. For all others, it
is the country where incorporated,
organized, created, or administered.
Requirement to file Form 5472. If
the cooperative checked “Yes,” it may
have to file Form 5472, Information
Return of a 25% Foreign-Owned U.S.
Corporation or a Foreign Corporation
Engaged in a U.S. Trade or Business.
Generally, a 25% foreign-owned
cooperative that had a reportable
transaction with a foreign or domestic
related party during the tax year must
file Form 5472. See the Instructions
for Form 5472 for filing instructions
and penalties for failure to file.

DRAFT AS OF
November 5, 2018

Any cooperative that meets either
of the above requirements should
check the “Yes” box. This applies
even if the cooperative is a subsidiary
member of one group and the parent
corporation of another.
Note. If the cooperative is an
“excluded member” of a controlled
group (see definition in the
Instructions for Schedule O (Form
1120)), it is still considered a member
of a controlled group for this purpose.

Affiliated group. An affiliated
group is one or more chains of
includible corporations (section
1504(a)) connected through stock
ownership with a common parent
corporation. The common parent must
be an includible corporation and the
following requirements must be met.
1. The common parent must own
directly stock that represents at least
80% of the total voting power and at
least 80% of the total value of the
stock of at least one of the other
includible corporations, and
2. Stock that represents at least
80% of the total voting power and at
least 80% of the total value of the
stock of each of the other
corporations (except for the common
parent) must be owned directly by one
or more of the other includible
corporations.
For this purpose, “stock” generally
does not include any stock that (a) is
nonvoting, (b) is nonconvertible, (c) is
limited and preferred as to dividends
and does not participate significantly
in corporate growth, and (d) has
redemption and liquidation rights that
do not exceed the issue price of the
stock (except for a reasonable
redemption or liquidation premium).
See section 1504(a)(4).

If the cooperative is required to
complete Schedule L, enter total
assets from Schedule L, line 13,
column (d). If filing a consolidated
return, report total consolidated
assets for all cooperatives and
corporations joining in the return.

Question 8

Check the “Yes” box if one foreign
person owned at least 25% of (a) the
total voting power of all classes of
stock of the cooperative entitled to
vote, or (b) the total value of all
classes of stock of the cooperative.

The constructive ownership rules of
section 318 apply in determining if a
cooperative is foreign owned. See
section 6038A(c)(5) and the related
regulations.
If the cooperative checked “Yes,”
enter on line 8a the percentage
owned by the foreign person specified
in Question 8. On line 8b, enter the
name of the owner's country.
Note. If there is more than one
25%-or-more foreign owner, complete
lines 8a and 8b for the foreign person
with the highest percentage of
ownership.
Foreign person. The term “foreign
person” means:
• An individual who is not a citizen or
resident of the United States;
• An individual who is a citizen or
resident of a U.S. possession who is
not otherwise a citizen or resident of
the United States;
• Any partnership, association,
company, or corporation that is not
created or organized in the United
States;
• Any foreign estate or trust within the
meaning of section 7701(a)(31); or
• A foreign government (or one of its
agencies or instrumentalities) to the
extent that it is engaged in the
conduct of a commercial activity as
described in section 892.
However, the term “foreign person”
does not include any foreign person
who consents to the filing of a joint
income tax return.
-24-

Item 10

Show any tax-exempt interest
received or accrued. Include any
exempt-interest dividends received as
a shareholder in a mutual fund or
other RIC. Also, if required, include
the same amount on Schedule M-1,
line 7 (or Schedule M-3 (Form 1120),
Part II, line 13, if applicable).

Item 12

If the cooperative has an NOL, it
generally can elect to waive the entire
carryback period for the NOL and
instead carry the NOL forward to
future tax years. To do so, check the
box in Item 12 and file the return by its
due date, including extensions. Do not
attach the statement described in
Temporary Regulations section
301.9100-12T. Once made, the
election is irrevocable.
If the corporation timely filed its
return for the loss year without making
the election, it can make the election
on an amended return filed within 6
months of the due date of the loss
year return (excluding extensions).
Attach the election to the amended
return and write “Filed pursuant to
section 301.9100-2” on the election
statement. See the Instructions for
Form 1139.
Cooperatives filing a consolidated
return that elect to waive the entire
carryback period for the group must
check the box in Item 12 and attach
the statement required by Regulations
section 1.1502-21(b)(3) or the
election will not be valid.

Item 13

Enter the amount of the NOL
carryover to the tax year from prior

years, even if some of the loss is used
to offset income on this return. The
amount to enter is the total of all NOLs
generated in prior years but not used
to offset income (either as a carryback
or carryover) in a tax year prior to
2017. Do not reduce the amount by
any NOL deduction reported on
page 1, line 26a.

A cooperative is not subject to the
business interest expense limitation
and is not required to file Form 8990.
A cooperative is a taxpayer that (a)
meets the gross receipts test, and (b)
is not a tax shelter (as defined in
section 448(d)(3)).

dividends during the tax year of the
cooperative.

Line 26. Adjustments to
Shareholders' Equity

Some examples of adjustments to
report on this line include:
• Unrealized gains and losses on
securities held “available for sale.”
• Foreign currency translation
adjustments.
• The excess of additional pension
liability over unrecognized prior
service cost.
• Guarantees of employee stock
(ESOP) debt.
• Compensation related to employee
stock award plans.

DRAFT AS OF
November 5, 2018

Question 16

If the cooperative had gross receipts
of at least $500 million in any one of
the three preceding tax years,
complete Form 8991 and attach it to
this return. For this purpose, the
cooperative's gross receipts include
the gross receipts of all persons
aggregated with the cooperative as
specified in 59A(e)(3). See the
instructions of Form 8991 to
determine if the cooperative is subject
to the base erosion minimum tax.

Item 17

For tax years beginning after
December 31, 2017, the limitation on
business interest expense applies to
every taxpayer with a trade or
business, unless the taxpayer meets
certain specified exceptions.
Cooperatives may deduct business
interest expense without regard to the
business interest expense limitation of
section 163(j). Check this box if the
cooperative, in the current or a prior
year, made an election under section
163(j) for any real property trade or
business or any farming business. If
an election was made to exclude a
trade or business from the business
interest expense limitation, the
election is irrevocable. For more
information, see the Instructions for
Form 8990.

Question 18

A cooperative must file Form 8990 to
claim a deduction for business
interest. In addition, Form 8990 must
be filed by any cooperative that owns
an interest in a partnership with
current year, or prior year carryover,
excess business interest expense
allocated from the partnership.

Exceptions. A cooperative is not
required to file Form 8990 if the
cooperative only has business interest
expense from:
• A small business,
• An electing real property trade or
business,
• An electing farming business, or
• Certain utility businesses.

A cooperative, other than a tax
shelter, that meets the gross receipts
test is not required to limit business
interest expense under section 163(j).

Note. The cooperative may not be
required to file Form 8990 if one of the
other exceptions applies, even if it
does not meet the small business
exception. In that case, check “No.”
Do not attach Form 8990.

Schedule L.
Balance Sheets per Books

The balance sheets should agree with
the cooperative's books and records.
Cooperatives with total receipts
(page 1, line 1a plus lines 4 through 9)
and total assets at the end of the tax
year less than $250,000 are not
required to complete Schedules L,
M-1, and M-2 if the “Yes” box on
Schedule K, Question 14, is checked.
Cooperatives with total assets
non-consolidated (or consolidated for
all cooperatives and corporations
included within the tax consolidation
group) of $10 million or more on the
last day of the tax year must file
Schedule M-3 (Form 1120). However,
see the instructions for Schedule M-1,
later. See the separate Instructions for
Schedule M-3 (Form 1120) for
provisions that also affect Schedule L.
If filing a consolidated return, report
total consolidated assets, liabilities,
and shareholder's equity for all
cooperatives and corporations joining
in the return. See Consolidated return,
earlier.

Line 1. Cash

Include certificates of deposit as cash
on this line.

Line 5. Investments

Include on this line:
• State and local government
obligations, the interest on which is
excludable from gross income under
section 103(a); and
• Stock in a mutual fund or other RIC
that distributed exempt-interest
-25-

If the total adjustment to be entered
on line 26 is a negative amount, enter
the amount in parentheses.

Schedule M-1.
Reconciliation of Income
(Loss) per Books With
Income per Return
In completing Schedule M-1, the
following apply.

• Cooperatives with total receipts
(page 1, line 1a plus lines 4 through 9)
and total assets at the end of the tax
year less than $250,000 are not
required to complete Schedules L,
M-1, and M-2 if the “Yes” box on
Schedule K, Question 14, is checked.
• Cooperatives with total assets
non-consolidated (or consolidated for
all cooperatives/corporations included
with the tax consolidation group) of
$10 million or more on the last day of
the tax year must file Schedule M-3
(Form 1120) instead of Schedule M-1.
• A cooperative filing Form 1120-C
that is not required to file
Schedule M-3 (Form 1120) may
voluntarily file Schedule M-3 instead
of Schedule M-1.
• Cooperatives that (a) are required
to file Schedule M-3 (Form 1120) and
have less than $50 million total assets
at the end of the tax year, or (b) are
not required to file Schedule M-3
(Form 1120) and voluntarily file
Schedule M-3 (Form 1120), must
either (i) complete Schedule M-3
(Form 1120) entirely or (ii) complete
Schedule M-3 (Form 1120) through
Part I, and complete Form 1120,
Schedule M-1 instead of completing
Part II and III of Schedule M-3 (Form
1120). If the cooperative chooses to

complete Schedule M-1 instead of
completing Parts II and III of
Schedule M-3, the amount on
Schedule M-1, line 1, must equal the
amount on Schedule M-3, Part I,
line 11. See the Instructions for
Schedule M-3 (Form 1120) for more
information.

Line 7. Tax-exempt Interest

Report any tax-exempt interest
received or accrued, including any
exempt-interest dividends received as
a shareholder in a mutual fund or
other RIC. Also report this same
amount on Schedule K, Item 10.

confidential, as required by section
6103.
The time needed to complete and
file this form will vary depending on
individual circumstances. The
estimated burden for business
taxpayers filing this form is approved
under OMB control number
1545-0123 and is included in the
estimates shown in the instructions for
their business income tax return.

DRAFT AS OF
November 5, 2018

Line 5c. Travel and
Entertainment

Include any of the following:
• Meals and entertainment expenses
not deductible under section 274(n).
• Expenses for the use of an
entertainment facility.
• The part of business gifts over $25.
• Expenses of an individual over
$2,000, which are allocable to
conventions on cruise ships.
• Employee achievement awards
over $400.
• The cost of skyboxes.
• The part of luxury water travel
expenses not deductible under
section 274(m).
• Expenses for travel as a form of
education.
• Other nondeductible expenses for
travel and entertainment.

Paperwork Reduction Act Notice.
We ask for the information on this
form to carry out the Internal Revenue
laws of the United States. You are
required to give us the information.
We need it to ensure that you are
complying with these laws and to
allow us to figure and collect the right
amount of tax.

You are not required to provide the
information requested on a form that
is subject to the Paperwork Reduction
Act unless the form displays a valid
OMB control number. Books or
records relating to a form or its
instructions must be retained as long
as their contents may become
material in the administration of any
Internal Revenue law. Generally, tax
returns and return information are

-26-

If you have comments concerning
the accuracy of these time estimates
or suggestions for making this form
simpler, we would be happy to hear
from you. You can send us comments
from IRS.gov/FormComments. Click
on More Information and then on
“Give us feedback.” Or write to the
Internal Revenue Service, Tax Forms
and Publications Division, 1111
Constitution Ave. NW, IR-6526,
Washington, DC 20224. Do not send
Form 1120-C to this address. Instead,
see Where To File, earlier.

Form 1120-C

Principal Business Activity Codes

This list of principal business activities and their
associated codes is designed to classify an
enterprise by the type of activity in which it is
engaged to facilitate the administration of the
Internal Revenue Code. These principal business
activity codes are based on the North American
Industry Classification System.

Using the list of activities and codes below,
determine from which activity the company derives
the largest percentage of its “total receipts.” Total
receipts is defined as the sum of gross receipts or
sales (page 1, line 1a) plus all other income
(page 1, lines 4 through 10). If the company
purchases raw materials and supplies them to a
subcontractor to produce the finished product, but
retains title to the product, the company is

considered a manufacturer and must use one of
the manufacturing codes (311110-339900).
Once the principal business activity is
determined, entries must be made on Form
1120-C, Schedule K, lines 2a, 2b, and 2c. On
line 2a, enter the six-digit code selected from the
list below. On line 2b, enter the company's
business activity. On line 2c, enter a brief
description of the principal product or service of
the company.

DRAFT AS OF
November 5, 2018

Agriculture, Forestry, Fishing,
and Hunting

Crop Production
111100 Oilseed & Grain Farming
111210 Vegetable & Melon Farming
(including potatoes & yams)
111300 Fruit & Tree Nut Farming
111400 Greenhouse, Nursery, &
Floriculture Production
111900 Other Crop Farming
(including tobacco, cotton,
sugarcane, hay, peanut,
sugar beet, & all other crop
farming)
Animal Production
112111 Beef Cattle Ranching &
Farming
112112 Cattle Feedlots
112120 Dairy Cattle & Milk Production
112210 Hog & Pig Farming
112300 Poultry & Egg Production
112400 Sheep & Goat Farming
112510 Aquaculture (including
shellfish & finfish farms &
hatcheries)
112900 Other Animal Production
Forestry and Logging
113110 Timber Tract Operations
113210 Forest Nurseries & Gathering
of Forest Products
113310 Logging
Fishing, Hunting, and Trapping
114110 Fishing
114210 Hunting & Trapping
Support Activities for Agriculture
and Forestry
115110 Support Activities for Crop
Production (including cotton
ginning, soil preparation,
planting, & cultivating)
115210 Support Activities for Animal
Production
115310 Support Activities for Forestry

Mining
211120
211130
212110
212200
212310
212320

Crude Petroleum Extraction
Natural Gas Extraction
Coal Mining
Metal Ore Mining
Stone Mining & Quarrying
Sand, Gravel, Clay, &
Ceramic & Refractory
Minerals Mining & Quarrying
212390 Other Nonmetallic Mineral
Mining & Quarrying
213110 Support Activities for Mining

Utilities

221100 Electric Power Generation,
Transmission & Distribution
221210 Natural Gas Distribution
221300 Water, Sewage & Other
Systems
221500 Combination Gas & Electric

Construction

Construction of Buildings
236110 Residential Building
Construction
236200 Nonresidential Building
Construction
Heavy and Civil Engineering
Construction
237100 Utility System Construction
237210 Land Subdivision
237310 Highway, Street, & Bridge
Construction

237990 Other Heavy & Civil
Engineering Construction
Specialty Trade Contractors
238100 Foundation, Structure, &
Building Exterior Contractors
(including framing carpentry,
masonry, glass, roofing, &
siding)
238210 Electrical Contractors
238220 Plumbing, Heating, &
Air-Conditioning Contractors
238290 Other Building Equipment
Contractors
238300 Building Finishing
Contractors (including
drywall, insulation, painting,
wallcovering, flooring, tile, &
finish carpentry)
238900 Other Specialty Trade
Contractors (including site
preparation)

Manufacturing

Food Manufacturing
311110 Animal Food Mfg
311200 Grain & Oilseed Milling
311300 Sugar & Confectionery
Product Mfg
311400 Fruit & Vegetable Preserving
& Specialty Food Mfg
311500 Dairy Product Mfg
311610 Animal Slaughtering and
Processing
311710 Seafood Product Preparation
& Packaging
311800 Bakeries,Tortilla, & Dry Pasta
Mfg
311900 Other Food Mfg (including
coffee, tea, flavorings, &
seasonings)
Beverage and Tobacco Product
Manufacturing
312110 Soft Drink & Ice Mfg
312120 Breweries
312130 Wineries
312140 Distilleries
312200 Tobacco Manufacturing
Textile Mills and Textile Product
Mills
313000 Textile Mills
314000 Textile Product Mills
Apparel Manufacturing
315100 Apparel Knitting Mills
315210 Cut & Sew Apparel
Contractors
315220 Men's & Boys' Cut & Sew
Apparel Mfg
315240 Women's, Girls' and Infants
Cut & Sew Apparel Mfg
315280 Other Cut & Sew Apparel Mfg
315990 Apparel Accessories & Other
Apparel Mfg
Leather and Allied Product
Manufacturing
316110 Leather & Hide Tanning &
Finishing
316210 Footwear Mfg (including
rubber & plastics)
316990 Other Leather & Allied
Product Mfg
Wood Product Manufacturing
321110 Sawmills & Wood
Preservation
321210 Veneer, Plywood, &
Engineered Wood Product
Mfg
321900 Other Wood Product Mfg

Paper Manufacturing
322100 Pulp, Paper, & Paperboard
Mills
322200 Converted Paper Product Mfg
Printing and Related Support
Activities
323100 Printing & Related Support
Activities
Petroleum and Coal Products
Manufacturing
324110 Petroleum Refineries
(including integrated)
324120 Asphalt Paving, Roofing, &
Saturated Materials Mfg
324190 Other Petroleum & Coal
Products Mfg
Chemical Manufacturing
325100 Basic Chemical Mfg
325200 Resin, Synthetic Rubber, &
Artificial & Synthetic Fibers &
Filaments Mfg
325300 Pesticide, Fertilizer, & Other
Agricultural Chemical Mfg
325410 Pharmaceutical & Medicine
Mfg
325500 Paint, Coating, & Adhesive
Mfg
325600 Soap, Cleaning Compound, &
Toilet Preparation Mfg
325900 Other Chemical Product &
Preparation Mfg
Plastics and Rubber Products
Manufacturing
326100 Plastics Product Mfg
326200 Rubber Product Mfg
Nonmetallic Mineral Product
Manufacturing
327100 Clay Product & Refractory
Mfg
327210 Glass & Glass Product Mfg
327300 Cement & Concrete Product
Mfg
327400 Lime & Gypsum Product Mfg
327900 Other Nonmetallic Mineral
Product Mfg
Primary Metal Manufacturing
331110 Iron & Steel Mills & Ferroalloy
Mfg
331200 Steel Product Mfg from
Purchased Steel
331310 Alumina & Aluminum
Production & Processing
331400 Nonferrous Metal (except
Aluminum) Production &
Processing
331500 Foundries
Fabricated Metal Product
Manufacturing
332110 Forging & Stamping
332210 Cutlery & Handtool Mfg
332300 Architectural & Structural
Metals Mfg
332400 Boiler, Tank, & Shipping
Container Mfg
332510 Hardware Mfg
332610 Spring & Wire Product Mfg
332700 Machine Shops; Turned
Product; & Screw, Nut, & Bolt
Mfg
332810 Coating, Engraving, Heat
Treating, & Allied Activities
332900 Other Fabricated Metal
Product Mfg
Machinery Manufacturing
333100 Agriculture, Construction, &
Mining Machinery Mfg
333200 Industrial Machinery Mfg

-27-

333310 Commercial & Service
Industry Machinery Mfg
333410 Ventilation, Heating,
Air-Conditioning, &
Commercial Refrigeration
Equipment Mfg
333510 Metalworking Machinery Mfg
333610 Engine, Turbine & Power
Transmission Equipment Mfg
333900 Other General Purpose
Machinery Mfg
Computer and Electronic Product
Manufacturing
334110 Computer & Peripheral
Equipment Mfg
334200 Communications Equipment
Mfg
334310 Audio & Video Equipment
Mfg
334410 Semiconductor & Other
Electronic Component Mfg
334500 Navigational, Measuring,
Electromedical, & Control
Instruments Mfg
334610 Manufacturing & Reproducing
Magnetic & Optical Media
Electrical Equipment, Appliance,
and Component Manufacturing
335100 Electric Lighting Equipment
Mfg
335200 Major Household Appliance
Mfg
335310 Electrical Equipment Mfg
335900 Other Electrical Equipment &
Component Mfg
Transportation Equipment
Manufacturing
336100 Motor Vehicle Mfg
336210 Motor Vehicle Body & Trailer
Mfg
336300 Motor Vehicle Parts Mfg
336410 Aerospace Product & Parts
Mfg
336510 Railroad Rolling Stock Mfg
336610 Ship & Boat Building
336990 Other Transportation
Equipment Mfg
Furniture and Related Product
Manufacturing
337000 Furniture & Related Product
Manufacturing
Miscellaneous Manufacturing
339110 Medical Equipment &
Supplies Mfg
339900 Other Miscellaneous
Manufacturing

Wholesale Trade

Merchant Wholesalers and Durable
Goods
423100 Motor Vehicle & Motor
Vehicle Parts & Supplies
423200 Furniture & Home Furnishings
423300 Lumber & Other Construction
Materials
423400 Professional & Commercial
Equipment & Supplies
423500 Metal & Mineral (except
Petroleum)
423600 Household Appliances and
Electrical & Electronic Goods
423700 Hardware, Plumbing, Heating
Equipment & Supplies
423800 Machinery, Equipment, &
Supplies
423910 Sporting & Recreational
Goods & Supplies

Form 1120-C (Continued)
423920 Toy & Hobby Goods &
Supplies
423930 Recyclable Materials
423940 Jewelry, Watch, Precious
Stone, & Precious Metals
423990 Other Miscellaneous Durable
Goods
Merchant Wholesalers and
Nondurable Goods
424100 Paper & Paper Products
424210 Drugs & Druggists' Sundries
424300 Apparel, Piece Goods, &
Notions
424400 Grocery & Related Products
424500 Farm Product Raw Materials
424600 Chemical & Allied Products
424700 Petroleum & Petroleum
Products
424800 Beer, Wine, & Distilled
Alcoholic Beverages
424910 Farm Supplies
424920 Book, Periodical, &
Newspapers
424930 Flower, Nursery Stock, &
Florists' Supplies
424940 Tobacco & Tobacco Products
424950 Paint, Varnish, & Supplies
424990 Other Miscellaneous
Nondurable Goods
Wholesale Electronic Markets and
Agents and Brokers
425110 Business to Business
Electronic Markets
425120 Wholesale Trade Agents &
Brokers

446190 Other Health & Personal Care
Stores
Gasoline Stations
447100 Gasoline Stations (including
convenience stores with gas)
Clothing and Clothing Accessories
Stores
448110 Men's Clothing Stores
448120 Women's Clothing Stores
448130 Children's & Infants' Clothing
Stores
448140 Family Clothing Stores
448150 Clothing Accessories Stores
448190 Other Clothing Stores
448210 Shoe Stores
448310 Jewelry Stores
448320 Luggage & Leather Goods
Stores
Sporting Goods, Hobby, Book, and
Music Stores
451110 Sporting Goods Stores
451120 Hobby, Toy, & Game Stores
451130 Sewing, Needlework, & Piece
Goods Stores
451140 Musical Instrument &
Supplies Stores
451211 Book Stores
451212 News Dealers & Newsstands
General Merchandise Stores
452200 Department Stores
452300 General Merchandise Stores,
incl. Warehouse Clubs and
Supercenters
Miscellaneous Store Retailers
453110 Florists
453210 Office Supplies & Stationery
Stores
453220 Gift, Novelty, & Souvenir
Stores
453310 Used Merchandise Stores
453910 Pet & Pet Supplies Stores
453920 Art Dealers
453930 Manufactured (Mobile) Home
Dealers
453990 All Other Miscellaneous Store
Retailers (including tobacco,
candle, & trophy shops)
Nonstore Retailers
454110 Electronic Shopping &
Mail-Order Houses
454210 Vending Machine Operators
454310 Fuel Dealers (including
Heating Oil and Liquefied
Petroleum)
454390 Other Direct Selling
Establishments (including
door-to-door retailing, frozen
food plan providers, party
plan merchandisers, &
coffee-break service
providers)

Pipeline Transportation
486000 Pipeline Transportation
Scenic & Sightseeing
Transportation
487000 Scenic & Sightseeing
Transportation
Support Activities for
Transportation
488100 Support Activities for Air
Transportation
488210 Support Activities for Rail
Transportation
488300 Support Activities for Water
Transportation
488410 Motor Vehicle Towing
488490 Other Support Activities for
Road Transportation
488510 Freight Transportation
Arrangement
488990 Other Support Activities for
Transportation
Couriers and Messengers
492110 Couriers
492210 Local Messengers & Local
Delivery
Warehousing and Storage
493100 Warehousing & Storage
(except lessors of
miniwarehouses &
self-storage units)

Activities Related to Credit
Intermediation
522300 Activities Related to Credit
Intermediation (including loan
brokers, check clearing, &
money transmitting)
Securities, Commodity Contracts,
and Other Financial Investments
and Related Activities
523110 Investment Banking &
Securities Dealing
523120 Securities Brokerage
523130 Commodity Contracts
Dealing
523140 Commodity Contracts
Brokerage
523210 Securities & Commodity
Exchanges
523900 Other Financial Investment
Activities (including portfolio
management & investment
advice)
Insurance Carriers and Related
Activities
524140 Direct Life, Health, and
Medical Insurance &
Reinsurance Carriers
524150 Direct Insurance and
Reinsurance (except life,
health, and medical) Carriers
524210 Insurance Agencies &
Brokerages
524290 Other Insurance Related
Activities (including
third-party administration of
insurance and pension funds)
Funds, Trusts, and Other Financial
Vehicles
525100 Insurance & Employee
Benefit Funds
525910 Form 1120-RIC, Open-End
Investment Funds
525920 Trusts, Estates, & Agency
Accounts
525990 Other Financial Vehicles
(including mortgage REITs &
closed-end investment funds)
“Offices of Bank Holding Companies”
and “Offices of Other Holding
Companies” are located under
Management of Companies
(Holding Companies), later.

DRAFT AS OF
November 5, 2018

Retail Trade

Motor Vehicle and Parts Dealers
441110 New Car Dealers
441120 Used Car Dealers
441210 Recreational Vehicle Dealers
441222 Boat Dealers
441228 Motorcycle, ATV, and All
Other Motor Vehicle Dealers
441300 Automotive Parts,
Accessories, & Tire Stores
Furniture and Home Furnishings
Stores
442110 Furniture Stores
442210 Floor Covering Stores
442291 Window Treatment Stores
442299 All Other Home Furnishings
Stores
Electronics and Appliance Stores
443141 Household Appliance Stores
443142 Electronics Stores (including
Audio, Video, Computer, and
Camera Stores)
Building Material and Garden
Equipment and Supplies Dealers
444110 Home Centers
444120 Paint & Wallpaper Stores
444130 Hardware Stores
444190 Other Building Material
Dealers
444200 Lawn & Garden Equipment &
Supplies Stores
Food and Beverage Stores
445110 Supermarkets and Other
Grocery (except
Convenience) Stores
445120 Convenience Stores
445210 Meat Markets
445220 Fish & Seafood Markets
445230 Fruit & Vegetable Markets
445291 Baked Goods Stores
445292 Confectionery & Nut Stores
445299 All Other Specialty Food
Stores
445310 Beer, Wine, & Liquor Stores
Health and Personal Care Stores
446110 Pharmacies & Drug Stores
446120 Cosmetics, Beauty Supplies,
& Perfume Stores
446130 Optical Goods Stores

Transportation and
Warehousing

Air, Rail, and Water Transportation
481000 Air Transportation
482110 Rail Transportation
483000 Water Transportation
Truck Transportation
484110 General Freight Trucking,
Local
484120 General Freight Trucking,
Long-distance
484200 Specialized Freight Trucking
Transit and Ground Passenger
Transportation
485110 Urban Transit Systems
485210 Interurban & Rural Bus
Transportation
485310 Taxi Service
485320 Limousine Service
485410 School & Employee Bus
Transportation
485510 Charter Bus Industry
485990 Other Transit & Ground
Passenger Transportation

Information

Publishing Industries (except
Internet)
511110 Newspaper Publishers
511120 Periodical Publishers
511130 Book Publishers
511140 Directory & Mailing List
Publishers
511190 Other Publishers
511210 Software Publishers
Motion Picture and Sound
Recording Industries
512100 Motion Picture & Video
Industries (except video
rental)
512200 Sound Recording Industries
Broadcasting (except Internet)
515100 Radio & Television
Broadcasting
515210 Cable & Other Subscription
Programming
Telecommunications
517000 Telecommunications
(including paging, cellular,
satellite, cable & other
program distribution,
resellers, other
telecommunications, &
internet service providers)
Data Processing Services
518210 Data Processing, Hosting, &
Related Services
Other Information Services
519100 Other Information Services
(including news syndicates,
libraries, internet publishing &
broadcasting)

Finance and Insurance

Depository Credit Intermediation
522110 Commercial Banking
522120 Savings Institutions
522130 Credit Unions
522190 Other Depository Credit
Intermediation
Nondepository Credit
Intermediation
522210 Credit Card Issuing
522220 Sales Financing
522291 Consumer Lending
522292 Real Estate Credit (including
mortgage bankers &
originators)
522293 International Trade Financing
522294 Secondary Market Financing
522298 All Other Nondepository
Credit Intermediation

-28-

Real Estate, Rental, and
Leasing

Real Estate
531110 Lessors of Residential
Buildings & Dwellings
(including equity REITs)
531120 Lessors of Nonresidential
Buildings (except
Miniwarehouses) (including
equity REITs)
531130 Lessors of Miniwarehouses &
Self-Storage Units (including
equity REITs)
531190 Lessors of Other Real Estate
Property (including equity
REITs)
531210 Offices of Real Estate Agents
& Brokers
531310 Real Estate Property
Managers
531320 Offices of Real Estate
Appraisers
531390 Other Activities Related to
Real Estate
Rental and Leasing Services
532100 Automotive Equipment Rental
& Leasing
532210 Consumer Electronics &
Appliances Rental
532281 Formal Wear & Costume
Rental
532282 Video Tape & Disc Rental
532283 Home Health Equipment
Rental
532284 Recreational Goods Rental
532289 All Other Consumer Goods
Rental

Form 1120-C (Continued)
532310 General Rental Centers
532400 Commercial & Industrial
Machinery & Equipment
Rental & Leasing
Lessors of Nonfinancial Intangible
Assets (except copyrighted works)
533110 Lessors of Nonfinancial
Intangible Assets (except
copyrighted works)

Professional, Scientific, and
Technical Services

Administrative and Support,
Waste Management, and
Remediation Services

Administrative and Support
Services
561110 Office Administrative
Services
561210 Facilities Support Services
561300 Employment Services
561410 Document Preparation
Services
561420 Telephone Call Centers
561430 Business Service Centers
(including private mail centers
& copy shops)
561440 Collection Agencies
561450 Credit Bureaus
561490 Other Business Support
Services (including
repossession services, court
reporting, & stenotype
services)
561500 Travel Arrangement &
Reservation Services
561600 Investigation & Security
Services
561710 Exterminating & Pest Control
Services
561720 Janitorial Services
561730 Landscaping Services
561740 Carpet & Upholstery Cleaning
Services
561790 Other Services to Buildings &
Dwellings
561900 Other Support Services
(including packaging &
labeling services, &
convention & trade show
organizers)
Waste Management and
Remediation Services
562000 Waste Management &
Remediation Services

621420 Outpatient Mental Health &
Substance Abuse Centers
621491 HMO Medical Centers
621492 Kidney Dialysis Centers
621493 Freestanding Ambulatory
Surgical & Emergency
Centers
621498 All Other Outpatient Care
Centers
Medical and Diagnostic
Laboratories
621510 Medical & Diagnostic
Laboratories
Home Health Care Services
621610 Home Health Care Services
Other Ambulatory Health Care
Services
621900 Other Ambulatory Health
Care Services (including
ambulance services & blood
& organ banks)
Hospitals
622000 Hospitals
Nursing and Residential Care
Facilities
623000 Nursing & Residential Care
Facilities
Social Assistance
624100 Individual & Family Services
624200 Community Food & Housing,
& Emergency & Other Relief
Services
624310 Vocational Rehabilitation
Services
624410 Child Day Care Services

721210 RV (Recreational Vehicle)
Parks & Recreational Camps
721310 Rooming & Boarding Houses,
Dormitories & Workers’
Camps
Food Services and Drinking Places
722300 Special Food Services
(including food service
contractors & caterers)
722410 Drinking Places (Alcoholic
Beverages)
722511 Full-Service Restaurants
722513 Limited-Service Restaurants
722514 Cafeterias and Buffets
722515 Snack and Non-alcoholic
Beverage Bars

DRAFT AS OF
November 5, 2018

Legal Services
541110 Offices of Lawyers
541190 Other Legal Services
Accounting, Tax Preparation,
Bookkeeping, and Payroll Services
541211 Offices of Certified Public
Accountants
541213 Tax Preparation Services
541214 Payroll Services
541219 Other Accounting Services
Architectural, Engineering, and
Related Services
541310 Architectural Services
541320 Landscape Architecture
Services
541330 Engineering Services
541340 Drafting Services
541350 Building Inspection Services
541360 Geophysical Surveying &
Mapping Services
541370 Surveying & Mapping (except
Geophysical) Services
541380 Testing Laboratories
Specialized Design Services
541400 Specialized Design Services
(including interior, industrial,
graphic, & fashion design)
Computer Systems Design and
Related Services
541511 Custom Computer
Programming Services
541512 Computer Systems Design
Services
541513 Computer Facilities
Management Services
541519 Other Computer Related
Services
Other Professional, Scientific, and
Technical Services
541600 Management, Scientific, &
Technical Consulting
Services
541700 Scientific Research &
Development Services
541800 Advertising & Related
Services
541910 Marketing Research & Public
Opinion Polling
541920 Photographic Services
541930 Translation & Interpretation
Services
541940 Veterinary Services
541990 All Other Professional,
Scientific, & Technical
Services

Management of Companies
(Holding Companies)

551111 Offices of Bank Holding
Companies
551112 Offices of Other Holding
Companies

Educational Services

611000 Educational Services
(including schools, colleges,
& universities)

Health Care and Social
Assistance

Offices of Physicians and Dentists
621111 Offices of Physicians (except
mental health specialists)
621112 Offices of Physicians, Mental
Health Specialists
621210 Offices of Dentists
Offices of Other Health
Practitioners
621310 Offices of Chiropractors
621320 Offices of Optometrists
621330 Offices of Mental Health
Practitioners (except
Physicians)
621340 Offices of Physical,
Occupational & Speech
Therapists, & Audiologists
621391 Offices of Podiatrists
621399 Offices of All Other
Miscellaneous Health
Practitioners
Outpatient Care Centers
621410 Family Planning Centers

Arts, Entertainment, and
Recreation

Performing Arts, Spectator Sports,
and Related Industries
711100 Performing Arts Companies
711210 Spectator Sports (including
sports clubs & racetracks)
711300 Promoters of Performing Arts,
Sports, & Similar Events
711410 Agents & Managers for
Artists, Athletes, Entertainers,
& Other Public Figures
711510 Independent Artists, Writers,
& Performers
Museums, Historical Sites, and
Similar Institutions
712100 Museums, Historical Sites, &
Similar Institutions
Amusement, Gambling, and
Recreation Industries
713100 Amusement Parks & Arcades
713200 Gambling Industries
713900 Other Amusement &
Recreation Industries
(including golf courses, skiing
facilities, marinas, fitness
centers, & bowling centers)

Accommodation and Food
Services

Accommodation
721110 Hotels (except Casino Hotels)
& Motels
721120 Casino Hotels
721191 Bed & Breakfast Inns
721199 All Other Traveler
Accommodation

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Other Services

Repair and Maintenance
811110 Automotive Mechanical &
Electrical Repair &
Maintenance
811120 Automotive Body, Paint,
Interior, & Glass Repair
811190 Other Automotive Repair &
Maintenance (including oil
change & lubrication shops &
car washes)
811210 Electronic & Precision
Equipment Repair &
Maintenance
811310 Commercial & Industrial
Machinery & Equipment
(except Automotive &
Electronic) Repair &
Maintenance
811410 Home & Garden Equipment &
Appliance Repair &
Maintenance
811420 Reupholstery & Furniture
Repair
811430 Footwear & Leather Goods
Repair
811490 Other Personal & Household
Goods Repair & Maintenance
Personal and Laundry Services
812111 Barber Shops
812112 Beauty Salons
812113 Nail Salons
812190 Other Personal Care Services
(including diet & weight
reducing centers)
812210 Funeral Homes & Funeral
Services
812220 Cemeteries & Crematories
812310 Coin-Operated Laundries &
Drycleaners
812320 Drycleaning & Laundry
Services (except
Coin-Operated)
812330 Linen & Uniform Supply
812910 Pet Care (except Veterinary)
Services
812920 Photofinishing
812930 Parking Lots & Garages
812990 All Other Personal Services
Religious, Grantmaking, Civic,
Professional, and Similar
Organizations
813000 Religious, Grantmaking,
Civic, Professional, & Similar
Organizations (including
condominium and
homeowners associations)

Index
A
Accounting methods 5
Accounting period 5
Address change 7
Advance payments 8
Affiliated group 24
Allocation of patronage and
nonpatronage income and
deductions 20
Allocations to patrons:
Elective 22
Recapture of elective
allocation of credit to
patrons 23
Recapture of required excess
credit allocated to
patrons 23
Required 22
Amended return 7
Amortization 10
Assembling the return 3
At-risk rules 15

Dividends 8
Dividends and special
deductions 17
Dividends-received
deduction 20
Domestic production activities
deduction allocation 22
Dues, membership and other 15

M
Merchant Marine capital
construction fund:
Deduction for
contributions 16
Minimum tax:
Prior year, credit for 23

Q
Qualified written notice of
allocation 21
Qualifying shipping activities,
Income from 8

DRAFT AS OF
November 5, 2018

B
Backup withholding 17
Bad debts 11
Balance sheets per books 25
Bond credits 23
Business start-up expenses 10
C
Capital construction
fund (See Merchant Marine
capital construction fund)
Charitable contributions 12
Closely held cooperatives 10
Compensation of officers 11
Consolidated return 24
Contributions, charitable 12
Contributions to reduce debt
held by the public 2
Controlled group:
Member of 22
Cost of goods sold 8
Credits:
Foreign tax 22
Form 2439 17
Form 4136 17
General business 22
Recapture of 23
Reducing expenses 10
D
Deductions 9
Deductions and adjustments
under section 1382 21
Depletion 14
Depository methods of tax
payment 3
Depreciation 13
Disclosure statement, reportable
transaction 5

E
Electronic Federal Tax Payment
System (EFTPS) 4
Employee benefit programs 13
Employer identification number
(EIN) 7
Estimated tax 4
Overpaid 16
Payments 16
Penalty 4
Extension of time to file 3
F
Final return 7
Foreign person (defined) 24
Foreign tax credit 22
Forms and publications, how to
get 2
G
General business credit 22
General instructions 2
Gross receipts 8
Gross rents and royalties 8
I
Identifying information 6
Income 7
Income from qualifying shipping
activities 8
Initial return 7
Installment sales 8
Interest:
Income 8
Interest and penalties 4
Interest due:
Late payment of tax 4
Interest expense 12
Interest expense (relating to
section 263A) 9
Interest income:
Tax-exempt 24, 26
Inventory:
Section 263A uniform
capitalization rules 9
L
Limitations on deductions 9, 12
Lobbying expenses,
nondeductibility 15

N
Name and address 6
Name change 7
Net operating loss 15, 24
Nonaccrual experience
method 8
Nonpatronage income 21

R
Reconciliation of income (Sch
M-1) 25
Recordkeeping 5
Refund 17
Refundable credits 17
Related taxpayer
transactions 10
Rents (expense) 11

O
Other deductions:
Amortization 14
Depletion 14
Entertainment expenses 14
Insurance premiums 14
Legal and professional
fees 14
Organizational costs 14
Reforestations costs 14
Repairs and maintenance 14
Start-up costs 14
Supplies 14
Travel expenses 14
Utilities 14
Other income 9
Other information 23
Other taxes:
Recapture 23
Overpaid estimated tax 16

S
Salaries and wages 11
Schedule:
C 17
G 20
H 21
J 22
K 23
L 25
M-1 25
M-3 (Form 1120) 7
O 22
Section 1382, deductions and
adjustments 15
Section 1383 adjustment 17
Section 263A costs 9
Shareholders' equity
adjustments 25
Signature 3
Specific instructions 6

P
Paid preparer authorization 3
Partnership income (loss) 14
Passive activity limitations 10
Patronage dividends 9, 21
Payment, depository methods
of 3
Penalties 17
Late filing of return 4
Late payment of tax 4
Trust fund recovery
penalty 4
Penalty:
Estimated tax 17
Late filing 4
Late payment 4
Pension, profit-sharing, etc.,
plans 13
Per-unit retain allocations 9
Preparer, tax return 3
Principal business activity
codes 27
Private delivery services 3

T
Tax computation 22
Taxes and licenses 11
Tax-exempt securities 25
Tax issues, unresolved 2
Taxpayer Advocate 2
Travel, meals, and
entertainment 14
Travel and entertainment 26
Trust fund recovery penalty 4
Type of cooperative 7

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W
When to file 3
Where to file 2
Who must file 2
Who must sign 3
Worksheet:
Schedule C
Written notice of allocation:
Nonqualified 21
Qualified 21