The activities of agricultural and horticultural organizations involve raising livestock, forestry, cultivating land, raising and harvesting crops or aquatic resources, cultivating useful or ornamental plants, and similar pursuits.
For this purpose, aquatic resources include only animal or vegetable life, but not mineral resources. The term harvesting, in this case, includes fishing and related pursuits.
The primary purpose of exempt agricultural and horticultural organizations under Internal Revenue Code section 501(c)(5) must be to better the conditions of those engaged in agriculture or horticulture, develop more efficiency in agriculture or horticulture, or improve the products. Their net earnings may not inure to the benefit of any member.
Agricultural organizations may be quasi-public and are often designed to encourage better agricultural and horticultural products through a system of awards, using income from entry fees, gate receipts, and donations to meet expenses of upkeep and operation. When the activities are directed toward improving marketing or other business conditions in one or more lines of business, rather than improving production techniques or bettering the conditions of persons engaged in agriculture, the organization may qualify for exemption as a business league, board of trade, or other organization under Code section 501(c)(6). In addition, an organization may qualify for exemption under section 501(c)(3) if its primary purpose is educating the public on horticultural or agricultural subjects.
During its existence, a tax-exempt agricultural or horticultural organization has numerous interactions with the IRS – from filing an application for recognition of tax-exempt status, to filing the required annual information returns, to making changes in its mission and purpose.
The illustration below provides an easy-to-use way of linking to the documents most organizations will need as they proceed though the phases of their “life cycle.”
**Agricultural and horticultural organizations promote the interests of persons engaged in raising livestock, harvesting crops or aquatic resources, cultivating useful or ornamental plants, or similar pursuits. Generally, agricultural and horticultural activities are those involved in the art or science of cultivating land, including preparing the soil, planting seeds, raising and harvesting crops or aquatic resources (including fishing and related pursuits), and rearing, feeding and managing livestock. Livestock includes fur-bearing animals raised in captivity for their pelts, as well as domestic farm animals such as sheep, cattle, hogs, etc. Aquatic resources does not include mineral resources.
DISCLAIMER: This information is not intended to provide legal or accounting advice,
or to address specific situations. Please consult with your legal or tax advisor to supplement and verify what you learn here.