Specific varieties of cooperatives get particular tax therapy by the government and are topic to stricter operating standards on what they're able to and cannot do. By way of example, farmers’ cooperatives cannot do even more than 50 percent of their home business with any single member. Rural electric cooperatives that distribute electricity to rural America cannot make even more than 15 percent of their earnings from sources unrelated to their major objective of creating or distributing electricity.
Cooperatives that do not get any particular therapy frequently are not topic to these limits. Yet, only earnings generated in pursuit on the cooperative’s objective is eligible for distribution as margin. In other words, earnings generated from an activity that is absolutely unrelated for the cooperative’s objective is taxed in the standard earnings tax rate for corporations.
