The Law of Tax-Exempt Organizations, 12th Edition

CHAPTER SIXTEENLabor, Agricultural, and Horticultural Organizations

• § 16.1 Labor Organizations
• § 16.2 Agricultural Organizations
• § 16.3 Horticultural Organizations

The federal tax law provides tax exemption for qualified labor, agricultural, and horticultural organizations. No part of the net earnings of this type of an organization may inure to the benefit of any member.¹ This category of organization must have as its principal object the betterment of the conditions of those engaged in the exempt pursuits, the improvement of the grade of their products, and the development of a higher degree of efficiency in the particular occupation.²

§ 16.1 LABOR ORGANIZATIONS

The principal purpose of a tax-exempt labor organization is to engage in collective action to better the working conditions of individuals engaged in a common pursuit. The most common example of the exempt labor entity is labor unions that negotiate with employers on behalf of workers for improved wages, fringe benefits, hours, and working conditions. Nonetheless, the exempt labor organization category encompasses a broader range of entities, including union-controlled organizations that provide benefits to workers that enhance the union's ability to bargain effectively. This classification includes, for example, an organization of exempt labor unions representing public employees,³ an organization to provide strike and lockout benefits (strike funds),⁴ the “labor temple” (offices, meeting rooms, auditoriums, ...