---
kind: "section"
citation: "26 U.S.C. § 1383"
title: "26"
title_heading: "Internal Revenue Code"
number: "1383"
heading: "Computation of tax where cooperative redeems nonqualified written notices of allocation or nonqualified per-unit retain certificates"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/26/1383"
units:
  - "Subtitle A — Income Taxes"
  - "Chapter 1 — Normal Taxes and Surtaxes"
  - "Subchapter T — Cooperatives and Their Patrons"
  - "Part I — Tax Treatment of Cooperatives"
---

# §1383. Computation of tax where cooperative redeems nonqualified written notices of allocation or nonqualified per-unit retain certificates

- (a) **General rule—** If, under [section 1382(b)(2)](/usc/26/1382.md?p=b-2) or (4), or (c)(2)(B), a deduction is allowable to an [organization](/usc/26/414.md?p=m-6-A) for the taxable year for amounts paid in redemption of nonqualified written notices of allocation or [nonqualified per-unit retain certificates](/usc/26/1388.md?p=i), then the tax imposed by this chapter on such [organization](/usc/26/414.md?p=m-6-A) for the taxable year shall be the lesser of the following:
  - (1) the tax for the taxable year computed with such deduction; or
  - (2) an amount equal to—
    - (A) the tax for the taxable year computed without such deduction, minus
    - (B) the decrease in tax under this chapter for any prior taxable year (or years) which would result solely from treating such nonqualified written notices of allocation or [nonqualified per-unit retain certificates](/usc/26/1388.md?p=i) as qualified written notices of allocation or [qualified per-unit retain certificates](/usc/26/1388.md?p=h-1) (as the case may be).
- (b) **Special rules—**
  - (1) If the decrease in tax ascertained under [subsection (a)(2)(B)](#a-2-B) exceeds the tax for the taxable year (computed without the deduction described in [subsection (a)](#a)) such excess shall be considered to be a payment of tax on the last day prescribed by law for the payment of tax for the taxable year, and shall be refunded or credited in the same manner as if it were an overpayment for such taxable year.
  - (2) For purposes of determining the decrease in tax under [subsection (a)(2)(B)](#a-2-B), the stated dollar amount of any [nonqualified written notice of allocation](/usc/26/1388.md?p=d) or [nonqualified per-unit retain certificate](/usc/26/1388.md?p=i) which is to be treated under such subsection as a [qualified written notice of allocation](/usc/26/1388.md?p=c-1) or [qualified per-unit retain certificate](/usc/26/1388.md?p=h-1) (as the case may be) shall be the amount paid in redemption of such [written notice of allocation](/usc/26/1388.md?p=b) or [per-unit retain certificate](/usc/26/1388.md?p=g) which is allowable as a deduction under [section 1382(b)(2)](/usc/26/1382.md?p=b-2) or (4), or (c)(2)(B) for the taxable year.
  - (3) If the tax imposed by this chapter for the taxable year is the amount determined under [subsection (a)(2)](#a-2), then the deduction described in [subsection (a)](#a) shall not be taken into account for any purpose of this subtitle other than for purposes of this section.

## Source credit

(Added Pub. L. 87–834, § 17(a), Oct. 16, 1962, 76 Stat. 1047; amended Pub. L. 89–809, title II, § 211(a)(5)–(7), Nov. 13, 1966, 80 Stat. 1581.)

## Notes

### Editorial Notes

### Amendments

1966—Pub. L. 89–809, § 211(a)(5), inserted “or nonqualified per-unit retain certificates” in section catchline.

Subsec. (a). Pub. L. 89–809, § 211(a)(6), substituted “section 1382(b)(2) or (4)” for “1382(b)(2)” and inserted references to per-unit retain certificates.

Subsec. (b)(2). Pub. L. 89–809, § 211(a)(7), substituted “section 1382(b)(2) or (4)” for “section 1382(b)(2)” and inserted references to per-unit retain certificates.

### Statutory Notes and Related Subsidiaries

### Effective Date of 1966 Amendment

Amendment by Pub. L. 89–809 applicable to per-unit retain allocations made during taxable years of an organization described in section 1381(a) of this title (relating to organizations to which part I of subchapter T of chapter 1 applies) beginning after Apr. 30, 1966, with respect to products delivered during such years, see section 211(e)(1) of Pub. L. 89–809, set out as a note under section 1382 of this title.

### Effective Date

Section applicable, except as otherwise provided, to taxable years of organizations described in section 1381(a) of this title beginning after Dec. 31, 1962, see section 17(c) of Pub. L. 87–834, set out as a note under section 1381 of this title.