Thank you for your patience.
Your contention is supported by the IRS Manual
Requirements for Mutual Ditch, Irrigation, Cooperative Telephone or Electric Companies, and "Like Organizations"
Ditch and irrigation companies, telephone companies, electric companies, and "like organizations" that seek exemption under IRC 501(c)(12) must be organized and operated as mutual or cooperative organizations. The terms "mutual" and "cooperative" have no legal distinction for purposes of section 501(c)(12). The U.S. Tax Court defined "cooperative" as follows:
"A cooperative is an organization established by individuals to provide themselves with goods and services or to produce and dispose of the products of their labor. The means of production and distribution are those owned in common and the earnings revert to the members, not on the basis of their investment in the enterprise, but in proportion to their patronage or personal participation in it."
Puget Sound Plywood, Inc. v. Commissioner , 44 T.C. 305 (1966), acq. 1966-2 C.B. 6.
The court described the organizational and operational cooperative principles as follows:
Democratic Control. The organization must periodically hold democratically conducted meetings with members. Election of officers must be on a one member, one vote basis.
Meetings must have a quorum of members in attendance or voting by proxy.
Do you have a copy of the bylaws that you can show me?
I could do more research if I had the name of the irrigation district.