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N Cal Attorney
N Cal Attorney, Lawyer
Category: Real Estate Law
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Experience:  Since 1983
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There is a water irrigation district that files taxes with

Resolved Question:

There is a water irrigation district that files taxes with IRS as a
501-C-12 is identified on the Secretary of State's website as a 501c_12
501- c-12 IRS guidelines say one member one vote to elect a Board.

But the bylaws say one share one vote and the Board has the most shares so
they get all the water and control the votes. Smaller users are not
included in decisions.
Just yesterday they filed a law issue against the local water master to
get more water in their canal supplying their storage lake. The Board
members benefit as they irrigate from that canal.

Majority of unserved users want to know how to get rid of the Board.

They are afraid of tax liability current Board has caused by
misrepresenting tax returns.

Jeff
Submitted: 1 year ago.
Category: Real Estate Law
Expert:  N Cal Attorney replied 1 year ago.
I'm sorry to hear this.

Where is the water district located?
Customer: replied 1 year ago.


lassen county


 

Expert:  N Cal Attorney replied 1 year ago.
I do not have time to research this until later tonight.

If that is OK, just wait. If that is not OK, you can opt me out and let another Expert take over.
Customer: replied 1 year ago.


ok

Expert:  N Cal Attorney replied 1 year ago.
Thank you for your patience.

Your contention is supported by the IRS Manual:

7.25.12.5 (08-09-2006)
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.
Customer: replied 1 year ago.

Any idea of what move to make next? How to get rid of this in control Board with all the votes?

Expert:  N Cal Attorney replied 1 year ago.

Is this a private or a public body?

 

There are a lot of statutes pertaining to specific irrigation districts and it would help if you would tell me the name of the district, assuming it is a public body.

 

How long have those bylaws been in force?

Customer: replied 1 year ago.


it's a 501-c-12 they file taxes as such. Aa private water district. Bylaws for a long time have been shares, one per acre. latered altered so shares could be sold and moved.

Expert:  N Cal Attorney replied 1 year ago.
It it one of the Districts mentioned at
http://leginfo.ca.gov/cgi-bin/displaycode?section=wat&group=20001-21000&file=20510-20543

Do the bylaws provide for a recall election of Directors?
Customer: replied 1 year ago.

it's not in the water code sectionsunless I mis-read. it's lassen irrigation company often referred to as LIC.


will check bylaws for re-call clause.


 


thanks!

Expert:  N Cal Attorney replied 1 year ago.
Please let me know what the by-laws say about that.

Leavitt v. Lassen Irrigation Company (1909) 157 Cal. 82 states:
The fundamental and all important proposition then is this, that a public service water company which is appropriating water under the constitution of 1879, for purposes of rental, distribution, and sale, cannot confer upon a consumer any preferential right to the use of any part of its water.

Is that what the company has been doing?
Customer: replied 1 year ago.

Attachment: 2013-04-27_225251_bylaws_1992_copy_paste_from_records.docx


why yes! You found something we had no clue about.

 

Expert:  N Cal Attorney replied 1 year ago.

I am sorry but my software can read doc but not docx files.

There are several ways to approach this problem. One is to ask the Board to change the voting rules to comply with the IRS rules or face penalties from IRS once this s reported to IRS. Another would be to try to recall the entire Board.

I cannot recommend a specific course of action.

You can get a free consultation from some of the local land use attorneys listed by location at
http://lawyers.findlaw.com/lawyer/practicestatecounty/Land-Use-&-Zoning/California/Lassen

I urge you to follow up on this with a local attorney who can read the relevant documents and advise you in confidence.

I hope this information is helpful.

N Cal Attorney, Lawyer
Category: Real Estate Law
Satisfied Customers: 8189
Experience: Since 1983
N Cal Attorney and 3 other Real Estate Law Specialists are ready to help you
Customer: replied 1 year ago.


thanks, XXXXX XXXXX You confirm what few things I had found .

Expert:  N Cal Attorney replied 1 year ago.
Thank you for the Excellent rating, and thank you very much for the bonus!

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