### Question
How does the law define eligible worker-owned cooperative?


### Answer
Under *26 U.S.C. § 1042*, **eligible worker-owned cooperative** is defined as:

> any organization—



(A) to which part I of subchapter T applies,



(B) a majority of the membership of which is composed of employees of such organization,



(C) a majority of the voting stock of which is owned by members,



(D) a majority of the board of directors of which is elected by the members on the basis of 1 person 1 vote, and



(E) a majority of the allocated earnings and losses of which are allocated to members on the basis of—



(i) patronage,



(ii) capital contributions, or



(iii) some combination of clauses (i) and (ii)

#### Citation:
  - *26 U.S.C. § 1042*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter O-Gain or Loss on Disposition of Property > PART III-COMMON NONTAXABLE EXCHANGES**

