Credit Union and Cooperative Patronage Refunds - Filene ...

on share deposits is not a patronage refund, because it is paid on the
basis of investment in Wright-Patt in contrast to use based on borrowings
from the credit union.
This is not to criticize Wright-Patt’s program but only to highlight
that in a report about patronage refunds, we must pay attention to
whether the payment was made on a patronage basis or the member’s
use of the credit union. In fact, Wright-Patt’s program highlights
the advantage of paying patronage refunds under 501(c)(14) rather
than, for example, Subchapter T. Under 501(c)(14), Wright-Patt is
allowed to be more creative in how it distributes its patronage payments
to members. Subchapter T would force a far narrower concept
of patronage on Wright-Patt because a patronage tax deduction is
allowed only for payments made on the basis of each member’s proportional
use of Wright-Patt.
Mislansky says that patronage refunds are a differentiator that distinguishes
Wright-Patt from IOF banks that compete in the credit
union’s market. Mislansky says that Wright-Patt’s membership grows
substantially each year after its patronage refunds are announced and
paid. The idea that patronage refunds are a differentiator resonates
with us, but on more levels than just whether patronage refunds are
good ideas as rebates. As we said earlier, we believe that patronage
refunds highlight the philosophical gulf that separates co-ops from
IOFs.
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