Credit Union and Cooperative Patronage Refunds - Filene ...

section on the exemption from filing 1099-PATRs for “consumer”
cooperatives.
19. 26 CFR 1.6044-4: “If 85 percent of its gross receipts for the
preceding taxable year, or 85 percent of its aggregate gross
receipts for the preceding three taxable years, are derived from
the sale at retail of goods or services of a type which is generally
for personal, living, or family use.”
20. Only the allocation of member- related patronage earnings is
deductible under Sub-T.
21. National Rural Electric Cooperative Association and National
Rural Utilities Cooperative Finance Corporation, Capital Credits
Task Force Report, January 2005.
22. Treas. Reg. § 301.6044–2(b)(2)(iii).
23. Coop Litigation News Publishing, “Coop Litigation News.”
coop-litigation.com.
24. Because each ACA operates a Credit Association subsidiary
that is taxed under Subchapter T, and because Sub-T co-ops
must allocate patronage- sourced income or maintain patronage
records, each ACA can be expected to follow a similar recordkeeping
process for its Land Bank subsidiary.
25. 12 CFR 701.6.
26. Examples include Iowa Code § 533.404, Kentucky Statutes
286.6-705, Wisconsin Code 186.18, and North Dakota
6-06.1-08.
27. www.aggeorgia.com; www.badgerlandfinancial.com. The financial
information discussed in this report is taken from each
association’s 2007, 2008, and 2009 fiscal year-end audits.
28. 12 CFR 615.5330.
29. 12 CFR 615.5301(b)(2)(ii).
30. See our earlier discussion at note 6.
31. See discussion above on Subchapter T. Key qualifications
include (1) preexisting obligation in the bylaws, (2) board of
directors declares patronage refund, (3) within 8½ months
following fiscal year end, prepare and send qualified written
notices of allocation and qualified payment constituting at least
20% of the allocation in cash, and (4) build out accounting
program to allow tracking of each member’s allocated equity.
32. See note 18 about cooperatives that primarily provide goods or
services for family, personal, or living needs.
33. It is not that all conversions of co-ops are ill conceived. Conversions
or demutualizations of co-ops with large equity
redemption obligations improve their financial metrics because
they are no longer required to devote huge capital resources
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