Proposed changes to Article 12 of our existing by-laws:

Article 12—Patronage Dividends

12.1 Adjusted net income:

The Board may, after the close of the fiscal year, shall determine how much of the net earnings will be distributed as patronage dividends. Such patronage dividends may be distributed to the members partially in cash or by check or voucher or electronic credit on the books of the Co-op and partially in allocated retained patronage credited to the account of each such member.  In no event shall the cash/check/voucher/electronic credit portion distributed to the members be less than the percentage required by the federal tax code. A member who receives an electronic credit may request issuance of a paper check or voucher.  In determining amounts distributable to members, the net income of the Co-op derived from the excess or deficit of revenues over costs and expenses shall first be determined in accordance with generally accepted accounting principles. Such net income shall then be reduced by amounts not attributable to business done with or on behalf of members, by amounts attributable to sales of beer and wine in accordance with state law, and by other amounts which are not allowable under federal or state tax laws, and by such reasonable reserves for necessary business purposes as may be determined by the Board. Net income attributable to business done with non-members shall be credited to unallocated members' equity.  Any allocations of such a nominal amount as not to justify the expenses of distribution may, as determined by the Board of Directors, be excluded from distribution, provided that they are not then or later distributed to other members.

12.2 Consent of members:

By obtaining or retaining membership in the Co-op, each member consents to take into account, in the manner and to the extent required by federal and state tax law, any patronage dividend received from the Cooperative. In addition, by obtaining or retaining membership in the Cooperative, each member is required to accept all patronage dividends received from the Cooperative. (See summary explanation below.)

12.3   Use of Patronage Dividend:

The cash/check/voucher/electronic portion of any patronage dividend distributed to a member may be used for the purchase of goods at the Co-op, redeemed for cash, or donated to the Co-op. The portion of a patronage dividend distributed to any member that is not claimed, used, redeemed or donated within 90 days from issuance shall revert to the Co-op as a donation without further notice to the member. Such cash/check/voucher/electronic portions of patronage dividends that are donated or that revert to the Co-op as provided in this subsection are taxable income to the Co-op and shall be distributed and allocated as the Board may determine. The portion of patronage dividends not currently distributed to members under this article shall be credited to revolving capital accounts in the names of recipient members. 

12.4 Allocation of Net Loss:

In the event the Co-op shall incur a net loss in any fiscal year, such loss may be charged against retained earnings or other unallocated members’ equity accounts. If the net loss exceeds such amounts, or in any event if the Board of Directors so determines, the amount of such loss may either be carried forward to offset adjusted net earnings of subsequent fiscal years or allocated to members in the same manner as for adjusted net earnings except that such allocation shall not exceed the total of invested capital. Any such allocated net loss shall be charged first against retained patronage dividends of prior fiscal years and then against patronage dividend allocations of subsequent fiscal years. Allocated net losses shall not otherwise be assessed to or collected from members.

12.5 No Known Address:

Patronage dividends and/or notice of patronage dividends may be sent to members by email or other form of electronic communication or by U.S. regular mail delivery to the member’s address in the Co-op’s records. Any member may request notice by U.S. regular mail delivery. If any such notice or dividend is returned to the Co-op as undeliverable, then the portion of the patronage dividend allocated to the member in question shall be forfeited by the member and retained by the Co-op as taxable income.

Explanation of Patronage Refund Consent Provision (Section 12.2 above)                                                                  

Patronage rebates are generally taxable only to organizational or business members, or to individual members, if that individual member’s purchases are for business or other income-producing purposes. Individuals whose Co-op purchases are for “personal, living, or family items” do not pay tax on their patronage rebates.

Disclaimer: The Co-op cannot give definitive advice on the tax consequences of patronage rebates to any member; members are encouraged to seek their own tax advice