FAQ's for Member-Owners

Updating member-owner benefits to carry the Co-op into the future

 

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  • What are patronage dividends or refunds?
  • Patronage dividends or refunds, are the cooperative method of sharing a co-op’s earnings with its member-owners in profitable years. Your patronage dividend is based on your purchases for that particular year and the profit that the co-op made on those purchases.
  • Will I get a patronage dividend every year and whose decision is it?
  • Patronage can only be distributed in profitable years and at the discretion of the Board of Directors.
  • Who qualifies for the patronage dividend?
  • Member-owners who purchased qualifying retail products. Equity payments, Co-op branded merchandise, and class payments are not included in patronage dividends.
  • Will I get a patronage check in the mail?
  • No. We will issue a patronage refund voucher. You can use the voucher to purchase products or gift cards at the co-op. You can donate it to help subsidize our Food For All program which is still being developed, or you can exchange it for cash (in the form of a check).
  • Do I have to claim this as income on my tax return?
  • No. The IRS regards this as a refund, not income. If you are a business, you may want to check with your tax preparer.
  • How is patronage calculated?
  • At the end of the fiscal year (July through June, after determining the amount of member-owner generated profit (based on the member-owner’s percentage of total sales), the Board decides on a refund percentage to distribute. According to the IRS, at least 20% of the member-owner’s patronage dividend must be distributed as cash or equivalent when a dividend has been declared (this is the “refund”). The Board may choose to retain up to 80% of each member-owner’s patronage dividend for projected capital and other business needs. I’ve included a calculation at the end of this section.
  • How does this affect the current discount program?
  • We have replaced the 2%, 5%, and 15% discounts with an expanded and affordable Co-op Basics program that will save you at least 15% on many of your favorite products throughout the co-op every day that you shop. We plan to have member-owner only promotions at different times throughout the year. We are also planning to bring in a customized loyalty program. The current 5% bulk/case discount has been raised to 10%.
  • Why are you changing the discount program?
  • There are a number of reasons why this will benefit both you and your co-op. Many member-owners have told us that they want better pricing and this is a sustainable, exciting and flexible way we can do it, regardless of which day of the month you shop at your co-op

    There are benefits for the co-op, too. Patronage gives the co-op a tax advantage. The co-op doesn’t have to pay taxes on the income that we declare as dividends. This means that we have more money to put back into your co-op and community! If you don’t use your patronage refund, the co-op has to reclaim unused or unclaimed patronage as income and pay taxes on it. We would much rather see our member-owners use this money.

    Nearly all food cooperatives have moved to a patronage system. It is a fiscally sound and responsible way to safeguard your co-op’s finances. Discounts are becoming unsustainable for the co-op and it restricts us from exploring and providing other benefits to our owners. In our 2014-2015 fiscal year, we gave our $290,000 in discounts at the register and finished our year with a net loss of almost $14,000. This is not sustainable.
  • When will this all happen?
  • We started on 10/1/16.

 

Example patronage calculation for member-owner Suzy Sunshine
Co-op sales at end of fiscal year$5,300,000
70% of Co-op sales are to member-owners$3,710,000
Board declares a patronage refund and
distributes 50% to member owners
and retains 50% for the co-op
$50,000
Suzy Sunshine spent $50/wk or $2600/year.
This is her percentage portion of the total
sales to member-owners.
This is the percentage of the total refund she's entitled to.
0.070%
Suzy's patronage refund$35.04