Taxable cooperatives – including Subchapter T cooperatives and taxable rural telephone and electric cooperatives – must determine whether income and expenses are considered patronage-sourced or not. This is called patronage determination. It is critical to taxable cooperatives because it determines whether income is taxable or subject to a patronage-dividend deduction or exclusion. Because it is so important, cooperatives should periodically review their sources of income and expenses and assess whether they are properly treated as patronage-sourced or non-patronage sourced.
AHC Attorney David Cook recently spoke to the National Business Cooperative Association’s Coop Professionals Conference about patronage determinations. His presentation handout is provided here. For more information about patronage determinations, or to schedule a cooperative tax seminar by David Cook, please contact David Cook.