Telephone Cooperatives

Discounted Capital Credits and the Member Income Test: The Creation of a New Equity Account

by David R. Cook Jr.
March 30, 2013February 15, 2022

Cooperatives have been given conflicting guidance from the IRS concerning the proper treatment of discounting of capital credits. Specifically, some pronouncements indicate that the discount… Read More »Discounted Capital Credits and the Member Income Test: The Creation of a New Equity Account

AHC Cooperative Tax Brief: Mutual Ditch and Irrigation Company Denied Exemption

by David R. Cook Jr.
December 20, 2012

The Service recently denied exemption to an organization that sought exemption under Section 501(c)(12) as a mutual ditch and irrigation company. The organization failed to… Read More »AHC Cooperative Tax Brief: Mutual Ditch and Irrigation Company Denied Exemption

AHC Cooperative Tax Brief: Telephone Cooperative’s Sale of Subsidiary

by David R. Cook Jr.
August 4, 2012February 15, 2022

In the latest cooperative tax ruling, the Service ruled that a cooperative’s (“Cooperative”) gain on sale of stock in corporations that offered services to Cooperative’s members was patronage-sourced. The ruling was important to Cooperative because it expected to fail the Member Income Test of Section 501(c)(12), subjecting Cooperative to regular corporate income tax. The favorable ruling allowed Cooperative to avoid substantial taxes in the gain.

Guest Blog: Preparing Your Cooperative Staff for an Election

by David R. Cook Jr.
April 8, 2012

This blog post was prepared by guest blogger Tim Madsen of Survey & Ballot Systems.

A cooperative, by definition, is an association of people voluntarily united to meet a common goal through democratic process and voluntary membership. Democratic cooperative governance requires an elected board that sets policies and makes decisions that are in the best interest of its members. In order for this to happen, members must have the opportunity to participate in well-run, open elections.Read More »Guest Blog: Preparing Your Cooperative Staff for an Election

IRS Provides Guidance on Member Income Test for Telephone Cooperatives

by David R. Cook Jr.
March 24, 2012February 15, 2022

The latest Cooperative Tax Brief discusses a recent technical advice memorandum concerning the Member Income Test for Telephone Cooperatives. The Service ruled that funds received by… Read More »IRS Provides Guidance on Member Income Test for Telephone Cooperatives

Electric and Telecom Cooperative Mergers

by Roland F. Hall
September 26, 2011March 12, 2023

Mergers of electric cooperatives are nothing new. Over the years, several mergers have occurred, mostly for the purpose of consolidating business functions and generating savings for members. For example, currently DS&O Electric Cooperative and Rolling Hills Electric Cooperative, both located in Kansas, are considering a merger. Such mergers often do not result in decreases in electric rates, because cooperatives typically already have long-term arrangements in place with their G&T or with third-party suppliers. Savings are most often achieved in the areas of human resources, IT, insurance, accounting, and legal fees. On the basis of such savings, as demonstrated by extensive studies and a 10-year financial forecast, two cooperatives in Texas – Humboldt County REC and Midland Power Cooperative – recently decided to seek approval of merger from their members. Of course any proposed merger must take into account complex issues such as tax considerations, regulatory issues, member relations, the effect on employees, management and the Boards of Directors, and financing and credit.Read More »Electric and Telecom Cooperative Mergers

Sale of Taxable Telephone Cooperative’s Subsidiary Generated Patronage-Sourced Income

by David R. Cook Jr.
June 22, 2011February 15, 2022

A recent IRS ruling addresses how one taxable telephone cooperative managed to avoid a devastating taxable gain on the sale of its interest in a subsidiary.