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Patronage Refund
What makes the Co-op different from a
profit-driven grocery store is not a lack of
profit. Rather, it is the underlying purpose of
the Co-op and the way money earned is controlled
and distributed. The Co-op does not exist to
maximize profit, but to serve the Ownership and
community by building a sustainable economy in
which everyone can participate.
How do Patronage Refunds work?
At the end of the fiscal year, net income from
operations is invested in the Co-op or returned
to Owners, depending on the source of the profit
and each Owner’s level of patronage. Income that
is attributable to sources other than Owner
transactions (i.e. non-owner transactions) is
separated from those attributed to Owner
transactions.
Income taxes are paid from
non-owner transactions. Also, 10% of the net
income is invested from these nonowner
transactions into the Co-op’s Capital Reserve.
Any remaining non-owner transaction income is
allocated to the Capital Reserve.
Net
operating income from Owner transactions is
allocated to Owners as a Patronage Refund by
dividing it among Owners based on how much each
Owner purchased that year. According to the tax
code that allows the Co-op to deduct Patronage
Refunds from its taxable income, the Board must
return to Owners at least 20% of the Patronage
Refund in cash/coupon. The other 80% can be
either returned in cash/coupon or retained as
Owner Equity (Retained Patronage), based on the
capital needs of the Co-op at any given time.
This will vary by year.
Patronage Refunds
will not affect Owners’ taxable income unless
you are purchasing items from the Co-op for
business purposes and deducting the purchases as
business expenses.
Each Owner’s retained
equity is their investment that remains in the
Co-op for the future needs of the Co-op. When
the Board believes it is fiscally prudent, they
will set aside Co-op money to return Owner
Equity based on the Board’s equity redemption
policy.
NOTE: It is an Owner’s
responsibility to communicate with the Co-op
concerning changes to your contact information.
This can be done at the store, by email, by
phone, or by written notification. Owner
capital, including capital stock, patronage
refund, and capital credits, will be forfeited
if a Owner cannot be located as described in the
Co-op’s Articles of Incorporation. See the
Articles
of Incorporation and the Bylaws for more
detailed information.
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