Patronage

A cooperative is an organization owned by and operated for the benefit of those using its services - the members. These member-borrowers control the company by electing a board of directors from among the membership.

Patronage refunds benefit borrowers by reducing their cost of borrowing. River Valley AgCredit charges competitive rates on its loans/rates comparable to those charged by other lenders for similar loans. However, a major difference between River Valley AgCredit and other lenders is that River Valley AgCredit returns its profits to its borrowers. 

We distribute refunds based on the amount of interest earned on each member's loan. That means the more business you do with River Valley AgCredit, the larger your potential patronage refund.

Patronage refunds can help River Valley AgCredit reduce its tax expense and maintain a strong capital position. This helps the entire membership because an association with a strong capital position is better able to offer competitive interest rates, ensure a constant supply of credit and provide for the retirement of member equity held in the form of allocated surplus.

Unlike other corporations where profits are taxed twice, when earned by the corporation and when distributed to owners as dividends, a cooperative's profits are taxed only once when they are distributed as a patronage refund.

River Valley AgCredit is allowed a tax deduction for the amount of net income that it distributes in the form of a qualified patronage refund. Therefore, to effectively manage the association's tax expense and maintain a strong capital position, the Board of Directors may elect to distribute taxable earnings to members as a qualified patronage refund.

A qualified patronage refund is one in which at least 20 percent is paid in cash and the remainder in either stock or qualified allocated surplus.

Patronage refunds issued in the form of allocated surplus can only be retired, or paid to members, upon approval of the board. Under the bylaws, the association cannot honor requests from members to retire the individual allocated surplus accounts.

Each time a patronage distribution is issued, River Valley AgCredit will notify eligible members of their patronage refunds. The notification will include a breakdown of the amount paid in cash (by check or patronage payable entry) and the amount paid in allocated surplus or stock.

Yes. In January, River Valley AgCredit will send you an IRS Form 1099. This form will show the total of all taxable patronage refunds issued to you during the previous year. The portion of the patronage refund paid in qualified allocated surplus will also be reported as taxable income.