§ 60 — Patronage capital contributions, allocations, and retirements

§ 60. Patronage capital contributions, allocations, and retirements.\n(a) Each cooperative's by-laws shall, unless otherwise determined by\nagreement of the members, provide for patronage capital allocations and\nretirements in the manner provided by this section. Agreement by the\nmembers for purposes of this section shall mean member approval of\nby-law provisions or by a majority vote of the members voting at a duly\ncalled meeting. Any matter set forth in this section which is subject to\ndetermination of the board of directors shall be determined in the\nexercise of such board of director's business judgment.\n (b) Patronage capital shall be determined by a cooperative on an\nannual basis and shall be the excess, if any, of amounts received or\nreceivable by such cooperative from furnishing electricity over such\ncooperative's operating costs and expenses properly chargeable against\nfurnishing electricity, as determined using such accounting method or\nmethods as agreed upon by the members. Costs and expenses chargeable\nagainst furnishing electricity shall include:\n (1) expenses of the operation and maintenance of its facilities during\nsuch fiscal year;\n (2) interest obligations of the cooperative coming due in such fiscal\nyear;\n (3) depreciation and other expenses to finance or to provide a reserve\nfor the financing of the construction or acquisition by the cooperative\nof additional facilities to the extent determined by the board of\ndirectors;\n (4) expenses to provide a reasonable reserve for working capital as\ndetermined by the board of directors;\n (5) expenses to provide a reserve for the payment of indebtedness of\nthe cooperative maturing more than one year after the date of the\nincurrence of such indebtedness in an amount not less than the total of\nthe interest and principal payments in respect thereof required to be\nmade during the next following fiscal year;\n (6) expenses to provide a fund for education in cooperation and for\nthe dissemination of information concerning the effective use of\nelectric energy and other services made available by the cooperative;\nand\n (7) all other costs and expenses from and directly related to the\nfurnishing of electric energy to the patrons.\n (c) "Patron", as referred to in subdivisions (b) through (h) of this\nsection, shall be defined as (1) a member and (2) a nonmember to whom\nthe cooperative furnishes electric energy or other services on a\npatronage basis pursuant to bylaws or as agreed upon by the members.\n (d) On an annual basis, patronage capital determined under subdivision\n(b) of this section shall be allocated on the books of the cooperative\nto each patron having furnished such capital and shall be based upon and\nin proportion to:\n (1) the revenue from each patron or group of similar patrons to the\ncooperative's total revenue;\n (2) the contribution of each patron or group of similar patrons to the\ncooperative's overall patronage capital;\n (3) the kilowatt-hour usage of each patron or group of similar patrons\nto the total kilowatt-hour usage of all patrons;\n (4) any other method which is agreed upon by the members; or\n (5) any combination of paragraphs one, two, three and/or four of this\nsubdivision as agreed upon by the members.\n (e) "Retirement" in reference to patronage capital shall mean the\nredemption and payment in cash or other property, as provided by\nsubdivision (f) of this section, of patronage capital to the cooperative\npatrons or former patrons to whom it has previously been allocated. The\nallocation of patronage capital to a patron's patronage capital account\nshall in no event create a vested right to the retirement of the amount\nso allocated. The board of directors of a cooperative may, in its\ndiscretion, retire patronage capital allocated on the books of the\ncooperative when it determines such retirement is consistent with sound\nbusiness and management practices and the long-term financial stability\nof the cooperative. Patronage capital shall be retired according to the\nmethod chosen by the members and at the time the board of directors\nshall determine as a matter of its discretion. However, patronage\ncapital may be retired in advance of the date when it would otherwise be\nretired under the previous sentence in such circumstances and upon such\nconditions as are agreed upon by the members, including, but not limited\nto, upon a patron's or former patron's death, the termination of a\npatron or former patron's electric service, or a patron or former\npatron's filing for bankruptcy. In the event of such early retirement of\npatronage capital, the amount of patronage capital allocated to the\npatron or former patron on the cooperative's books may be discounted for\npurposes of its retirement in accordance with such method as is agreed\nupon by the members. The difference between the discounted amount and\nthe patron's or former patron's patronage capital may be retained by the\ncooperative as part of its net savings in a manner determined by the\nboard of directors.\n (f) When the board of directors of the cooperative has determined,\npursuant to subdivision (e) of this section, that patronage capital\nshall be retired, the retirement may be accomplished by a bill credit,\nby the mailing of payment or notice of payment to the patron's or former\npatron's last known address of record on file with the cooperative, or\nby such other method as the board of directors shall determine to be\nappropriate. No interest shall be paid or payable by the cooperative on\nany patronage capital. The amount of patronage capital being retired may\nbe reduced by any amount owed to the cooperative by the patron or former\npatron.\n (g) A cooperative may adopt such procedures for the assignment and\ncontribution of unclaimed patronage capital to the cooperative as are\nagreed upon by its members. Such procedures may include providing that\npatronage capital which has not been claimed by a patron or former\npatron, after reasonable efforts to locate said patron or former patron,\nshall be added to the net savings of the cooperative. Mailing of a check\nor notice of the availability of a check to the last known address of a\npatron or former patron by first class mail and publication of the list\nof patrons or former patrons having unclaimed patronage capital on the\nwebsite and/or newsletter of the cooperative for a period of three years\nshall be deemed reasonable effort to locate said patron or former\npatron.\n (h) In the event that the cooperative should engage in the business of\nfurnishing goods and services other than electric energy, all amounts\nreceived and receivable therefrom which are in excess of costs and\nexpenses properly chargeable against the furnishing of such goods or\nservices shall, insofar as permitted by law, bylaws, or by approval of\nthe members, be prorated annually on a patronage basis and allocated to\neach member and shall be retired to said member according to the method\nchosen by the members and at the time that the board of directors shall\ndetermine as a matter of its discretion. Nothing in this section,\nhowever, prevents a cooperative from furnishing goods and services other\nthan electric energy on a non-patronage basis to non-members; the net\nearnings of which may be retained as part of its net savings.\n (i) With respect to any cooperative formed under this chapter that is\nexempt from federal income taxation under paragraph twelve of subsection\n(c) of section five hundred one of the internal revenue code of nineteen\neighty-six, as amended, or any corresponding provision of future federal\ntax law, or any cooperative which would otherwise qualify for said\nexemption but for having less than eighty-five percent (or whatever\nthreshold may be specified in the future for said purpose by the\ninternal revenue code) of income from members, this section shall in all\nevents be limited to and interpreted in a manner which is compliant with\nthe requirements of exemption under such internal revenue code section,\nand any agreement by the members or determination by the board of\ndirectors under this section with respect to the subject matter hereof\nshall also be limited to and interpreted in a manner which is compliant\nwith such internal revenue code section.\n