What is Patronage and How Does it Work?

Patronage is the distribution of a co-op’s profits back to its members. The amount each member receives is generally based on the amount of business they do with the co-op in a fiscal year.  Members are required to spend at least $10,000, complete a credit application, and maintain an account in good credit standing to receive patronage.  The rates are determined based on sales and profitability for each respective commodity There are two components of patronage, cash, and equity. Co-ops are required to pay back at least 20% of the profits to members in cash. Recently, the Valley United Co-op Board of Directors has decided to pay 50% in cash with the balance distributed as “Allocated Equity”. Equity is the portion of patronage that is retained and used for operating the co-op. Your patronage both cash and non-cash from Valley United Co-op is taxable. A 1099 Patronage IRS form will be mailed out in January for patronage received in the previous year. Estates are paid as received after board approval and the proper documents have been submitted.