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Patronage

Patronage

When you do business with Mountain View Co-op, you become eligible to be a member (owner) of our cooperative. Mountain View Co-op has over 14,000 members throughout north central Montana that do business with us on an annual basis. Each of these ‘patrons’ receive a portion of the profits generated annually based on the amount of business they do with us. In cooperative lingo, we call these distributed profits patronage.

 

Frequently Asked Questions about Mountain View Co-op Patronage

What is a cooperative?

  • A cooperative is a business entity operated primarily to provide benefits to member owners through marketing transactions and through a distribution of patronage earnings from these transactions; in return, members have a responsibility to provide ownership capital and exercise member control (governance). 

What is patronage?

  • Patronage is the distribution of a co-op’s income (profits) to its member owners (patrons).  The amount of patronage each customer receives is generally based on the amount of business they do with the cooperative in a fiscal year.  There are two components of patronage: (1) cash and (2) equity. Tax law requires co-ops to pay at least 20% of patronage distributions in cash.  MVC typically pays 40% in cash.  The balance is distributed as allocated equity.  By “allocated”, we mean that it has a patron’s name or business name associated with it.

How does MVC determine the patronage rates from year-to-year?

  • The rates are determined based on sales and profitability for each respective commodity.

Who receives patronage?

  • Any patron who earns at least $50 in total patronage, maintains an account in good credit standing, and has signed the proper patronage forms will receive patronage.

When is patronage paid or distributed?

  • Cash patronage and allocated equity are distributed in December.

Is my patronage from MVC taxable?

  • Yes.  A 1099 PATRONAGE IRS form will be mailed to you in January. 

What are the historical patronage rates that have been paid out to members?

  • The five-year average (2014-2018) patronage rates are shown below. Patronage paid per unit (e.g., cents per gallon) will vary from year to year based on commodity prices and profits.

How much cash has MVC paid out in the past five years?

  • Mountain View Co-op has paid out almost $22 million in cash back to our member owners in the last five years!  Two thirds of that was cash patronage and the remainder was retirement and equity redemptions.

What is equity?

  • Equity is the portion of patronage that is retained on the co-op’s balance sheet used for operating the co-op. Over the past five years, MVC has allocated $12 million of our total net income to its member owners.

When and how do I receive my equity back, and is it considered taxable income?

  • Since you paid the taxes on the patronage in the year it was allocated, equity redemptions are not considered taxable income.  Individuals are eligible to have their equity “retired” when they reach the age of 70.  MVC pays out equities of estates as they are requested.  For further explanation, please contact our administration office.

How do I become a member so that I can receive patronage?

  • Becoming a member is as easy as signing up for a membership application (insert URL for application) and doing business with any one of our locations throughout north central Montana (URL for locations). Congratulations! You are now an owner. Every time you do business with Mountain View Co-op, you are doing business with yourself.