In an effort to keep you informed of the decisions made by your cooperative this past year as they relate to yearend tax planning we have summarized key points below for 2015:
Qualified Patronage Allocation – Wheat Grower’s Board of Directors has approved a record $16M qualified patronage allocation for 2015 with $6.4M to be paid in cash. This dividend is made possible due to solid financial results for the fiscal year ended July 31st, 2015 and the continued strength of Wheat Grower’s Balance Sheet. The return of savings back to the member/owners of the Cooperative is one of the principles on which the cooperative system was founded and Wheat Grower’s Board is committed to honoring this principle. Dividend checks are scheduled to be mailed in early December.
Old Year Equity Retirement – In addition to the record patronage dividend Wheat Grower’s Board has approved the payment of two years of old year equity totaling $4.2M. This represents your equity in Wheat Growers for 100% of 1998 and 1999 and moves the Coop to a sixteen year revolvement. Wheat Grower’s Board of Directors remain committed to returning cash to the member/owners of the Cooperative and feel this two year retirement demonstrates that commitment. Although we don’t give tax advice, there is typically no tax due on old year equity retirements as you most likely paid the tax in the year this was allocated. Old year equity checks are scheduled to be mailed in October.
Non Qualified Patronage Allocation – In November, Wheat Grower’s patrons will receive a letter indicating their portion of a record $10M non qualified patronage allocation approved by the Board of Directors for 2015. Please keep the letter as record of your non qualified allocation amount. There are no tax consequences to the patron related to the non qualified patronage allocation in the year of allocation as the Cooperative pays the tax on the non qualified amount. Wheat Grower’s Board reserves the right to pay the non qualified allocation at any time in the future. In the year approved, checks would be written to patrons and the tax liability to the patron would follow the receipt of cash.
Domestic Production Activities Tax Deduction (Section 199) – Each year the Wheat Growers Board of Directors reviews where the use of this tax deduction will bring the most benefit to the Cooperative and its member/owners. Over the past five years Wheat Growers has passed through $80M of Domestic Production Activities Tax Deductions to its member/owners. With lower commodity prices in the marketplace and given Wheat Growers corporate tax rate of 35% the Board has decided to retain this deduction at the Cooperative level which should result in the greatest tax savings for the Coop and its member/owners as a whole.
You may want to share this letter with your tax preparer. Have a safe and prosperous harvest!
South Dakota Wheat Growers Association
Blake L. Bomesberger, CPA
Chief Financial Officer