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Arthur Capper Cooperative Center

Cooperative Finance and Taxation

  • Cooperative Financing and Taxation
    • http://www.rd.usda.gov/files/cir1sec9.pdf
      • This report provides an overview of cooperative finance and the characteristics of agricultural cooperatives that make their financial and taxation requirements unique. Discussion includes member equity, base capital plan, equity redemption, special equity redemption programs, measuring equity performance, debt capital, cooperative taxation, and the future of cooperative finance.
      • CIR 1 Section 9. 26 pgs. Revised 1995. Robert C. Rathbone.
      • Library ID Number: 2698
  • Tax Treatment of Cooperatives
    • http://www.rd.usda.gov/files/cir23.pdf
      • This brochure dispels some myths about cooperatives and taxes. Cooperatives pay a variety of taxes-real and personal property taxes, sales and employment taxes, fuel taxes, utility excise taxes, and motor vehicle registration and license fees. Cooperatives and their owners also pay a single income tax on margins, usually at the owner level. Subchapter T of the Internal Revenue Code, taxes, qualified or nonqualified written notices of allocation, per-unit retains, and tax planning alternatives are also discussed.
        • CIR 23. 10 pgs. Revised 1995. Donald A. Frederick.
        • Library ID Number: 2730
    • Annual Audits Board Responsibilities
      • http://www.rd.usda.gov/files/cir41.pdf
        • This report presents the reasons for an audit, steps and criteria for selecting an auditor, procedures and the audit report, and other accounting services available to help ensure proper financial reporting. The information contained in this report is intended for directors, managers, and advisers of new and developing cooperatives. The audit is part of the board's fiduciary responsibilities.
        • CIR 41. 17 pgs. Reprinted 1995. Rosemary K. Mahoney.
        • Library ID Number: 4560
    • Section 7: Financing Co-ops, Robert Rathbone
      • http://www.rd.usda.gov/files/cir45-7.pdf
        • This article discusses the ways equity capital is used to finance a cooperative operation. These include retained net income, per-unit capital retains, and revolving fund financing. Short- and long-term loans and sources of borrowed funds are also discussed.
        • Library ID Number: 4023
    • Section 8: Income Tax Treatment of Co-ops
      • http://www.rd.usda.gov/files/CIR45-8.pdf
        • The tax status of cooperatives is clearly explained, as are the concepts of patronage refunds and payment options in returning patronage to members. Background is also provided on per-unit retains, Section 521 cooperatives, and the various tax forms which cooperatives must file.
        • Donald A Frederick
        • Library ID Number: 4028
    • Section 12: Base Capital Financing of Co-ops
      • http://www.rd.usda.gov/files/CIR45-12.pdf
        • Base capital equity plans can be used to accumulate and redeem member equity in a cooperative. This article describes how base capital plans operate, implementing them, and advantages and disadvantages.
        • Robert Rathbone
        • Library ID Number: 4024
    • Working with Financial Statements
      • http://www.rd.usda.gov/files/cir43.pdf
        • The financial health and performance of cooperatives can make a major impact on the financial conditions and operations of the cooperative's patrons. This basic guide is intended to inform members who are unfamiliar with a cooperative's annual statement-the principal source of information about its financial condition. The report is oriented to grain marketing and farm supply cooperatives.
        • CIR 43. 21 pgs. 1991. (Slightly revised 1996). Roger Wissman.
        • Library ID Number: 2591
    • Income Tax Treatment of Cooperatives: Background
      • http://www.rd.usda.gov/files/cir44-1.pdf
        • Cooperatives have been granted a degree of flexibility in their financial and tax planning and should exercise their operations effectively to maximize benefits for members. This report provides important background to understanding current income tax treatment of cooperatives. The role of legislation, administrative rulings, and judicial decisions establishing cooperative tax policy are also reviewed in this 5-part series.
        • CIR 44, Part I. 96 pgs. 1993. Donald A. Frederick and John Reilly.
        • Library ID Number: 7252
    • Income Tax Treatment of Cooperatives: Distribution, Retains, Redemptions, and Patronage Taxation
      • http://www.rd.usda.gov/files/cir44-3.pdf
        • This report examines tax treatment of cooperatives as related to distributions and redemptions. Treatment of patronage refunds, the linchpin of cooperative accumulation, is also examined, along with per-unit retains used by cooperatives. Cooperatives have been granted a certain degree of flexibility in their financial and tax planning and should exercise their options effectively to maximize benefits for members.
        • CIR 44, Part 111. 133 pgs. Reprinted 1996. Donald A. Frederick and John Reilly.
        • Library ID Number: 2815
    • Income Tax Treatment of Cooperatives: Handling of Losses
      • http://www.rd.usda.gov/files/cir44-5.pdf
        • Rules qualifying cooperatives to make deductions from Federal income tax are covered under Section 521 of the Internal Revenue Code, the subject of this report. Although use of Section 521 has fallen off in recent years, special rules make it valuable in some cases for marketing cooperatives. This booklet contains two chapters: one deals with requirements for Section 521 status and the other reviews special tax deductions and other tax and securities law treatments related to Section 521 status.
        • CIR 44, Part IV. 104 pgs. 1996. Donald A. Frederick.
        • Library ID Number: 7256
    • Can Grain Elevators Survive Record Crop Prices 
      • http://www.kansascityfed.org/publicat/mse/MSE_0308.pdf
        • This article describes the challenges grain elevators face in today’s volatile agricultural environment. The financial challenges for grain elevators have risen sharply over the past six months and have even led to a few grain elevator bankruptcies. In the past, bankruptcies also led to economic losses for business partners, particularly farmers who used grain elevator services and local banks that extended credit to them.
        • Jason Henderson
        • Library ID Number:7643
    • The role of small scale producer’s organizations to address market access
    • Managing Your Cooperative’s Equity
      • http://www.rd.usda.gov/files/cir56.pdf
        • This article discusses the essentials of antitrust law and explains why limited antitrust protection granted in the Capper-Volstead Act is critical to cooperative marketing by agricultural producers. It outlines who is covered by Capper-Volstead, how a cooperative must be organized to qualify for limited antitrust protection, and what types of activity by the cooperative are protected.
        • CIR 56. 29 pgs. 1997. Robert C. Rathbone.
        • Library ID Number: 2782 
    • Understanding Cooperative Bookkeeping and Financial Statements
      • http://www.rd.usda.gov/files/cir57.pdf
        • This guide assists those with limited bookkeeping experience and understanding of bookkeeping and financial statements. It should be used as a learning tool for new cooperatives in developing and understanding basic accounting procedures.
        • CIR 57. 36 pgs. 1998. Robert W. Binion.
        • Library ID Number: 3397
    • Leasing as an Alternative Method of Financing for Agricultural Cooperatives
      • http://www.rd.usda.gov/files/rr83.pdf
        • Economic incentives for agricultural cooperatives to lease capital assets such as structures, machinery, equipment and other depreciable items are explored and illustrated in this report. Selected aspects of lease contracts are reviewed. The lease or purchase problem is analyzed using capital budgeting (discounted cash flow) and whole firm financial simulation methods. Results for a case farmer cooperative situation are compared under pre- and post-1886 Tax Reform Act rules and various interest rate and lease rate conditions. The analyses suggest that the attractiveness of facility leasing for cooperatives has declined in the post-1986 period. However, leasing will likely continue to be used selectively by farmer cooperatives.
        • Research Report 83. 56 pgs. 1990. Glenn D. Peterson and Eric E. Gill.
        • Library ID Number: 2715
    • Equity Redemption and Member Equity Allocation Practices of Ag Co-ops
      • http://www.rd.usda.gov/files/rr124.pdf
        • This 1991-92 survey of farmer cooperatives shows current equity redemption practices including how equity is distributed between allocated and unallocated accounts. This report updates the previous survey of nearly 20 years ago and reflects many changes in the financial, operational, and structural makeup of agricultural cooperatives. Equity redemption practices are at the center of all cooperative financial considerations.
        • Research Report 124. 25 pgs. 1993. Robert C. Rathbone and Roger A. Wissman.
        • Library ID Number: 2874
    • Cost of Capital for Agricultural Cooperatives
      • http://www.rd.usda.gov/files/rr163.pdf
        • Cooperatives face a problem in determining the cost of membership. Solving the problem presents a challenge because the cost of equity capital in a cooperative can't be derived directly from the capital market like a publicly traded company. In this report, logical and innovative approaches to making these important determinations of cost of capital are presented along with the pros and cons on their applicability to agricultural cooperatives. This report also studies the changing capital structure (long-term debt and equity) of agricultural cooperatives in the Upper Midwest from 1984-94. This study provides a useful backdrop for considering the cost of capital issues.
        • Research Report 163. 1998. Glenn Pederson.
        • Library ID Number: 4610 
    • The Farmer’s Cooperative Yardstick: Should Your Cooperative be “Exempt” or “Non-Exempt”
      • http://www.uky.edu/Ag/AgriculturalEconomics/pubs/aec53.pdf
        • This article focuses on explaining the differences between tax exempt and non-tax exempt cooperatives. It also examines the tax structure and how taxes are calculated. Lastly, the article takes time to examine some of the pros and cons of each of these systems.
        • Lionel Williamson
        • Library ID Number: 7645
    • Consolidation of Balance Sheet Components During Cooperative Mergers
      • http://www.rd.usda.gov/files/rr139.pdf
        • This report provides information on consolidating critical balance sheet components during cooperative mergers. It discusses the implications of combining assets and liabilities and provides information and examples on various methods of consolidating member equities. Several case studies of cooperatives that have merged are included.   They provide actual examples on how equities were combined during mergers, consolidations, and acquisitions.
        • Research Report 139 March 1995 James J Wadsworth David S Chesnick
        • Library ID Number: 2630
    • Innovations in Cooperative Ownership: Converted and Hybrid Listed Cooperatives
      • http://www.uwcc.wisc.edu/pdf/innovationownership.pdf
        • Cooperatives are often criticized for being an inferior company ownership form. It is asserted that their decision making processes are inefficient and that, due to the principle of member finance, they capital constrained. While cooperatives continue to feature strongly in agro-industry rankings, it is true that many cooperatives have introduced important changes in their governance structures and ownership form. In this paper we present and discuss examples from our database of over 50 cases of cooperatives worldwide that have introduced innovative capital structures, often including external ownership, during the past two decades. Especially we zoom in on cooperatives that have obtained public listing of their share in the stock exchange. We observe that a number of cooperatives, rather than converting into limited company structures, deliberately maintain their cooperative identity. Rather than alluding to its end, may cooperative floatation actually signal the emergence of a new and viable business form, the publicly listed cooperative hybrid?
        •  O. F. van Bekkum and J Bijman à University
        • Library ID Number: 7655
    • How a Banker Looks at Financial Leverage
      • http://www.uwcc.wisc.edu/pdf/how%20a%20bankerlooks.pdf
        • This article discusses four different perspectives of calculating the financial leverage of a cooperative. These include the cost of capital, the business cycle influence, competitive advantage and owner philosophy and commitment approaches. It then goes on to discuss how the financial leverage is evaluated by those in the banking industry.
        • Lee Estenson – University of Wisconsin
        • Library ID Number: 3186