After considering the merits of qualified and non-qualified patronage distributions, the board voted earlier this year to modify the way that patronage is paid to our members. In the past, members have received part of their patronage in cash and a portion of their patronage as qualified equity. The member then received a 1099 for the entire amount and had to pay taxes on the entire amount for the year they were distributed. Upon redemption of the qualified patronage in a future year, the member would not owe taxes on the redemption valued received.

Under the new methodology, the member will still receive cash but will also receive a portion of their patronage as non-qualified patronage. When the members receive their 1099s, only the cash portion received will be considered taxable income. If at a later date the company redeems this non-qualified patronage, taxes would be paid by the members at that time. The new system will allow members to pay taxes on cash received. (The tax implications of this change for the company also indicate that there will be no DPAD tax deduction pass-through to members this year.) PLEASE ADVISE YOUR TAX CONSULTANT OF THIS CHANGE.