Since 2014, the board has elected to distribute equity patronage on a non-qualified basis. Under this methodology, 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. This system allows members to only pay taxes on cash received.
In recent years, the Co-op has also been able to pass thru a portion of the Domestic Productions Activities Deduction to members with grain activity. This deduction is distributed to members using the same methodology for grain patronage, and has averaged 15.4 cents per bushel in the last 3 years.
As with any tax matters, please consult with your tax accountant on the impact of your individual return.