Customers who are agricultural producers, owners of land used for agriculture production and other cooperative associates who purchase at least $1,000 of product from MFA Oil Company during its fiscal year (September 1 through August 31) are encouraged to apply for membership at your local MFA Oil office.
Members vote on delegates to represent the local plant and elect MFA Oil Company’s board of directors. Members also earn dividends based on purchases they have made from the company through their bulk, propane and Petro-Card 24 accounts tagged with membership.
Each year, the board of directors determines the amount of patronage dividends to be disbursed to members, based on profit. When the total dollar amount is determined, a formula is used to calculate member’s earnings on accounts tagged with membership.
In February following the end of the fiscal year, checks are issued to members for each account tagged with membership. Only a portion of the entire amount allocated to the member is paid at this time. Usually, the initial payment amount is 60% of the total allocated dividend. The remaining portion of the patronage dividend is retained in an equity account for the member and released at a later date determined by the board of directors.
Patronage dividends are considered taxable income by the federal government and must be reported to the IRS. The entire amount allocated to the customer is reported on a 1099-PATR that is issued in January the year following initial payment.
- John Doe is allocated $5,000 for fiscal year 2014.
- He receives a check for $3,000 in February 2015 and $2,000 is placed in his equity account.
- He will receive a 1099-PATR in January 2016 in the amount of $5,000. The entire $5,000 must be reported to the IRS for 2015.
Because 1099s are issued in January and checks are issued in February, customers often may be confused about which amount is being used for the 1099, believing the 1099-PATR received in January is for the check they receive a month later. But, as shown in the example, the January 1099 is reporting the dividend allocated to them the previous year.
Accelerated Equity Retirement
Occasionally, members will ask to have their equity balance paid to them in a lump sum. The only provision allowing for accelerated issuance of equities is upon death of the equity holder, at which time any equities may be paid to the equity holder’s estate or trust. We cannot pay out an equity balance because a business or partnership has dissolved.
If you have any questions, please feel free to contact us.
Since equity may build up over a long period of time, it is important that we keep current addresses and/or contact information for our patrons. Please contact us should you move or change your mailing address.