Capital Credits FAQs
What are capital credits?
A cooperative does not earn profits the way other businesses do. Instead, any margins, or revenues remaining after all expenses have been paid, are allocated to the members. The amount that is allocated is based on the electricity purchases made that year. Capital credits represent each member’s share of the cooperative’s margins and ownership of the co-op.
How does the cooperative determine who receives capital credits?
Capital credits are allocated to each member of the cooperative every year based on participation in the cooperative. The allocations are based on the total dollar amount of services purchased.
The board of directors determines whether or not it is feasible to have a general retirement of previous years' allocations. This is called a general retirement, and the board determines what the amount of that retirement will be.
What happens to a member’s capital credits if the member dies?
Capital credits in the member’s account belong to the member’s estate. In order to assist the member’s heirs in closing the estate, the co-op offers a special capital credits retirement of the deceased member’s capital credits account.
What happens to a member’s capital credits if the member moves away from the system?
A member who terminates service no longer receives capital credits allocations. The balance in the member’s capital credits account is maintained until it is retired in full. It is the member’s responsibility to notify the co-op of any changes in address so the member can be located when it is time for the co-op to retire capital credits allocated to the member’s account.
Does the member have to report capital credits on tax returns?
Capital credits are a return of money paid for electricity in previous years and are generally not taxable income for residential consumers.
Contact you tax adviser to address your personal situation.