N.Y.
Rural Electric Cooperative Law Section 60
Patronage capital contributions, allocations, and retirements
(a)
Each cooperative’s by-laws shall, unless otherwise determined by agreement of the members, provide for patronage capital allocations and retirements in the manner provided by this section. Agreement by the members for purposes of this section shall mean member approval of by-law provisions or by a majority vote of the members voting at a duly called meeting. Any matter set forth in this section which is subject to determination of the board of directors shall be determined in the exercise of such board of director’s business judgment.(b)
Patronage capital shall be determined by a cooperative on an annual basis and shall be the excess, if any, of amounts received or receivable by such cooperative from furnishing electricity over such cooperative’s operating costs and expenses properly chargeable against furnishing electricity, as determined using such accounting method or methods as agreed upon by the members. Costs and expenses chargeable against furnishing electricity shall include:(1)
expenses of the operation and maintenance of its facilities during such fiscal year;(2)
interest obligations of the cooperative coming due in such fiscal year;(3)
depreciation and other expenses to finance or to provide a reserve for the financing of the construction or acquisition by the cooperative of additional facilities to the extent determined by the board of directors;(4)
expenses to provide a reasonable reserve for working capital as determined by the board of directors;(5)
expenses to provide a reserve for the payment of indebtedness of the cooperative maturing more than one year after the date of the incurrence of such indebtedness in an amount not less than the total of the interest and principal payments in respect thereof required to be made during the next following fiscal year;(6)
expenses to provide a fund for education in cooperation and for the dissemination of information concerning the effective use of electric energy and other services made available by the cooperative; and(7)
all other costs and expenses from and directly related to the furnishing of electric energy to the patrons.(c)
“Patron”, as referred to in subdivisions (b) through (h) of this section, shall be defined as (1) a member and (2) a nonmember to whom the cooperative furnishes electric energy or other services on a patronage basis pursuant to bylaws or as agreed upon by the members.(d)
On an annual basis, patronage capital determined under subdivision (b) of this section shall be allocated on the books of the cooperative to each patron having furnished such capital and shall be based upon and in proportion to:(1)
the revenue from each patron or group of similar patrons to the cooperative’s total revenue;(2)
the contribution of each patron or group of similar patrons to the cooperative’s overall patronage capital;(3)
the kilowatt-hour usage of each patron or group of similar patrons to the total kilowatt-hour usage of all patrons;(4)
any other method which is agreed upon by the members; or(5)
any combination of paragraphs one, two, three and/or four of this subdivision as agreed upon by the members.(e)
“Retirement” in reference to patronage capital shall mean the redemption and payment in cash or other property, as provided by subdivision (f) of this section, of patronage capital to the cooperative patrons or former patrons to whom it has previously been allocated. The allocation of patronage capital to a patron’s patronage capital account shall in no event create a vested right to the retirement of the amount so allocated. The board of directors of a cooperative may, in its discretion, retire patronage capital allocated on the books of the cooperative when it determines such retirement is consistent with sound business and management practices and the long-term financial stability of the cooperative. Patronage capital shall be retired according to the method chosen by the members and at the time the board of directors shall determine as a matter of its discretion. However, patronage capital may be retired in advance of the date when it would otherwise be retired under the previous sentence in such circumstances and upon such conditions as are agreed upon by the members, including, but not limited to, upon a patron’s or former patron’s death, the termination of a patron or former patron’s electric service, or a patron or former patron’s filing for bankruptcy. In the event of such early retirement of patronage capital, the amount of patronage capital allocated to the patron or former patron on the cooperative’s books may be discounted for purposes of its retirement in accordance with such method as is agreed upon by the members. The difference between the discounted amount and the patron’s or former patron’s patronage capital may be retained by the cooperative as part of its net savings in a manner determined by the board of directors.(f)
When the board of directors of the cooperative has determined, pursuant to subdivision (e) of this section, that patronage capital shall be retired, the retirement may be accomplished by a bill credit, by the mailing of payment or notice of payment to the patron’s or former patron’s last known address of record on file with the cooperative, or by such other method as the board of directors shall determine to be appropriate. No interest shall be paid or payable by the cooperative on any patronage capital. The amount of patronage capital being retired may be reduced by any amount owed to the cooperative by the patron or former patron.(g)
A cooperative may adopt such procedures for the assignment and contribution of unclaimed patronage capital to the cooperative as are agreed upon by its members. Such procedures may include providing that patronage capital which has not been claimed by a patron or former patron, after reasonable efforts to locate said patron or former patron, shall be added to the net savings of the cooperative. Mailing of a check or notice of the availability of a check to the last known address of a patron or former patron by first class mail and publication of the list of patrons or former patrons having unclaimed patronage capital on the website and/or newsletter of the cooperative for a period of three years shall be deemed reasonable effort to locate said patron or former patron.(h)
In the event that the cooperative should engage in the business of furnishing goods and services other than electric energy, all amounts received and receivable therefrom which are in excess of costs and expenses properly chargeable against the furnishing of such goods or services shall, insofar as permitted by law, bylaws, or by approval of the members, be prorated annually on a patronage basis and allocated to each member and shall be retired to said member according to the method chosen by the members and at the time that the board of directors shall determine as a matter of its discretion. Nothing in this section, however, prevents a cooperative from furnishing goods and services other than electric energy on a non-patronage basis to non-members; the net earnings of which may be retained as part of its net savings.(i)
With respect to any cooperative formed under this chapter that is exempt from federal income taxation under paragraph twelve of subsection (c) of section five hundred one of the internal revenue code of nineteen eighty-six, as amended, or any corresponding provision of future federal tax law, or any cooperative which would otherwise qualify for said exemption but for having less than eighty-five percent (or whatever threshold may be specified in the future for said purpose by the internal revenue code) of income from members, this section shall in all events be limited to and interpreted in a manner which is compliant with the requirements of exemption under such internal revenue code section, and any agreement by the members or determination by the board of directors under this section with respect to the subject matter hereof shall also be limited to and interpreted in a manner which is compliant with such internal revenue code section.
Source:
Section 60 — Patronage capital contributions, allocations, and retirements, https://www.nysenate.gov/legislation/laws/REL/60 (updated Jan. 18, 2019; accessed Apr. 20, 2024).
