What is a Patronage Refund?

Patronage refund is the name for how co-ops send profits back to their members. Essentially, each member gets back part of the profit from their own purchases.

Co-ops are distinctive businesses based on member-ownership. While members buy shares to join (the $80) the profits are not distributed based on how many shares are owned. Co-op profit is distributed based on how much each member spends at the co-op, that is, their patronage.

Our co-op finds the food and other things that our members want, and sets prices to cover the costs of providing them in a retail store. Every member purchase is recorded in the membership records. Those records are the basis for the patronage refund in profitable years.

Co-op Profit Belongs to the Members

Cooperatives enjoy a privileged status and can return the profit to the members as patronage refunds that are tax free to both the co-op and the members. The cooperative can distribute the patronage refunds to each member as cash or retain a portion as additional investment in the business.

The board of directors looks at the financial performance each year, considers the co-op's financial position and plans for the future. They decide what portion to pay as cash. That portion is sent (as a check) with a notice of allocation that also indicates the retained investment (recorded as non-voting stock) held in the member's name.

Who is Eligible

To be eligible for a patronage refund, a member must have shopped as a member in good standing during a fiscal year (July 1-June 30). Checks are sent in October or November.

The check stub will mention the part of the profit the Wedge is reinvesting in the business, called "qualified equity certificates," a type of stock share. The law requires us to let members know about the retained portion of the year's profits in this manner.

Co-op shares differ from stock in other kinds of businesses. They do not gain or lose value, they cannot be traded and they do not increase member voting power. The non-voting shares are how we record who the co-op assets belong to.

Cash refunds will be sent to members who purchased enough products to have earned at least $2 as a cash portion, otherwise the entire refund will be issued as retained stock.