Because cash patronage is always qualified it is only the stock portion of the patronage refund that could be structured as non-qualified. He believed in starting small, and realized that the working classes would need to set up co-operatives for themselves, so he saw his role as one of instruction. Because a cooperative that distributed all of its income to members as patronage would not have taxable income, the tax credit calculations allowed the cooperative to calculate patronage income before patronage. By combining member demand, the co-op can provide better availability, selection, pricing, or delivery of products or services to individual consumers. The patron consent requirement is typically satisfied by having the patron sign an agreement as part of the membership application or is specified as part of endorsing and cashing a qualified check. Similar to consumer cooperatives, purchasing or shared services cooperatives are owned and governed by independent business owners. In other cases, cooperatives may focus on the worker cooperative model and organize into a collective of worker-owners who accept contract-based work with established minimum wages and access to shared . Through the 20th century, smaller societies merged with CWS, such as the Scottish Co-operative Wholesale Society (1973) and the South Suburban Co-operative Society (1984). As employment moved to industrial areas and job sectors declined, workers began organizing and controlling businesses for themselves. Sub Chapter T does not apply to mutual savings banks, mutual insurance companies, or rural electric or telephone cooperatives. Consumer cooperative means a cooperative the majority of the votes of which are held by consumers, or, in the case of a cooperative which provides residential dwelling units, the majority of the votes of which are held by consumers and the majority of members of which do not have the right of possession or occupancy of dwelling units they . Consumer cooperatives are owned by members who use the co-op to purchase the goods or services that they need. Each member enjoys equal voting rights in a cooperative regardless of the number of shares they own. in many parts of the world, similar to corporations. When issuing non-qualified retained patronage the cooperative pays taxed on that income in the year of distribution and then gets a tax deduction in a later year when the equity is redeemed. This work is supported in part by New Technologies for Agriculture Extension grant no. ), While some claim that surplus payment returns to consumer/owner patrons should be taxed the same as dividends paid to corporate stock holders,[11] others argue that consumer cooperatives do not return a profit by traditional definition, and similar tax standards do not apply.[12].

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