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Effects of Federal Taxes on Member Cash Flows From Patronage Refunds

Author

Listed:
  • Junge, Katie A.
  • Ginder, Roger G.

Abstract

Scheduled changes in Federal Insurance Contributions Act (FICA) tax rates will affect member net cash flow when a patronage refund is received from a cooperative. Cash patronage refunds at the minimum 20 percent level generally required by law will create negative cash flows for patrons in very low tax brackets. Negative cash flows accumulated over the 10-year period 1980-90 may result in opportunity costs to patrons that exceed the value of the refunds. Boards will need to consider one or more of the following strategies to deal with this problem: (1) increased cash patronage refunds, (2) shorter revolving periods, and (3) use of nonqualified written notices of allocation.

Suggested Citation

  • Junge, Katie A. & Ginder, Roger G., 1986. "Effects of Federal Taxes on Member Cash Flows From Patronage Refunds," Journal of Agricultural Cooperation, National Council of Farmer Cooperatives, vol. 1, pages 1-16.
    • Handle: RePEc:ags:joagco:46270
    DOI: 10.22004/ag.econ.46270
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    Cited by:

    1. Poray, Michael Charles, 1997. "Economic and financial analysis of large scale closed cooperative swine production under uncertainty in Iowa," ISU General Staff Papers 1997010108000018182, Iowa State University, Department of Economics.
    2. Poray, Michael C. & Ginder, Roger, 1997. "Large Scale Closed Cooperative Swine Production Under Uncertainty," ISU General Staff Papers 199701010800001299, Iowa State University, Department of Economics.
    3. McKee, Gregory & Larsen, Ryan, 2012. "The Effects of Uncertainty and Capital Source on Cooperative Firm Leverage," Journal of Rural Cooperation, Hebrew University, Center for Agricultural Economic Research, vol. 40(2), pages 1-18.
    4. Zhang, Tianwei & Mallory, Mindy L., 2010. "Patronage Refunds Paying Decision of Farm Credit System Associations: A Logit Model," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61756, Agricultural and Applied Economics Association.
    5. Kimberly A. Zeuli & Robert P. King, 2004. "The Impact of Organizational Form on Producer Contracting Decisions," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 52(2), pages 147-164, July.

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    Keywords

    Agribusiness; Agricultural Finance;

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