Capital Credits
As a
not-for-profit organization, we allocate part of the margins over
and above the cost of operation to members in the form of capital
credits. Years of service and the amount of electricity an
individual member uses determine the amount of credit that a
member receives. Between the time capital credits are assigned and
the time they are refunded to you, the money is used by the
cooperative to maintain, improve and ensure dependable service.
Are your capital
credits taxable?
Under current law, no part of the capital credits allocated to you
by Roseau Electric Cooperative is taxable until actually paid in cash.
When you actually receive a check through a capital credit
retirement, it is subject to taxation only to the extent that your
electric costs were deducted as an expense on your income tax
return for the year the credit was allocated.
For example, a
farm or other business claiming 75 percent business use of their
electric costs would have to include 75 percent of the cash
payment for the capital credits when received as income. The
non-business portion is not subject to taxation.
Wage earners
who take no deductions for electric costs would not have to show
any of the cash retirement as income.
