The IRS publicly issued a private letter ruling concluding the proceeds that a cooperative received in settlement of a lawsuit filed against a supplier constitute patronage-sourced income. The IRS approved the cooperative’s plan for allocation of the lawsuit settlement proceeds as patronage dividends. PLR 201545001 (released November 6, 2015, and dated August 3, 2015)
Read text of PLR 201545001 [PDF 67 KB]
The taxpayer, a wholesale distributor of grocery products, operated on a cooperative basis and provided grocery products to retail grocery operators. The taxpayer’s business was almost exclusively with its cooperative members, and the taxpayer annually distributed its patronage earnings to its members / patrons. The taxpayer filed a lawsuit against one of its suppliers. Later, the taxpayer entered into agreements to settle the lawsuit. The taxpayer proposed to allocate a portion of the settlement proceeds to the general patronage pool and the remainder allocated to patrons. The IRS approved this plan of allocation.
For more information, contact KPMG’s National Director of Cooperative Tax Services:
David Antoni | +1 (267) 256-1627 | firstname.lastname@example.org
Or Associate National Director of KPMG’s Cooperative Tax Services
Brett Huston | +1 (916) 554-1654 | email@example.com
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.