2021-11-15T14:29:58-06:00 2020-12-31 750882037 BOLINGER SEGARS GILBERT AND MOSS LLP 8215 NASHVILLE AVENUE LUBBOCK TX 79423 990 2020-01-01 740720615 KARNES ELECTRIC COOPERATIVE INC KARN 8307809292 PO BOX 7 KARNES CITY TX 78118 BRAD BIERSTEDT GENERAL MANAGER 8307809292 2021-11-10 1 BRAD BIERSTEDT 999009999 WILLIAM M MILLER P00439459 8067473806 2021-11-10 X 2 AAL1 IAL1 2020 2022-09-23 18:48:47Z BRAD BIERSTEDT PO BOX 7 KARNES CITY TX 78118 96653987 0 X WWW.KARNESEC.ORG X 1938 TX TO PROVIDE QUALITY AND RELIABLE ELECTRIC SERVICE TO MEMBERS OF THE COOPERATIVE. 7 7 85 0 0 0 0 0 102239538 96084442 929324 479627 154668 89918 103323530 96653987 59549 22012 19161431 11425189 5934655 5720001 0 0 0 77997895 79756785 103153530 96923987 170000 -270000 193360823 195433978 49847715 44524547 143513108 150909431 TO PROVIDE QUALITY SERVICE TO EMPOWER COMMUNITIES AND IMPROVE LIVES. 0 0 PROVIDING ELECTRIC POWER TO OUR MEMBERS AT COST ON A COOPERATIVE BASIS THROUGH THE ALLOCATION OF PATRONAGE CAPITAL. THERE WERE 21,327 ACTIVE SERVICES AT YEAR END. 0 0 0 0 0 0 0 1 0 1 0 1 0 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 37 0 85 1 0 0 0 0 0 96590627 838395 0 0 0 X 7 7 0 0 0 0 1 1 1 1 0 0 0 1 1 1 1 1 1 1 0 0 X BRAD BIERSTEDT GENERAL MANAGER 8307803952 1007 NORTH HIGHWAY 123 KARNES CITY TX 78118 X FRANK GEYER ASST SECRETARY/TREASURER 8.10 X X 30100 0 0 PAUL BRYSCH PRESIDENT 5.10 X X 29203 0 0 CLIF ROYAL VICE PRESIDENT 2.10 X X 25973 0 0 ROSS NIESCHWITZ DIRECTOR 3.20 X 25523 0 0 SHIRLEY HOFMANN DIRECTOR 3.40 X 22915 0 0 LARRY SCHENDEL SECRETARY/TREASURER 4.40 X X 16570 0 0 SCOTT MCCLAUGHERTY APR-DEC DIRECTOR 1.80 X 8208 0 0 BRADLEY BIERSTEDT GENERAL MANAGER 50.00 X 221847 0 94729 PATRICK JANYSEK OPERATIONS SUPERINTENDENT 50.00 X 154657 0 155877 QUINT WOELFEL SHOP FOREMAN 50.00 X 128053 0 117257 JOE ESCANDON CONSTRUCTION FOREMAN 50.00 X 136894 0 85169 RUDOLFO TORRES CONSTRUCTION FOREMAN 50.00 X 130903 0 67088 WILLIAM WILSON IT MANAGER 50.00 X 131014 0 46785 1061860 0 566905 23 0 1 0 COOPERATIVE BUILDING SOLUTIONS 77 WESTPORT PLAZA DR SAINT LOUIS MO 63146 NEW OFFICE CONSTRUCTION 13287559 JAMES POWER LINE CONSTRUCTION INC 43 SHOOTING CLUB ROAD BOERNE TX 78006 UTILITY CONSTRUCTION 4271045 SENDERO POWER LINE CONSTRUCTION INC PO BOX 2209 VICTORIA TX 77902 UTILITY CONSTRUCTION 2909217 IVM SOLUTIONS 2038 LEE ROAD 137 AUBORN AL 36832 ROW CLEARING 1953492 SCHNEIDER ENGINEERING 191 MENGER SPRINGS PARKWAY BOERNE TX 78006 ENGINEERING 1024077 9 X SALES OF ELECTRICITY 221000 91767040 91767040 PATRONAGE DIVIDENDS 221000 4004868 4004868 SERVICE FEES 221000 312534 312534 96084442 479627 479627 48707 48707 POLE ATTACHMENT INCOME 221000 41211 41211 41211 96653987 96084442 0 569545 X 22012 11425189 475068 3507061 408264 1040488 289120 887006 5977670 PURCHASED POWER 66773398 DISTRIBUTION EXPENSE 3554627 ADMIN & GENERAL EXPENSE 1688233 CONSUMER EXPENSE 637831 238020 96923987 19477484 11346021 17100000 8100000 6836888 6496285 4404001 3900658 95651 184637 131844206 22318376 93035564 109525830 282612 289922 43652839 47549732 8475784 8040893 193360823 195433978 7794622 9619635 36982 -2215 21001247 19579317 21014864 15327810 49847715 44524547 X 85815 87240 0 0 143427293 150822191 143513108 150909431 193360823 195433978 X -270000 7666323 X X 0 1 X 0 0 0 1 X 1426006 1426006 14382389 1266845 13115544 99719097 21051531 78667566 16316714 16316714 109525830 PATRONAGE CAPITAL - STEC 44933189 C PATRONAGE CAPITAL - TEC 1131472 C PATRONAGE CAPITAL - CFC 125268 C PATRONAGE CAPITAL - COBANK 149360 C PATRONAGE CAPITAL - NRTC 162970 C PATRONAGE CAPITAL - CRC 7009 C PATRONAGE CAPITAL - VALLEY TELEPHONE 3767 C OTHER INVESTMENTS IN ASSOCIATED ORGANIZATIONS 15810 C CAPITAL TERM CERTIFICATES - CFC 989728 C PATRONAGE CAPITAL - NISC 31159 C 47549732 ACCRUED OPERATING TAXES 1075478 CONSUMER DEPOSITS 5061425 ACCUMULATED PROVISION FOR PENSION AND BENEFITS 4313900 DEFERRED CREDITS - ADVANCES FOR CONSTRUCTION 3353470 DEFERRED CREDITS - UNCLAIMED PATRONAGE CAPITAL 1498253 DEFERRED CREDITS - OTHER 25284 15327810 X 96638948 0 96638948 15039 15039 96653987 85483759 0 85483759 11440228 11440228 96923987 PART IV, LINE 2B: PURSUANT TO SECTION 74.3013 OF THE TEXAS PROPERTY CODE, THE COOPERATIVE HAS ESTABLISHED A RURAL SCHOLARSHIP FUND WITH AMOUNTS DESIGNATED UNCLAIMED UNDER TEXAS STATE LAW. THE AMOUNTS DEPOSITED INTO THE RURAL SCHOLARSHIP FUND ARE APPROVED BY THE STATE OF TEXAS AND CAN ONLY BE USED FOR SCHOLARSHIPS TO ENABLE STUDENTS FROM RURAL AREAS TO ATTEND COLLEGE, TECHNICAL SCHOOL OR OTHER POST SECONDARY EDUCATION INSTITUTION. ANY AMOUNTS SO DEPOSITED INTO THE RURAL SCHOLARSHIP FUND ARE STILL PAYABLE TO THE PERSON TO WHOM THE ORIGINAL PAYMENT WAS MADE BUT UNCLAIMED. PART X, LINE 2: THE COOPERATIVE HAS ADOPTED THE "UNCERTAIN TAX POSITIONS" PROVISIONS OF ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA. THE PRIMARY TAX POSITION OF THE COOPERATIVE IS ITS FILING STATUS AS A TAX EXEMPT ENTITY. THE COOPERATIVE DETERMINED THAT IT IS MORE LIKELY THAN NOT THAT ITS TAX POSITION WILL BE SUSTAINED UPON EXAMINATION BY THE INTERNAL REVENUE SERVICE (IRS), AND THAT ALL TAX BENEFITS ARE LIKELY TO BE REALIZED UPON SETTLEMENT WITH TAXING AUTHORITIES. PART XI, LINE 4B - OTHER ADJUSTMENTS: OTHER DEDUCTIONS RECLASSIFIED TO EXPENSES 15,039. PART XII, LINE 4B - OTHER ADJUSTMENTS: PATRONAGE CAPITAL ALLOCATED OR TO BE ALLOCATED 11,425,189. OTHER DEDUCTIONS RECLASSIFIED FROM NON-OPERATING MARGINS 15,039. PART VII: THE AMOUNT OF INVESTMENTS - OTHER SECURITIES ON FORM 990, PAGE 11, PART X, LINE 12 DOES NOT EQUAL OR EXCEED 5% OF THE TOTAL ASSETS ON FORM 990, PAGE 11, PART X, LINE 16, COLUMN B. CONSEQUENTLY, IN ACCORDANCE WITH IRS INSTRUCTIONS, SCHEDULE D, PART VII HAS BEEN LEFT BLANK. PART IX: THE AMOUNT OF OTHER ASSETS ON FORM 990, PAGE 11, PART X, LINE 15 DOES NOT EQUAL OR EXCEED 5% OF THE TOTAL ASSETS ON FORM 990, PAGE 11, PART X, LINE 16, COLUMN B. CONSEQUENTLY, IN ACCORDANCE WITH IRS INSTRUCTIONS, SCHEDULE D, PART IX HAS BEEN LEFT BLANK. PART XII, LINE 4B: FOR THE AUDITED FINANCIAL STATEMENTS, THE AMOUNT OF PATRONAGE DIVIDENDS PAID OR ALLOCATED TO THE MEMBERS IS REPORTED AS AN INCREASE IN EQUITY AND NOT AS AN EXPENSE. THEREFORE, NET INCOME PER THE AUDITED FINANCIAL STATEMENTS IS REPORTED GROSS OF THE AMOUNT OF PATRONAGE DIVIDENDS THAT ARE EITHER ALLOCATED OR TO BE ALLOCATED AT THE TIME THE AUDITED FINANCIAL STATEMENTS ARE PREPARED. HOWEVER, BECAUSE THE ALLOCATION OF PATRONAGE DIVIDENDS IS ONE ASPECT OF HOW THE COOPERATIVE FULFILLS ITS TAX EXEMPT PURPOSE OF OPERATING ON A COOPERATIVE BASIS, THE AMOUNT OF PATRONAGE DIVIDENDS EITHER ALLOCATED OR TO BE ALLOCATED TO THE MEMBERS IS REPORTED ON FORM 990, PART IX, LINE 4 AS "BENEFITS PAID TO MEMBERS". PATRONAGE DIVIDENDS ARE ALLOCATED ON A PATRONAGE BASIS AND DONE SO PURSUANT TO A PRE-EXISTING OBLIGATION AS PROVIDED FOR IN THE "NON-PROFIT OPERATION" ARTICLE OF THE COOPERATIVE'S BYLAWS. X 1 1 X X 0 0 0 BRADLEY BIERSTEDT GENERAL MANAGER 146547 0 18600 0 56700 0 67800 0 26929 0 316576 0 0 0 PATRICK JANYSEK OPERATIONS SUPERINTENDENT 132045 0 13739 0 8873 0 129748 0 26129 0 310534 0 0 0 QUINT WOELFEL SHOP FOREMAN 83665 0 9339 0 35049 0 91883 0 25374 0 245310 0 0 0 JOE ESCANDON CONSTRUCTION FOREMAN 118730 0 9252 0 8912 0 59795 0 25374 0 222063 0 0 0 RUDOLFO TORRES CONSTRUCTION FOREMAN 112216 0 8873 0 9814 0 41790 0 25298 0 197991 0 0 0 WILLIAM WILSON IT MANAGER 105644 0 10788 0 14582 0 21238 0 25547 0 177799 0 0 0 FORM 990, PART I: IN GENERAL, WHEN AN ELECTRIC COOPERATIVE BASES THE PATRONAGE DIVIDEND CALCULATION ON ITS NET BOOK INCOME/(LOSS), PAGE 1, PART I, LINE 19 - REVENUE LESS EXPENSES - WILL BE $0. FOR THE CURRENT YEAR, PAGE 1 , PART I, LINE 19 REPORTS NET LOSS OF $270,000, WHICH IS THE INCOME STATEMENT EFFECT OF ACCRUED UNBILLED REVENUE. THE GAAP BASIS FINANCIAL STATEMENTS INCLUDE AN ACCRUAL FOR UNBILLED REVENUE BECAUSE THE COOPERATIVE'S BILLING CYCLE DOES NOT END ON THE LAST DAY OF THE MONTH. THEREFORE, IT HAS REVENUE IN DECEMBER OF EACH YEAR THAT IT HAS EARNED BUT WILL NOT BILL UNTIL THE FIRST BILLING CYCLE OF THE FOLLOWING YEAR. THE COOPERATIVE ESTIMATES THIS REVENUE AND RECORDS IT AS ACCRUED UNBILLED REVENUE IN ORDER TO MATCH THE REVENUE WITH THE YEAR EARNED. HOWEVER, THE COOPERATIVE ALLOCATES THE REVENUE TO MEMBERS IN THE YEAR IT IS BILLED RATHER THAN WHEN ACCRUED. THIS TIMING DIFFERENCE IS FAIR AND EQUITABLE BECAUSE IT MATCHES THE PATRONAGE DIVIDEND ALLOCATED WITH THE BILLING RECORDS USED TO ALLOCATE THE MARGINS. DUE TO THE TIMING OF WHEN THE COOPERATIVE ALLOCATES ACCRUED UNBILLED REVENUE, PAGE 1, PART I, LINE 19 ANNUALLY REPORTS NET INCOME EQUAL TO THE NET INCREASE IN ACCRUED UNBILLED REVENUE OR A NET LOSS EQUAL TO THE NET DECREASE IN UNBILLED REVENUE. THE FOLLOWING SCHEDULE IS PROVIDED TO FURTHER EXPLAIN THE IMPACT OF THIS TRANSACTION: ADD: UNBILLED REVENUE 12/31/20 $ 8,010,000 LESS: UNBILLED REVENUE 12/31/19 (8,280,000) (A) - NET DECREASE EQUALS NET LOSS ON PAGE I, LINE 19 $ (270,000) (B) - BENEFITS PAID TO MEMBERS (I.E. PATRONAGE DIVIDENDS), PART I, LINE 14 $11,425,189 TOTAL 2020 NET MARGIN (A + B) $11,155,189 FORM 990, PART VI, SECTION A, LINE 6 THE COOPERATIVE WAS FORMED BY THE MEMBERS TO PROVIDE ELECTRIC SERVICE AT COST ON A COOPERATIVE BASIS. FORM 990, PART VI, SECTION A, LINE 7A THE MEMBERS OF THE COOPERATIVE VOTE ON THE BOARD OF DIRECTORS AT THE ANNUAL MEETING. ELECTIONS ARE DONE ON A ONE MEMBER ONE VOTE BASIS. FORM 990, PART VI, SECTION A, LINE 7B THE FOLLOWING ACTS REQUIRE APPROVAL OF THE MEMBERS OF THE COOPERATIVE: 1. DISSOLUTION/LIQUIDATION OF THE COOPERATIVE 2. MERGER OR CONSOLIDATION OF THE COOPERATIVE WITH ANOTHER ORGANIZATION 3. DISPOSAL OF A SUBSTANTIAL PORTION OF THE COOPERATIVE'S ASSETS 4. AMENDMENT TO THE ARTICLES OF INCORPORATION FORM 990, PART VI, SECTION A, LINE 8B THE COOPERATIVE HAS NO COMMITTEES WITH AUTHORITY TO ACT ON BEHALF OF THE GOVERNING BODY. THEREFORE, AND PURSUANT TO FORM 990 INSTRUCTIONS, THE QUESTION HAS BEEN ANSWERED "NO". FORM 990, PART VI, SECTION B, LINE 11B MANAGEMENT PROVIDED A COPY OF THE FORM 990 TO THE BOARD OF DIRECTORS FOR DISCUSSION AND REVIEW PRIOR TO FILING. FORM 990, PART VI, SECTION B, LINE 12C EACH MEMBER OF THE BOARD MUST COMPLETE AND FILE WITH THE BOARD PRESIDENT A DISCLOSURE REPORT DETAILING ANY POSSIBLE CONFLICTS OF INTEREST. THE DISCLOSURE REPORT MUST BE COMPLETED WITHIN 30 DAYS OF BECOMING A BOARD MEMBER AND THEN ANNUALLY THEREAFTER. THE DISCLOSURE REPORT MUST BE KEPT CURRENT BY FILING A SUPPLEMENTAL REPORT SHOWING ANY CHANGE OF PERSONAL OR BUSINESS RELATIONSHIP WITHIN 30 DAYS AFTER SUCH RELATIONSHIP CHANGES. FORM 990, PART VI, SECTION B, LINE 15A THE BOARD AND THE GENERAL MANAGER USE THE EXPERTISE OF A COMPENSATION SURVEY WHEN DETERMINING THE COMPENSATION OF THE COOPERATIVE'S OTHER EMPLOYEES MEETING THE DEFINITION OF OFFICER AND KEY EMPLOYEES, IF ANY. THE SURVEY INCLUDES SALARIES FROM SIMILARLY SITUATED COOPERATIVES THROUGHOUT TEXAS AND THE NATION. OTHER THAN THE GENERAL MANAGER, THE COOPERATIVE DID NOT HAVE ANY EMPLOYEES MEETING THE DEFINITION OF OFFICER OR KEY EMPLOYEE. THEREFORE, AND PURSUANT TO FORM 990 INSTRUCTIONS, LINE 15B HAS BEEN ANSWERED "NO". FORM 990, PART VI, SECTION C, LINE 19 THE COOPERATIVE WILL PROVIDE A COMPLETE COPY OF ITS GOVERNING DOCUMENTS, CONFLICT OF INTEREST POLICY, AND AUDITED FINANCIAL STATEMENTS TO ANY MEMBER WHO REQUESTS A COPY OF ANY SUCH DOCUMENT. THE COOPERATIVE PROVIDES ANNUALLY A COPY OF THE AUDITED BALANCE SHEET AND INCOME STATEMENT TO THE MEMBERS IN THE TEXAS COOPERATIVE MAGAZINE THAT IS MAILED TO EACH MEMBER, ALONG WITH THE NOTICE OF THE ANNUAL MEETING. FINALLY, THE COOPERATIVE REVIEWS THE FINANCIAL STATEMENTS FOR THE MEMBERS OF THE COOPERATIVE AT THE ANNUAL MEETING DURING THE TREASURER'S REPORT. FORM 990, PART VII, COLUMN F: IN ORDER TO PROVIDE RETIREMENT BENEFITS TO ITS EMPLOYEES, THE COOPERATIVE HAS ESTABLISHED A DEFINED CONTRIBUTION PLAN UNDER SECTION 401(K) OF THE INTERNAL REVENUE CODE. EMPLOYER CONTRIBUTIONS TO THE PLAN ARE MADE PURSUANT TO THE PLAN DOCUMENT. ADDITIONALLY, THE COOPERATIVE PARTICIPATES IN A SINGLE-EMPLOYER DEFINED BENEFIT PLAN. CONTRIBUTIONS TO THIS PLAN ARE BASED ON THE FULL FUNDING LIMITATION OF SUCH PLAN. EMPLOYER CONTRIBUTIONS FOR BOTH PLANS ARE AVAILABLE TO PARTICIPATING EMPLOYEES MEETING THE ELIGIBILITY REQUIREMENTS OF SUCH PLANS. THE COOPERATIVE ALSO PROVIDES HEALTH AND LIFE INSURANCE TO ALL ELIGIBLE EMPLOYEES THROUGH A QUALIFIED PLAN. THE AMOUNTS REPORTED ON PART VII, COLUMN (F) FOR THE OFFICERS AND HIGHLY COMPENSATED EMPLOYEES IS COMPRISED OF ACTUARIAL INCREASE IN THE DEFINED BENEFIT PLAN, THE TOTAL AMOUNT CONTRIBUTED BY THE COOPERATIVE TO THE DEFINED CONTRIBUTION PLAN AND INSURANCE PAID ON BEHALF OF AND FOR THEIR BENEFIT. FORM 990, PART VII, SECTION A: THE BOARD OF DIRECTORS CONSIDER THE GENERAL MANAGER TO BE BOTH THE TOP MANAGEMENT OFFICIAL AND THE TOP FINANCIAL OFFICIAL. THEREFORE, ONLY THE GENERAL MANAGER IS LISTED AS AN EMPLOYEE OFFICER. FORM 990, PART VIII, LINE 2B: PATRONAGE DIVIDENDS RESULT FROM THE PURCHASE OF WHOLESALE POWER FROM A GENERATION & TRANSMISSION COOPERATIVE. PATRONAGE DIVIDENDS ALSO RESULT FROM THE PAYMENT OF INTEREST FROM COOPERATIVE BANKS AND THE PURCHASE OF SUPPLIES AND SERVICES FROM OTHER COOPERATIVE ORGANIZATIONS. THE EXPENSES ASSOCIATED WITH PURCHASES FROM AND PAYMENTS TO SUCH COOPERATIVE ORGANIZATIONS ARE A DIRECT COMPONENT OF COST OF THE ELECTRIC SERVICE PROVIDED BY THE ORGANIZATION TO ITS MEMBERS. FORM 990, PART IX: THE ACCOUNTING RECORDS OF THE COOPERATIVE ARE MAINTAINED IN ACCORDANCE WITH THE RUS UNIFORM SYSTEM OF ACCOUNTS (USOA) AS PRESCRIBED BY THE FEDERAL ENERGY REGULATORY COMMISSION FOR CLASS A AND B ELECTRIC UTILITIES MODIFIED FOR ELECTRIC BORROWERS OF THE RURAL UTILITIES SERVICE (RUS). THE USOA DOES NOT RECORD EXPENSES IN THE GENERAL EXPENSE CATEGORIES PROVIDED ON PART IX LINES 1 - 23. THE COOPERATIVE SEPARATELY REPORTS SALARIES AND WAGES, EMPLOYEE BENEFITS AND PAYROLL TAXES THAT ARE ALLOCATED IN ACCORDANCE WITH THEIR ACCOUNTING SYSTEM, BUT OTHER EXPENSES THAT ARE DESCRIBED IN LINES 1 - 23 ARE REPORTED ON LINE 24 UNDER THE EXPENSE CATEGORIES REQUIRED BY THE USOA. FORM 990, PART IX, LINES 5-7: SALARIES AND WAGES ARE ALLOCATED TO ASSET, LIABILITY, AND EXPENSE ACCOUNTS BASED ON THE ACCOUNTING SYSTEM DESCRIBED ABOVE. THE FOLLOWING SCHEDULE RECONCILES AMOUNTS REPORTED ON LINES 5-7 TO TOTAL WAGES ACCRUED AND/OR PAID: TOTAL PER LINES 5-7 $ 3,982,129 LESS: DIRECTOR FEES REPORTED ON FORMS 1099-NEC (158,492) LESS: EMPLOYEE OFFICER BENEFITS INCLUDED IN LINE 5 (94,729) PLUS: SALARIES AND WAGES CAPITALIZED DIRECTLY TO PLANT 2,440,805 PLUS: SALARIES AND WAGES CAPITALIZED/EXPENSED INDIRECTLY THROUGH CLEARING AND OTHER ACCOUNTS 320,012 TOTAL WAGES ACCRUED AND/OR PAID $ 6,489,725 FORM 990, PART IX, LINE 24: ADMINISTRATIVE & GENERAL EXPENSE IS COMPRISED OF THE FOLLOWING: ADMINISTRATIVE & GENERAL SALARIES, BENEFITS, & OTHER $ 1,178,436 OFFICE SUPPLIES 389,888 OUTSIDE SERVICES 258,899 WORKMEN'S COMPENSATION AND OTHER INSRUANCES 337,489 EMPLOYEE BENEFITS 40,682 REGULATORY 18,721 DIRECTORS 169,419 INSTITUTIONAL AND GOODWILL ADVERTISING 44,206 DUES TO ASSOCIATED ORGANIZATIONS 79,172 ANNUAL MEETING 6,858 MANAGER 6,779 MISCELLANEOUS GENERAL 384,836 MAINTENANCE OF GENERAL PLANT 639,971 TOTAL ADMIN & GENERAL EXP PER FINANCIAL STATEMENTS $ 3,555,356 LESS: RECLASS OF DONATIONS TO PART IX, LINE 1 (22,012) LESS: RECLASS OF DIRECTOR FEES TO PART IX, LINE 5 (158,492) LESS: RECLASS OF LABOR TO PART IX, LINES 5 & 7 (1,130,854) LESS: RECLASS OF BENEFITS TO PART IX, LINES 8-10 (555,765) TOTAL ADMIN & GENERAL EXPENSE PER FORM 990, PART IX $ 1,688,233 FORM 990, PART IX, LINE 4: PURSUANT TO THE FORM 990 INSTRUCTIONS, THE AMOUNT OF PATRONAGE DIVIDENDS PAID TO THE MEMBERS (HEREINAFTER REFERRED TO AS "PATRONS") SHOULD BE REPORTED ON PART IX, LINE 4. THE PHRASE "PATRONAGE DIVIDENDS PAID" REFERS TO THE PROCESS, SUBSEQUENT TO YEAR-END, BY WHICH THE COOPERATIVE ALLOCATES PATRONAGE CAPITAL TO AND, THEREFORE, OPERATES AT COST WITH ITS PATRONS. THE COOPERATIVE'S TAX EXEMPT PURPOSE IS TO PROVIDE ELECTRICITY TO ITS PATRONS AND TO DO SO ON A COOPERATIVE BASIS. TAX LAW DEFINES "OPERATING ON A COOPERATIVE BASIS" AS SUBORDINATION OF CAPITAL, DEMOCRATIC CONTROL, AND OPERATION AT COST. THE COOPERATIVE OPERATES AT COST THROUGH THE ALLOCATION OF TRUE PATRONAGE DIVIDENDS (ALSO REFERRED TO AS ALLOCATIONS OF PATRONAGE CAPITAL) TO ITS PATRONS. PATRONAGE DIVIDENDS ARE CONSIDERED PAID IF THE ALLOCATION IS MADE (1) PURSUANT TO A PRE-EXISTING OBLIGATION, (2) FROM THE MARGINS PRODUCED FROM THE TRANSACTIONS DONE WITH OR FOR PATRONS, AND (3) IN A FAIR AND EQUITABLE MANNER ON THE BASIS OF PATRONAGE (I.E. PURCHASES). ADDITIONALLY, THE ALLOCATION OF PATRONAGE DIVIDENDS SHOULD BE MADE WITHIN A REASONABLE TIME PERIOD AFTER THE CLOSE OF THE COOPERATIVE'S YEAR-END OF DECEMBER 31. EACH ONE OF THESE REQUIREMENTS FOR A TRUE PATRONAGE DIVIDEND IS PROVIDED FOR IN THE NON-PROFIT OPERATION ARTICLE OF THE COOPERATIVE'S BYLAWS. THE AMOUNT REPORTED ON PART IX, LINE 4 REPRESENTS THE AMOUNT OF PATRONAGE CAPITAL THAT IS EITHER ALLOCATED OR TO BE ALLOCATED TO THE PATRONS RESULTING FROM THEIR PURCHASE OF ELECTRICITY FROM THE COOPERATIVE FOR THE 2020 CALENDAR YEAR. BECAUSE PATRONAGE DIVIDENDS ARE THE PROCESS BY WHICH THE COOPERATIVE OPERATES AT COST WITH ITS PATRONS AND THEREBY A KEY COMPONENT TO ACCOMPLISHING ITS EXEMPT PURPOSE, THE COOPERATIVE HAS REPORTED SUCH AMOUNTS AS AN EXPENSE FOR FORM 990 REPORTING. PATRONAGE DIVIDENDS ARE NOT AN EXPENSE FOR FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, HOWEVER. FORM 990, PART XI, LINE 9: PATRONAGE CAPITAL ALLOCATED OR TO BE ALLOCATED 11,425,189. PATRONAGE CAPITAL RETIRED - TOTAL -2,028,862. PATRONAGE CAPITAL RETIRED - DISCOUNT 1,802. NET CHANGE IN MEMBERSHIPS 1,425. OTHER COMPREHENSIVE INCOME - PENSION LIABILITY CHANGE -1,733,231.