2018-10-29T12:00:24-05:00 2017-12-31 750882037 BOLINGER SEGARS GILBERT AND MOSS LLP 8215 NASHVILLE AVENUE LUBBOCK TX 79423 990 2017-01-01 740708876 JACKSON ELECTRIC COOPERATIVE INC JACK 3617714400 PO BOX 1189 EDNA TX 779571189 JAMES COLEMAN GENERAL MANAGER 3617714400 2018-10-26 1 WILLIAM M MILLER P00439459 8067473806 2018-10-26 X 65.182.80.152 2018-10-26 15:16:03 CD P 587A88673713A033F58E04FDF6801CBB1F7DD2F2 587A88673713A033F58E04FDF6801CBB1F7DD2F2 2017 2018-06-14 16:35:46Z JAMES COLEMAN PO BOX 1189 EDNA TX 779571189 57777291 0 X WWW.JECEC.COM X 1939 TX TO PROVIDE QUALITY AND RELIABLE ELECTRIC SERVICE TO MEMBERS OF THE COOPERATIVE. 11 11 87 0 3135565 -88731 0 0 50820921 54057147 299489 383703 2337342 3231115 53457752 57671965 8930 27569 1247217 641202 4424855 5435335 0 0 0 45684799 48914850 51365801 55018956 2091951 2653009 107614900 125886332 56021158 70587695 51593742 55298637 PROVIDE DEPENDABLE ELECTRIC AND SUBSIDIARY SERVICES AT COMPETITIVE PRICES, TO MAINTAIN LINES OF COMMUNICATION BETWEEN THE BOARD OF DIRECTORS, MANAGEMENT, EMPLOYEES, MEMBERS AND COMMUNITY LEADERS TO ACTIVELY PARTICIPATE IN COMMUNITY AFFAIRS. 0 0 PROVIDING ELECTRIC ENERGY TO OUR MEMBERS - 15,693 CONNECTED METERS AT YEAR END WERE PROVIDED ELECTRICITY ON A COOPERATIVE BASIS THROUGH THE ALLOCATION OF PATRONAGE CAPITAL. 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 1 0 1 0 0 0 0 1 0 0 0 0 0 1 0 0 0 1 59 0 87 1 1 1 0 0 0 0 52767442 3415453 0 X 11 11 0 0 0 0 1 1 1 1 0 0 0 1 1 1 1 1 1 1 0 0 X JAMES COLEMAN GENERAL MANAGER 3617714400 8925 STATE HIGHWAY 111 SOUTH GANADO TX 77962 X LH CORNELIUS JR PRESIDENT 4.00 X X 12450 0 0 DICK KOOP VICE PRESIDENT 2.00 X X 10500 0 0 MICHAEL JACOBS SECRETARY/TREASURER 4.00 X X 9450 0 0 BRUCE ELLIOTT DIRECTOR 2.20 X 12150 0 0 RAY BRUNDRETT DIRECTOR 7.00 X 8250 0 0 WILLIAM HANSEN DIRECTOR 2.50 X 12150 0 0 JAMES HOFFMEISTER DIRECTOR 5.00 X 10050 0 0 TOM HUDGINS DIRECTOR 3.00 X 11250 0 0 LAVAL SIMONS DIRECTOR 4.00 X 10350 0 0 TOM WARD DIRECTOR 3.00 X 10200 0 0 W H WEBERNICK DIRECTOR 2.50 X 6750 0 0 JAMES E COLEMAN GENERAL MANAGER 55.00 X 194044 0 65748 ERIC GARDNER OPERATIONS - BC 50.00 X 104367 0 42968 RICHARD BOURLAND OPERATIONS - ED 52.00 X 117852 0 32046 MARTIN FLORES LINEMAN 54.00 X 115590 0 32390 TYLER STASTNY LINEMAN 53.00 X 105514 0 12340 MICHAEL MCLEOD LINEMAN 56.00 X 106310 0 12057 857227 0 197549 6 0 1 0 COOPERATIVE BLDG SOLUTIONS 77 WESTPORT PLAZA STE 250 ST LOUISE MO 63146 BUILDING CONTRACTOR 5549596 POWERLINE CONSTRUCTION INC PO BOX 889 EDNA TX 77957 LINE CONSTRUCTION 1602648 ASPLUNDH TREE EXPERT CO 621 DIAMOND CUT DR CORPUS CHRISTI TX 78409 TREE TRIMMING 765258 SOUTHEASTERN DATA COOPERATIVE 100 ASHFORD CTR N ATLANTA GA 30338 BILL PRINTING AND COMPUTER SUPPORT 205920 PETROLEUM SOLUTIONS INC 3702 S EXPWY 281 EDINBURG TX 78542 FUEL PUMP SOFTWARE-PUMPS 150838 8 X SALES OF ELECTRICITY 221000 51906242 51906242 PATRONAGE DIVIDENDS 221000 1971518 1971518 SERVICE FEES 221000 179387 179387 54057147 214063 214063 169640 0 169640 169640 169640 172564 105326 67238 67238 SALES OF PROPANE 453000 2948203 2948203 INTERNET SERVICE PROVIDER 517000 187362 187362 POLE ATTACHMENT INCOME 221000 28312 28312 3163877 57671965 54124385 3135565 412015 X 27569 641202 373342 3700413 547266 549426 264888 2005172 2577728 PURCHASED POWER 36782942 DISTRIBUTION EXPENSE 3685430 PROPANE OPERATIONS 1646639 UNRELATED BUS. INC. TAX 11000 2205939 55018956 2756524 5200034 87000 4084357 4228414 2568 3898 1058787 2098922 393947 341417 105929484 20463284 72315450 85466200 4244615 3873318 22744170 24587129 14482 0 107614900 125886332 5849070 5484144 3304577 2733111 158541 175710 45672561 61108829 1036409 1085901 56021158 70587695 X 187955 191820 0 0 51405787 55106817 51593742 55298637 107614900 125886332 X 2653009 406820 645066 X X 0 1 X 0 0 0 1 X 1724699 1724699 14175153 14175153 80158429 20463284 59695145 9871203 9871203 85466200 PATRONAGE CAPITAL - TEC 287269 C PATRONAGE CAPITAL - CFC 790823 C PATRONAGE CAPITAL - STEC 22376139 C PATRONAGE CAPITAL - SEDC 123641 C PATRONAGE CAPITAL - NRTC 4730 C CAPITAL TERM CERTIFICATES 917095 C OTHER INVESTMENTS 15475 C NON-UTILITY PLANT - UNAMORTIZED GOODWILL 71957 C 24587129 CONSUMER DEPOSITS 1045738 OTHER CURRENT & ACCRUED LIABILITIES 40163 1085901 X 57409170 406820 406820 57002350 669615 669615 57671965 53708139 0 53708139 1310817 1310817 55018956 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 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: ASC TOPIC #740, "INCOME TAXES", REQUIRES THAT AN ENTERPRISE CANNOT RECOGNIZE A TAX BENEFIT IN ITS FINANCIAL STATEMENTS UNLESS IT CONCLUDES THAT IT IS "MORE LIKELY THAN NOT" THAT THE BENEFIT WILL BE SUSTAINED ON AUDIT BY THE TAXING AUTHORITY. TAX-EXEMPT AND NOT-FOR-PROFIT ENTERPRISES ARE ALSO WITHIN THE SCOPE OF THE ASC, SINCE THE DECISION THAT SOME OR ALL OF AN ENTERPRISE'S ACTIVITIES ARE NOT SUBJECT TO INCOME TAXES IS ITSELF A TAX POSITION FOR WHICH THE INTERPRETATION REQUIRES EVALUATION. AT ADOPTION, AND ANNUALLY THEREAFTER, JACKSON ELECTRIC COOPERATIVE, INC. APPLIES THE REQUIREMENTS TO ALL TAX POSITIONS FOR WHICH THE STATUE OF LIMITATIONS REMAINED OPEN. JACKSON ELECTRIC RECOGNIZES THE FINANCIAL STATEMENT BENEFIT OF A TAX POSITION ONLY AFTER DETERMINING THAT THE RELEVANT TAX AUTHORITY WOULD MORE LIKELY THAN NOT SUSTAIN THE POSITION FOLLOWING AN AUDIT. JACKSON ELECTRIC WAS DETERMINED BY THE INTERNAL REVENUE SERVICE TO BE AN EXEMPT COOPERATIVE FOR PURPOSES OF FEDERAL INCOME TAXES, UNDER SECTION 501(C)(12) OF THE INTERNAL REVENUE CODE, IN YEARS WHEN RECEIPTS FROM MEMBERS, FOR THE PURPOSE OF MEETING LOSSES AND EXPENSES, ARE AT LEAST 85 PERCENT OF TOTAL INCOME. THE AMOUNT OF UNRECOGNIZED TAX BENEFITS AS OF DECEMBER 31, 2017 AND 2016 WAS ZERO. PART XI, LINE 4B - OTHER ADJUSTMENTS: INVESTMENT EXP INCLUDED IN NONOPERATING MARGINS RECLASSED TO EXPENSE 27,247. INTERNET SERVICE EXP INCLUDED IN NONOPERATING MARGINS RECLASSED TO EXPENSE 642,368. PART XII, LINE 4B - OTHER ADJUSTMENTS: INVESTMENT EXP INCLUDED IN NONOPERATING MARGINS RECLASSED TO EXPENSE 27,247. INTERNET SERVICE EXP INCLUDED IN NONOPERATING MARGINS RECLASSED TO EXPENSE 642,368. PATRONAGE CAPITAL ASSIGNABLE 641,202. 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. 0 VICTORIA BOULEVARD LIONS CLUB DBA VENTURING CREW 182 PO BOX 3134 VICTORIA TX 77903 742981857 501(C)(3) 12000 2017 DONATION PART II: ALL GRANTS, SPONSORSHIPS AND/OR DONATIONS ARE MADE TO NON-PROFIT AND CIVIC ORGANIZATIONS THAT ARE LOCATED IN THE COOPERATIVE'S SERVICE AREA, AND ARE INTENDED TO IMPROVE THE COMMUNITIES IN WHICH OUR MEMBERS RESIDE. X 0 0 X 0 0 0 JAMES E COLEMAN GENERAL MANAGER 174761 0 1624 0 17659 0 43801 0 21947 0 259792 0 0 0 PART I, LINE 1A HEALTH OR SOCIAL CLUB DUES OR INITIATION FEES - THE COOPERATIVE HAS A WELLNESS PROGRAM IN WHICH THE COOPERATIVE WILL DEDUCT $10 PER MONTH PER ELIGIBLE EMPLOYEE AND INCUR THE ENTIRE BILLING COSTS FOR EMPLOYEE SELECTED WELLNESS VENDORS. PART II, COLUMN C: INCLUDED IN THIS AMOUNT IS THE INCREASE IN ACTUARIAL VALUE OF BENEFITS PAYABLE UNDER A DEFINED BENEFIT RETIREMENT PLAN. THE CONTRIBUTION RATE FOR PARTICIPANTS IN THE NRECA R&S DEFINED BENEFIT PENSION PLAN ARE THE SAME FOR ALL INDIVIDUALS IN THIS MULTI-EMPLOYER PLAN. THE CHANGE IN ACTUARIAL VALUE FOR EACH PARTICIPANT, HOWEVER, VARIES WITH AGE, YEARS OF SERVICE AND THE CURRENT INTEREST RATE ENVIRONMENT. IN OTHER WORDS, THE OLDER A PLAN PARTICIPANT IS, THE GREATER THE INCREASE IN THAT INDIVIDUAL'S CHANGE IN ACTUARIAL VALUE, ALL OTHER THINGS BEING EQUAL. BECAUSE THIS RELATES TO A MULTI-EMPLOYER PLAN, CASH CONTRIBUTIONS TO THE PLAN IN LIEU OF THE ACTUARIAL INCREASE ARE EXPENSED IN THE FINANCIAL STATEMENTS. JAMES COLEMAN: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 43,801 EMPLOYER CONTRIBUTION TO 401(K) PLAN 0 TOTAL REPORTED IN COLUMN C $ 43,801 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (43,801) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 41,368 EXPENSE TO THE COOPERATIVE $ 41,368 DAMIEN COLEMAN FAMILY RELATIONSHIP 80548 DAMIEN COLEMAN RECEIVED COMPENSATION AS AN EMPLOYEE OF THE COOPERATIVE. HE AND JAMES COLEMAN, EMPLOYEE OFFICER, ARE FAMILY MEMBERS PER THE 990 DEFINITION OF FAMILY MEMBERS. 0 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. 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 PRESENTED A COPY OF THE FORM 990 TO THE BOARD FOR DISCUSSION AND REVIEW PRIOR TO FILING. THE DISCUSSION AND REVIEW TOOK PLACE AT THE BOARD MEETING IMMEDIATELY BEFORE FILING THE RETURN. FORM 990, PART VI, SECTION B, LINE 12C ON A MONTHLY BASIS, THE BOARD OF DIRECTORS AND OFFICERS REVIEW ALL TRANSACTIONS THAT MIGHT VIOLATE THE CONFLICT OF INTEREST POLICY. ADDITIONALLY, THE BOARD OF DIRECTORS AND OFFICERS ARE REQUIRED TO BE FAMILIAR WITH THE POLICIES OUTLINED IN THE COOPERATIVE'S CONFLICT OF INTEREST POLICY AND ARE REQUIRED TO DISCLOSE ANY ACTION OR SITUATION THAT MIGHT VIOLATE THE POLICY TO THE FULL BOARD OF DIRECTORS AS SOON AS POSSIBLE. IF A CONFLICT OF INTEREST ARISES THE INVOLVED DIRECTOR WILL NOT VOTE ON THE ISSUE. FORM 990, PART VI, SECTION B, LINE 15A THE BOARD OF DIRECTORS DETERMINE THE GENERAL MANAGER'S COMPENSATION BY UTILIZING INTERNAL AND/OR EXTERNAL RESOURCES WHICH ARE ALSO USED TO COMPARE ANNUAL COMPENSATION WITHIN THE INDUSTRY. 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 THE AUDITED FINANCIAL STATEMENTS, CONFLICT OF INTEREST POLICY, OR GOVERNING DOCUMENTS TO ANY MEMBER WHO REQUESTS A COPY. 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 MULTI-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, INCLUDING THE EMPLOYEE OFFICER AND HIGHLY COMPENSATED EMPLOYEES, MEETING THE ELIGIBILITY REQUIREMENTS OF SUCH PLANS. THE COOPERATIVE ALSO PROVIDES HEALTH, DENTAL, VISION AND LIFE INSURANCE TO ALL ELIGIBLE EMPLOYEES THROUGH A QUALIFIED PLAN. THE AMOUNTS REPORTED ON PART VII, COLUMN (F) FOR THE EMPLOYEE OFFICER 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 CONSIDERS 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 2: 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 COOPERATIVE TO ITS MEMBERS. FORM 990, PART IX: THE ACCOUNTING RECORDS OF THE COOPERATIVE ARE MAINTAINED IN ACCORDANCE WITH THE 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 NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION (CFC). 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 $ 4,073,755 LESS: DIRECTOR FEES REPORTED ON FORM 1099-MISC (113,550) LESS: EMPLOYEE OFFICER BENEFITS INCLUDED IN LINE 5 (65,748) PLUS: SALARIES AND WAGES ALLOCATED TO NONOPERATING MARGINS 1,413 PLUS: SALARIES AND WAGES CAPITALIZED DIRECTLY TO PLANT 998,483 PLUS: SALARIES AND WAGES CAPITALIZED/EXPENSED INDIRECTLY THROUGH CLEARING AND OTHER ACCOUNTS 343,198 TOTAL WAGES ACCRUED AND/OR PAID $ 5,237,551 FORM 990, PART IX, LINE 24E: OTHER EXPENSES ARE COMPRISED OF THE FOLLOWING: ADMINISTRATIVE & GENERAL $ 1,198,434 CUSTOMER ACCOUNTS 311,591 INTERNET PROGRAMMING SALES EXPENSE 642,368 INVESTMENT EXPENSES 27,247 TAXES 26,299 TOTAL OTHER EXPENSE PER 990, LINE 24E $ 2,205,939 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 2017 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 ASSIGNABLE 641,202. NET CHANGE IN MEMBERSHIPS 3,864. FORM 990, PART XII, LINE 2C: THE BOARD AS A WHOLE IS RESPONSIBLE FOR OVERSEEING THE FINANCIAL STATEMENT AUDIT AND SELECTING THE INDEPENDENT FINANCIAL STATEMENT AUDITOR. PROCEDURAL CHANGES DID NOT OCCUR DURING THE YEAR. JEC BROADBAND LLC PO 1189 EDNA TX 779571189 BROADBAND SERVICE PROVIDER TO MEMBERS OF THE COOPERATIVE TX 185954 2340331 JACKSON ELECTRIC COOPERATIVE INC