IRS letter ruling - Cooperative may use email, website notification of patronage dividends 

March 28:  The IRS today publicly released a private letter ruling* allowing a taxpayer cooperative to use email or an enhanced website in providing notice of a member’s patronage dividend for the year. PLR 201413002 (released date March 28, 2014, and dated March 6, 2014).

Read text of PLR 201413002 [PDF 85 KB]

*Private letter rulings are taxpayer-specific rulings furnished by the IRS National Office in response to requests made by taxpayers and can only be relied upon by the taxpayer to whom issued. It is important to note that, pursuant to section 6110(k)(3), such items cannot be used or cited as precedent. Nonetheless, such rulings can provide useful information about how the IRS may view certain issues.


The taxpayer is a consumer cooperative, with what is apparently an unusually large number of active members who purchase personal, living, or family items from the taxpayer. The taxpayer’s patronage dividends are paid each year in the form of nonqualified written notices of allocation, which cooperative members are encouraged to use to purchase merchandise. The taxpayer currently uses U.S. mail to send out notices of member patronage dividends.

Because of the costs of sending such a very large number of patronage dividend notifications by mail each year, the taxpayer requested to change the manner in which it notifies members of their patronage dividends. The taxpayer proposes to use electronic media as the principal means of deliver (i.e., email or an enhanced website) and only use U.S. mail if neither type of electronic means is available.

The IRS ruled that the use of email or a enhanced website by the taxpayer would be regarded as sufficient for a “nonqualified written notice of allocation” with regards to patronage dividends and thus would entitle the taxpayer to an exclusion or deduction (pursuant to section 1382(b)(2)) or a tax benefit computed under section 1383(a)(2) when such a nonqualified written notice of allocation is paid as part of a patronage dividend and later used to purchase merchandise or is redeemed for money or other property.

For more information, contact KPMG’s National Director of Cooperative Tax Services:

David Antoni, in Philadelphia

(267) 256-1627

Or Associate National Director of KPMG’s Cooperative Tax Services

Brett Huston, in Sacramento

(916) 554-1654

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