Frequently asked question of Golden Growers Cooperative Members

A Minnesota 308B cooperative can be structured to operate much as a traditional cooperative (one-member, one-vote, etc.) while being taxed for federal income tax purposes as a limited liability company. The operation of GGC is very similar under the Minnesota structure to what is was prior to September 1, 2009, as a North Dakota cooperative.

Please see “Grain Delivery System Explanations” under Member Information.

The GGC Board of Directors cannot authorize future cash allocations or distributions from net profits or losses in advance because available funds for distributions can vary due to expenses, changing cash requirements, and other factors which cannot be anticipated. The current board has indicated its desire in maximizing returns to members while maintaining a strong balance sheet and remaining open to business opportunities that could require funding on short notice.

Golden Growers is required to allocate all of its profits and losses to its members annually based on each member’s patronage, pursuant to its bylaws. An allocation of profit does not necessarily mean that an equal amount of cash will be distributed to the members. The bylaws require the board to annually distribute at least 30% of GGC’s income to its members in cash. GGC expects that this minimum distribution will be sufficient to permit most members to satisfy their federal and state income tax liabilities arising from allocations of taxable income by GGC. The actual amount of cash in excess of the required 30% minimum will be determined annually by the Board of Directors. You will be entitled to share in these distributions based on your proportionate patronage within the respective Method A and Method B pools.

We expect that GGC’s distributions will be relatively consistent from year to year based on the lease payments made by Cargill to ProGold. GGC receives 49% of the income distributed by ProGold. Expenses at both the ProGold and Golden Growers levels will affect the amount of cash available for distribution in any year.

Because GGC is now taxed as a limited liability company, the cooperative falls under regulations of the Internal Revenue Code restricting membership Unit transfers. All transfers must first be approved by the Board of Directors at one of its regular quarterly meetings.

Transfers will be categorized either as “Private transfers” or “General transfers.”

Private transfers include transfers between family members, and a few other rare situations. Private transfers will be handled by GGC’s staff.

General transfers generally include all transfers between or among unrelated parties. All General transfers are required to be handled by a Qualified Matching Service (QMS) appointed by the cooperative. GGC has appointed FNC Ag Stock, LLC of Grand Forks, North Dakota, as its QMS. Please refer to FNC Ag Stock for information on the QMS services, requirements and commissions.

Whether the transfer is considered a Private transfer or a General transfer, the transfer becomes effective on the first day of the quarter after the sale is approved by the Golden Growers Board of directors. The buyer of membership Units (transferee) will not have a delivery obligation for those Units for the balance of the year.

Whichever delivery method you choose for your corn commitment, you must complete your annual delivery commitment before your transfer request will be considered. For Method A deliveries, bushels must be delivered by the member to satisfy the commitment. For Method B deliveries, the Member must pay the Cooperative the $0.02 Agency fee for bushels delivered through the pool for the year.

Units Transferred with a Method A delivery obligation: The seller, having completed deliveries for the year, is entitled to an incentive payment on each bushel delivered. In these Unit transfer situations, the incentive payment will be issued shortly after the transfer becomes effective.

Units Transferred with a Method B delivery obligation: The seller, having completed delivery obligations using Golden Growers as their Agent, must pay the $0.02 Agency fee as part of fulfilling the delivery requirement for the year.

Profits, Losses, & Distributions: All of the profit or loss for GGC will be attributed to the seller (transferring member) in the year the delivery commitment is fulfilled. This is because Golden Growers allocates income based on patronage for the year. Notwithstanding the allocation of income or losses to the selling member, the buyer will receive any distributions of cash or retirement of equity credits at the time such distributions are made. Such distributions will be reduced by any tax withholding payments that are made on the transferor’s (seller’s) allocated income.

Buyers and sellers are expected to understand the impacts of allocation of profit and losses and distribution of patronage income when transactions occur.