What is patronage in a cooperative?

Chapter 308B defines patronage as "business, transactions, or services done for or with the cooperative as defined by the cooperative" ^{P1, § 308B.005, subd. 21}. The statute leaves the definition to you, so write it in the bylaws.

Patronage matters because the bylaws allocate profits and distributions between patron and other interests, and the cooperative's patron members are defined by it ^{P1, § 308B.721; § 308B.005, subd. 23}. The board may allocate and distribute in cash, capital credits, allocated patronage equities, revolving fund certificates or the cooperative's securities ^{P1, § 308B.725, subd. 5}. On the member's side, the IRS explains how patronage dividends are reported, including on Form 1099-PATR ^G5.

Federal patronage dividend is a separate tax definition: the payment must reflect quantity or value of patron business, a pre-existing obligation, and net earnings from that business. Calling a payment patronage does not establish a deduction; payment form and timing also matter ^{C5, § 1388(a); @C13, § 1382}. These are the 2024 Code edition provisions, not a complete current-law certification. See Allocate patronage and make distributions and Understand cooperative tax basics for source limits.