Capital Credit FAQs
What's the difference between allocated and retired capital credits?
Allocated capital credits appear as an entry on the permanent financial records of the association and reflect your equity or ownership in Dakota Valley Electric Cooperative. When capital credits are retired, a check is issued to you and your equity in the association is reduced. Checks are generally issued 15-17 years after the year in which the margins were earned.
How often will I receive an allocation notice?
You should receive an allocation notice annually after the finances for the previous year have been audited provided the cooperative earned margins in that year.
What do I have to do to start accumulating capital credits?
Capital credits are calculated by Dakota Valley for everyone who purchased electricity during a year in which the utility earned margins. No special action is required to start a capital credits account. Your membership with Dakota Valley Electric activates your capital credits account.
How are capital credits calculated?
The amount of capital credits you earn in a given year is based upon the amount of capital you contribute to the association through payment of your monthly bills. The more electric service you buy, the greater your capital credits account- although the percentage will remain the same. The sum of your monthly bills for a year is multiplied by a percentage to determine your capital credits.
Are capital credits taxable?
This is a question that the cooperative can not answer. In some cases they are taxable and in some cases they are not. Whether they are taxable or not depends on how you accounted for them previously. To answer this question you should seek the advice of a tax expert.
What percent of my bill is returned as capital credits?
The percentage of your total payment that is allocated as capital credits varies from year to year depending upon the success of the cooperative. Capital Credits are only allocated for a year in which Dakota Valley Electric Cooperative earns margins. Since capital credits are a member's share of the margins, no credits are allocated for a year with no margins.
Do I have to be a customer for an entire year to earn capital credits?
No. Capital credits are calculated based upon a member's monthly bills. If you are billed for service for even one month, you will accumulate some capital credits, If Dakota Valley earned margins in that year.
What happens to the capital credits of a member who dies?
Dakota Valley offers two options to families or executors settling the estate of a person who was a member of Dakota Valley and has a capital credit account.
One option is to re-assign the capital credits to the heir or heirs of the estate, with the capital credits continuing to be retired in the normal rotation over the years ahead. With this option, the heirs will receive over time every dollar in the former member's capital credit account.
The second option is for the estate to request an early retirement of capital credits to the estate. The cooperative offers this option because it recognizes that some estates desire to settle all accounts and complete the transfer of assets. For estates which chose this option, the capital credit amount is discounted by a factor for each year in advance of the normal retirement. The discount factor is adjusted each year to correspond to the cooperative's average cost of debt.
Why are capital credits discounted to estates?
The capital credits are discounted in order to balance the fairness between the estate and the other members of the cooperative, recognizing the time value of money (funds received today are worth more than funds received some time in the future). The fairness issue arises from the fact that if estates were given preference and received a full retirement of capital credits early, then other members or the cooperative would be disadvantaged by receiving less retirement that year because only so much of cooperative funds are available for retirement each year.
What happens if a spouse who is a joint member dies?
In the event of the death of either the husband or wife in joint membership, the surviving spouse has the option of re-assigning all the joint membership capital credits over to another membership in the surviving spouses' name where they will be retired in the normal rotation; or assigning the remaining half over to the surviving spouses' name.
What happens to the capital credits of a business which ceases operation?
Capital credits for a sole-proprietorship business, upon the death of the proprietor, are handled like other estate retirements. If the sole-proprietorship business ceases operation prior to the death of the owner, the owner is not entitled to early retirement of the capital credits.
Because of potential to adversely impact the financial condition of the cooperative, the capital credits of corporations, partnerships, associations, and LLC's are not eligible for early retirement in the event the business is sold or discontinued, but instead will continue to be retired in the normal rotation to the corporate address. Some businesses chose to sell or transfer their capital credit allocation to another entity with interest in those capital credits. The cooperative will work with businesses to facilitate that transaction.
Will I receive a capital credits check every year?
Not necessarily. The Board of Directors must authorize a retirement before you receive a check. When considering a retirement, the Board analyzes the financial health of the association and will not authorize a retirement if Dakota Valley cannot afford it.
What happens to my capital credits when I leave the Dakota Valley Service area?
Your capital credits remain on the books in your name and member number until they are retired. Because payments are made approximately 15-17 years after credits are earned, you should ensure that Dakota Valley always has your current mailing address.
What happens to the capital credits if the cooperative is unable to locate a member?
The cooperative tries very hard to locate members who have not cashed their retired capital credit checks. Ads are placed in the ND Living Magazine and in area newspapers asking people to call in if they know the whereabouts of a retired member.
If the member doesn't claim the check with in 90 days the cooperative records the capital credits as unretired capital credits and the money is deposited into a fund that is used by the cooperative for economic development.
Review a list of past members whose capital credits remain unclaimed.