Capital Credits

Wes-Tex Telephone Cooperative, Inc. is a member-owned cooperative.  On a calendar year basis, the Cooperative calculates the amount of regulated net income to allocate to its members by subtracting expenses related to providing telephone, Internet and other regulated services from related revenues for those services.  Each member is allocated a portion of the regulated net income based a ratio of the amount each member is billed for telephone and internet service compared to the total of all members’ telephone and internet service billings for the calendar year.  Each member’s allocated portion is called patronage capital credits (“Capital Credits” or “Patronage Capital”).  Each member’s capital credits are recorded in individual accounts until such time as the board of directors determines it is feasible to retire capital credits and that such retirements are permitted by the Cooperative’s bylaws and any loan covenants that may be in effect.  The annual patronage capital statements sent to members are not an immediate promise to refund capital credits, nor are they a bill that the members owe.

The capital credit allocation from a cooperative providing telephone service to rural areas, such as WTTC, is not taxable income to the member receiving the allocation.  The cash redemption/retirement of the capital credit allocation, on the other hand, does generate taxable income for business accounts but not for person/residential accounts.