Taylor Electric Cooperative Inc

“During the year, the cooperative's bylaws were amended. The following is a summary of the changes: article 2 cooperative membership: section 2.3 membership, states "for other good cause determined by the board, including a determination that the applicant poses a danger to the cooperative, the board may refuse, suspend, or terminate an otherwise qualified person membership in the cooperative." section 2.6 provision of cooperative service, added to part (b) "except as otherwise provided by the board, the cooperative owns all cooperative equipment...as necessary to safely, reliably, and efficiently operate the cooperative, provide a cooperative service, and added "to secure the safety of cooperative employees, the cooperative may temporarily suspend or terminate provision of a cooperative service. A member shall not tamper with, alter, interfere with, damage, impair, and added or attempt to sabatoge" cooperative equipment. Deleted last sentence "except as otherwise provided by the board, the cooperative owns all cooperative equipment." section 2.7, use of electric energy and/or service, deleted in (2) "a member shall not participate in a program, activity, or event regarding the members use of electric service or the value or quantity of a cooperative service used by the member." in (a), payment for electric energy and/or service, changed "fees" to "administration fees." section 2.9 member suspension, amended the reasons the cooperative may suspend a member, adding "(1) threatening cooperative employees or board members, in any manner; (2) posing a danger to cooperative employees, board or equipment; and (10) the member initiates litigation against the cooperative." section 2.10 member termination, added "(4) the member failing to comply with the governing documents of the cooperative." article 3 member meetings and member voting: section 3.1 annual and regular member meetings, added "the cooperative may hold regular and special meetings of members." it was also amended to state "in addition, to the extent authorized by the board, and subject to guidelines and procedures adopted by the board, the annual meeting of the members may be conducted as a drive-through format, if the format allows (1) the cooperative to verify that each person participating in the meeting is a member; and allows (2) the members an opportunity to (a) review any written or recorded reports regarding the activities and financial condition of the cooperative, (b) vote on matters submitted to the members, and (c) ask questions or make comments, in advance of or during the meeting." section 3.2 special member meetings, states "if the cooperative does not notify members of a special meeting within sixty (60) days of receiving a member demand which complies with the mandatory number of signatures as stated above...". Section 3.6 member voting, amended the wording from "to vote for" to "to vote on behalf of". Section 3.8 nominations committee, amended the title from "nominations and election committee" as well as all references to "n&e" to just "nominating". Section 3.9 election procedure, was added to the bylaws and states " (1) election officials are selected by the executive office and approved by the cooperative attorney.(2) election officials must not be an existing cooperative board member, nominating committee member, cooperative employee, or a close relative as defined in section 4.16.(3) election officials oversee voting and the tabulation of member votes; and(4) cooperative attorney shall mediate and decide all questions, issues or disputes regarding: (a) member registration and voting, including the determination of members present; (b) the tabulation or count of member votes, including the determination of vote results.(5) election results are verified and announced by the cooperative attorney." article 4 board of directors: section 4.1 board of directors, amended the number of directors from nine (9) to seven (7). Section 4.2 director zones, amended”

“The cooperative was formed by the members to provide electric service at cost on a cooperative basis.”

“The members of the cooperative vote on the board of directors. Elections are done on a one member one vote basis.”

“The following acts require approval of the members of the cooperative: 1. Dissolution/liquidation of the cooperative 2. Merger or consolidation of the cooperative with another organization 3. Disposal of a substantial portion of the cooperative's assets 4. Amendment to the articles of incorporation”

“The cooperative has no committees with authority to act on behalf of the governing body. Therefore, and pursuant to form 990 instructions, the question has been answered "no".”

“Management presented a copy of the form 990 to the board for discussion and review prior to filing. The discussion and review were performed at the board meeting immediately before filing the form 990.”

“All new employees and directors are required to sign a conflict of interest certification when they begin employment with the cooperative. All employees, directors and officers are required to review and be familiar with the policies outlined in the cooperative's conflict of interest policy and are required to disclose any action or situation that might violate the policy to the full board of directors as soon as possible. The president/ceo regularly monitors and enforces this policy.”

“The board of directors utilize internal and/or external resources when determining the compensation for the president/ceo. The president/ceo utilizes internal and/or external resources when determining the compensation of the organization's other employees meeting the definition of officer or key employee, if any.”

“The cooperative provides a summarized copy of audited financial statements to the members of the cooperative at the annual meeting. The cooperative will provide a complete copy of the audited financial statements, conflict of interest policy, or governing documents to any member who requests a copy any such document.”

“In order to provide retirement benefits to its employees, the cooperative has established a defined contribution plan under section 401(k) of the internal revenue code. Employer contributions to the plan are made pursuant to the plan document. Additionally, the cooperative participates in a multi-employer defined benefit plan. Contributions to this plan are based on the full funding limitation of such plan. Employer contributions for both plans are available to participating employees, including officers, key employees, and highly compensated employees, meeting the eligibility requirements of such plans. The cooperative also provides health and life insurance to all eligible employees through a qualified plan. The amounts reported on part vii, column (f) for the officers, key employees, and highly compensated employees is comprised of actuarial increase in the defined benefit plan, the total amount contributed by the cooperative to the defined contribution plan and insurance paid on behalf of and for their benefit. In addition to the above pension plans, the cooperative also provides post-retirement health insurance benefits through an unfunded welfare benefit plan. The value of these benefits has not been estimated.”

“Taylor electric cooperative compensated director richard petree $7,000 for consulting fees. This compensation, as well as his director fees, is reported on director petree's form 1099-nec and is shown on part vii of the return. The amount is also included in part ix, line 5.”

“Patronage dividends result from the purchase of wholesale power from a generation & transmission cooperative. Patronage dividends also result from the payment of interest from cooperative banks and the purchase of supplies and services from other cooperative organizations. The expenses associated with purchases from and payments to such cooperative organizations are a direct component of cost of the electric service provided by the cooperative to its members.”

“As provided in form 990, part iii, lines 4a and 4b, the cooperative has two primary tax-exempt purposes and program service accomplishments, which are to provide electric energy and fiber based internet services to our member-consumers (hereinafter referred to as "patrons"). Both services are provided on a cooperative basis through separate divisions. The annual determination and allocation of patronage capital on the basis of patronage, which is reported on form 990 as the "benefits paid to members" expense, is determined separately for each division. The cooperative does not net the net margins of one division with the losses of another for a net allocation of patronage capital. Instead of netting, any divisional loss remains unallocated and is recovered from the respective patrons as a reduction in future allocations of patronage capital for that division. For the 2024 calendar year, the cooperative allocated patronage capital for the electric division to the patrons of such division in the amount of $9,302,679. After taking into consideration patronage capital allocated with respect to the electric division, part i, line 19 reports a loss in the amount of $2,117,089, which is primarily derived from the internet services division. Due to the fact the fiber internet service division is in a buildout and start up phase, this loss is representative of the fiber internet service division loss and indicative of the fact that the loss is unallocated and available to reduce future allocations of patronage capital of the fiber internet service division. To the extent these losses are utilized in the future as an offset to the amount of patronage capital to be allocated to the patrons of the fiber internet service division, part i, line 19 will report net income equal to the amount of the loss offset.”

“The accounting records of the cooperative are maintained in accordance with the uniform system of accounts (usoa) as prescribed by the federal energy regulatory commission for class a and b electric utilities modified for electric borrowers of the national rural utilities cooperative finance corporation (cfc). The usoa does not record expenses in the general expense categories provided on part ix lines 1-23. The cooperative separately reports salaries and wages, employee benefits and payroll taxes that are allocated in accordance with their accounting system, but other expenses that are described in lines 1-23 are reported on line 24 under the expense categories required by the usoa.”

“Salaries and wages are allocated to asset, liability, and expense accounts based on the accounting system described above. The following schedule reconciles amounts reported on lines 5-7 to total wages accrued and/or paid: total per lines 5-7 $ 6,549,946 less: director fees reported on forms 1099-nec (156,750) less: employee officer and key employee benefits included in line 5 (391,559) plus: salaries and wages allocated to nonoperating margin 61,412 plus: salaries and wages capitalized directly to plant 1,952,731 plus: salaries and wages capitalized/expensed indirectly through clearing and other accounts 791,161 total wages accrued and/or paid $ 8,806,941”

“Other expenses is comprised of the following: customer accounts $ 358,757 cost of fiber 306,886 taxes 144,197 air evac expense 14,060 electrician expense 120,251 other deductions 10,603 total other expenses per form 990, part ix $ 954,754”

“Pursuant to the form 990 instructions, the amount of patronage dividends paid to the members (hereinafter referred to as "patrons") should be reported on part ix, line 4. The phrase "patronage dividends paid" refers to the process, subsequent to year-end, by which the cooperative allocates patronage capital to and, therefore, operates at cost with its patrons. The cooperative's tax exempt purpose is to provide electricity to its patrons and to do so on a cooperative basis. Tax law defines "operating on a cooperative basis" as subordination of capital, democratic control and operation at cost. The cooperative operates at cost through the allocation of true patronage dividends (also referred to as allocations of patronage capital) to its patrons. Patronage dividends are considered paid if the allocation is made (1) pursuant to a pre-existing obligation, (2) from the margins produced from the transactions done with or for patrons, and (3) in a fair and equitable manner on the basis of patronage (i.e. Purchases). Additionally, the allocation of patronage dividends should be made within a reasonable time period after the close of the cooperative's year-end of december 31. Each one of these requirements for a true patronage dividend is provided for in the non-profit operation article of the cooperative's bylaws. The amount reported on part ix, line 4 represents patronage capital that is either allocated or to be allocated to the patrons resulting from their purchase of electricity from the cooperative for the 2024 calendar year. Because patronage dividends are the process by which the cooperative operates at cost with its patrons and thereby a key component to accomplishing its exempt purpose, the cooperative has reported such amounts as an expense for form 990 reporting. Patronage dividends are not an expense for financial statements prepared in accordance with generally accepted accounting principles, however.”

“Administrative & general expense is comprised of the following: administrative & general salaries, benefits, & other $ 3,596,020 office supplies 764,324 outside services 427,449 injuries and damages 356,699 regulatory commission 113,293 directors 172,765 annual meeting 197,296 miscellaneous general 448,946 miscellaneous fiber 22,700 maintenance of general plant 1,196,492 total admin & general exp per financial statements $ 7,295,984 less: reclass of director fees to part ix, line 5 (156,750) less: reclass of labor to part ix, lines 5 & 7 (2,703,440) less: reclass of benefits to part ix, lines 8-10 (1,286,119) total admin & general expense per form 990, part ix $ 3,149,675”

“Patronage capital allocated or to be allocated 9,302,679. Patronage capital retired - total -988,405. Net change in memberships 7,405. Donated capital 0.”

“The board as a whole is responsible for overseeing the financial statement audit and selecting the independent financial statement auditor. Procedural changes did not occur during the year.”