What are Capital Credits?
When you become a member of our cooperative and have an electric account you receive one share of stock, which is a non-interest-bearing stock called capital credits. A cooperative is owned by the members. Any money made by the cooperative each year gets allocated back to the member based on their electric usage for that given year.
What is the difference between allocated and retired Capital Credits?
Capital Credit allocations are your share of North Itasca Electric’s net margins and reflect your equity and ownership of the Cooperative. Each year, your portion of any margins that North Itasca Electric may have are “allocated” or assigned to you based upon your use of electricity during the year. In the meantime, the margin is used by the Cooperative for operating capital, necessary reserves, storm damage and other system investments. Until Capital Credit retirement, allocations have no cash value. A Capital Credit retirement is the amount you receive as a refund. This refund is a portion of your total allocation. The percentage retired is decided by the Board of Directors annually, based on the financial condition of the Cooperative. When Capital Credits are retired, a check is issued and your equity in the Cooperative is reduced.
How are my Capital Credit allocations used until I receive them?
Capital Credit allocations are pooled together and used by the Cooperative for operating capital, necessary reserves, storm damage and other operational investments. If we refunded the total amount of allocations, we would have to borrow that amount of money in order to continue operating. Having operating capital helps the Cooperative minimize the amount of high-interest money it must borrow, which in turn helps lower member’s costs by stabilizing rates.
Can my Capital Credit allocations be refunded to me all at once?
No. Remember that Capital Credit funds are used for reliability improvements and maintenance—and these are long-term investments. Capital Credits cannot be refunded all at once because they help the Cooperative remain financially sound, thereby ensuring stable, reliable electric service for the benefit of the members we serve.
Can I collect my Capital Credit payments early?
No. Capital Credits are only paid out when a general retirement is approved by the Board of Directors for a particular time period or in the event of an estate payout.
Do I have to claim Capital Credit payments on my taxes?
In general, Capital Credits are not taxable because they are essentially a refund for past electric costs. However, if you deducted your electric bill as an expense on your tax return in the year(s) we are refunding, then your Capital Credits check may be taxable. In this case, we encourage you to consult with your tax advisor on questions related to income tax filings.
If I move, can my Capital Credit allocations be paid out in full?
Capital Credits cannot be refunded when you terminate service because they are used for long-term investments and operations of the Cooperative. Because Capital Credit retirements are paid a number of years after the credits are earned and allocated to your account, be sure to keep North Itasca Electric informed of any contact information changes
What happens to the unclaimed Capital Credits?
In spite of our efforts to keep current addresses for past members, some checks are returned by the postal service without a forwarding address. If after an extended period of time the member cannot be located, North Itasca Electric offers scholarships to graduating high school students, and to adults who are heading to college for the first time.