35-18-316. Allocation and retirement of patronage capital -- retention of unclaimed retirement payments. (1) A cooperative's patronage capital for any fiscal year must, unless otherwise determined by a vote of the members, be allocated by the cooperative to its members in accordance with this section.

(2) (a) Patronage capital must be determined by a cooperative on an annual basis and reflect an amount equal to cooperative revenue in excess of its costs of doing business.

(b) For the purposes of patronage capital, costs include but are not limited to revenue to:

(i) defray expenses of the cooperative and of the operation and maintenance of its facilities during the fiscal year;

(ii) pay interest and principal obligations of the cooperative coming due in the fiscal year;

(iii) finance or provide a reserve for the financing of the construction or acquisition by the cooperative of additional facilities to the extent determined by the board of trustees;

(iv) provide a reasonable reserve for working capital;

(v) provide a reserve for the payment of indebtedness of the cooperative maturing more than 1 year after the date of the incurrence of the indebtedness in an amount not less than the total of the interest and principal payments required to be made during the next fiscal year; and

(vi) provide a fund, which may be not less than 2% or more than 5% of the balance remaining, for education in cooperation and for the dissemination of information concerning the effective use of electrical energy and other services made available by the cooperative.

(3) (a) Patronage capital must annually be allocated on the books of the cooperative to each member.

(b) The allocation must be based on and in proportion to:

(i) the revenue from each member or group of similar members;

(ii) the contribution of each member or group of similar members to the cooperative's overall patronage capital; or

(iii) any combination of subsections (3)(b)(i) and (3)(b)(ii) as determined by the board of trustees.

(4) The allocation of patronage capital to a member's account does not vest until the board of trustees determines that retirement is proper pursuant to subsection (5).

(5) (a) Retirement of patronage capital is the actual payment, as provided in subsection (6), of patronage capital to the cooperative members to whom it has previously been allocated.

(b) The board of trustees of a cooperative may, in its discretion, use its business judgment to retire patronage capital allocated on the books of the cooperative when the retirement is consistent with sound business and management practices and the long-term financial stability of the cooperative. If the board of trustees, in its discretion, uses its business judgment to offer members the option of accepting retirement of patronage capital outside of the normal retirement cycle, then the retirement may be discounted from the board's approved retirement cycle to present-day value when determined to be appropriate by the board of trustees.

(6) When the board of trustees of the cooperative determines in accordance with subsection (5) that patronage capital should be retired, the payment must be made. Interest may not be paid or payable by the cooperative on any patronage capital furnished by its members.

(7) Nothing contained in this section may be construed to prohibit the payment by a cooperative of all or any part of its indebtedness prior to the date when the payment becomes due.

(8) A cooperative shall, upon the action of the board of trustees, retain retirements of patronage capital allocated to its members that remain unclaimed for a period of 5 years after the end of the year in which the retirement is made. Unclaimed retirements retained by the cooperative must be used for educational purposes.