Grain Payments = Per Unit Retain Paid In Money (PURPIMs)
By: Charles L. Telk Jr., CPA, Senior Tax Advisor | email
The Internal Revenue Service rulings are clear that for Federal Tax purposes, under code section 1382, payments made by a marketing cooperative to its patrons for product are considered Per Unit Retains Paid in Money or PURPIMs.
What this means is that cooperatives need to continue to educate their patron members as to the effect this has on their operations. For instance, the patron cannot count these payments received as Domestic Production Qualified Gross Receipts. We would suggest that the cooperative send out an annual letter in the fall reminding their producer patrons of this. Let us know if you would like assistance with this communication.
We also suggest that cooperatives consider inserting wording right on their grain checks indicating that this check is a PURPIM. We recommend that you work with your data processing vendor to request that this wording is added to your member grain checks. Remember that PURPIMs only relate to member business, so you would not add this wording to non-member grain checks.
In addition, cooperatives will continue to report these cash payments on form 1099 PATR, Box 3, on a calendar year basis. These 1099 PATRs are due by January 31st for the following calendar year. It would be a good idea to make sure your accounting software can run the necessary reports to issue these forms on a timely basis.
