Objective
This document will explain what a pass through credit is, how calculate the credit(s) and how the credit(s) is reported on the 1099-PATR form.
Pass Through Credits
A pass through credit is a credit that the Co-operative can use to lower its tax liability. If the
Co-operative does not use any or all of the credit then it can pass it on to the patrons and the credit is reported on the 1099-PATR. There are seven credits at this time that AGRIS can handle. They are:
Alternative Minimum Tax (AMT) 1099-PATR Box 10
Low Sulfur Diesel Tax 1099-PATR Box 12
Small Ethanol Producer 1099-PATR Box 12
Indian Employment 1099-PATR Box 12
Small Refiner Coops 1099-PATR Box 12
Qualified Production Activities (also called DPAD) 1099-PATR Box 6
Small Agri-Biodiesel Producer. 1099-PATR Box 12
The system doesn't make a transaction for the pass through credits so it is important to keep a copy of the report that is generated. This will be important if you have to reprint a 1099 for a patron for a prior year. The system does holds the information until the option to Clear All Totals is performed.
For this discussion we will look at Alternative Minimum Tax and Qualified Production Activities. The pass through credits can be calculated by the system or imported. First we will discuss how the system calculates the credit.
Before allocating any pass through credits be sure and clear all totals. This only needs to be done once per 1099 reporting period. To do this go to Patronage and select 1099 Reporting and then select the menu option Pass Through Credits. The following screen will appear.
Select Option 1 – Clear All Totals.
Then Select the menu option to wipe that total out.
Illustration 1
Alternative Minimum Tax
A prorated share of a co-op's alternative minimum tax (AMT) can be passed on to patrons. The amount is not a part of the refund, does not impact Accounts Receivable or Accounts Payable and does not change the patron's stock/equity balances, but the patron will have to report it as income.
The formula for calculating each patron's share of the AMT is: (Individual patronage allocation divided by Total patronage amount) times Alternative minimum tax allocated = Patron's alternative minimum tax allocation. The steps for processing the AMT are as follows:
Select Option 2 – Alternative Minimum Tax (see Illustration 2 below)
Alternative Minimum Tax Amount to Allocate – Type the total alternative minimum tax to be used in the calculation of each patron's share of the alternative minimum tax. Refer to the formula above. There will a report generated when the process is finished, it is recommended that this report be sent to the spool.
For the Calculation Option select 1 – Refund Based
Begin/End Transaction Date – Type the dates that define the range in which a patronage refund was completed and is to be used to calculate each patron's share of the total patronage refund.
Enter in any other parameters that may be necessary.
Illustration 3, which can be found on the next page, is an example of the report.
Illustration 2
Illustration 3
Qualified Production Activities (DPAD)
The Qualified Production Activities is based on grain purchased from the member patrons during the Co-operative's fiscal year.
From the menu shown in Illustration 1 select Option 7 – Qualified Production Activities
The steps for processing are as follows (see Illustration 4 on the next page):
Qualified Production Activities Amount To Allocate – Type the amount of the credit to be allocated to the patrons.
Calculation Option – Option 1 will calculate the credit based on refund dollars, whereas Option 2 will calculate based on activity.
Transaction/Activity Date – If using Option 1, enter the date range of the refund to be used to calculate the credit. If using Option 2, enter the date range of the activity that is to be used to calculate the credit.
Click OK.
If you are using Option1, at this point the credit will be calculated
With Option 2 there are additional parameters to enter.
Because the allocation is based on activity you will need to enter the parameters that you use to specify who is eligible to participate in a patronage refund.
After clicking OK, additional fields will appear, see Illustration 5 on the next page.
Purchase/Sales – Enter a P, beginning and ending
Accounting Type – The options are 2 – 4. Enter the accounting type that is designated on the commodity patronage code
Product Code – Enter the range of the commodity patronage codes for which the credit is to use in the calculation.
Location Code – Enter a location range if there is activity in a direct ship location that they do not want to allocate on.
Proration Option – Enter 1 – Quantity Based or enter 2 for Amount Based.
Click OK, the credit will now be calculated.
Illustration 4
Illustration 5
Below is an example of the Qualified Production Activities report
Illustration 6
How to Edit a Patron's Pass Through Credit
If the necessity arises, there is a way to correct or re-enter a pass through credit for a patron. To do this go to Account Balance Inquiry, select the patron you wish to make a change to. The following screen will appear. To make the change click the Edit button which will open up the fields to be edited. See Illustration 8 on the next page.
Illustration 7
Illustration 8
Building a Spreadsheet
To utilize this function, Excel must be installed on your computer or the terminal server. Remember if you are going to import the credit then you will need to manually calculate the credit for each individual. To build a spreadsheet that can be imported you will need the file layouts for imports. These can be found by going to Maintenance at the Main Menu of AGRIS then select File Layouts for Import. The following screen (Illustration 9) will appear. Scroll down until you reach the PAT package, here select the import description Pass Through Credits.
Illustration 9
The file layout provides the necessary information to build the spreadsheet. The first column on the report indicates the column of the spreadsheet and what is in the Comments column tells you what goes in the column. See the example of a spreadsheet below.
Illustration 9
Illustration 10
~ Documentation Written by: Alisa Mueller and Sherelyn Roberson 11/2015
