Coop Institutes Rebate Policy Change

The Harvard Coop has instituted a new policy on unclaimed member rebates this year because of an Internal Revenue Service ruling, Howard Davis, general manager of the Coop, said yesterday.

The IRS ruling, issued after the agency began a tax audit of the Coop last spring, says the Coop's previous policy on unclaimed rebates violated the federal laws governing cooperative societies. Davis said he will sign a final audit report early next week.

The new policy will cause a small decrease in the size of the annual rebate for all members and may prevent members from obtaining any rebates left unclaimed longer than a certain period of time. The new policy will take effect with rebates left unclaimed this fall.

Held for Two Years

Under the previous policy, unclaimed rebates were held for two years and then distributed to all Coop members as part of that year's rebate.

Davis said the Coop "would prefer" to use the unclaimed funds to increase the annual rebate, but it is "simply abiding by the IRS decision."

He said the laws governing cooperative societies "are not clear" and do not specifically mention unclaimed rebates. "Our interpretation of the laws was not acceptable," he said.

The Coop now holds $20,000 in unclaimed rebates which could have raised this year's 7.35 per cent rebate to 7.5 per cent.

Reclassified

The Coop will now classify unclaimed rebates as taxable business. Half the $20,000 will be paid in taxes and half will be added to retained earnings, Davis said.

He said the Coop has not yet decided whether to set a final date beyond which rebates cannot be claimed. The Coop may continue to honor requests for old rebates because "the amounts involved are so small," he said.

Davis said the new policy will benefit Coop members in the long run "because the Coop will have greater cash resources and won't have to borrow as much money."

The Coop is "not distressed" about the IRS ruling, Davis said.

Davis said the Coop's accounting firm, Touche Ross and Co., advised the store not to contest the IRS decision.

The Coop's present rebate for fiscal 1974 is 1.35 per cent higher than last year's rebate of 6 per cent. The store experienced an increase in its total sales during fiscal 1974, Davis said.

Member rebates for 1974 amount to $820,000, while the Coop's net earnings were $328,978.