Measuring the Cooperative Economy
The University of Wisconsin Center for Cooperatives continues to pursue foundational work to develop the data resources for measuring the cooperative economy on an ongoing basis. A national cooperative census that can be efficiently and regularly updated is the first step to this effort.
A”first draft” of a cooperative census based on a national business data set has been completed, and drives the tables and maps on this website. Further development and refinement of the data set is continuing, and updated reporting will follow.
There have been no ongoing, comprehensive national-level statistics about U.S. cooperative businesses and their impact on the lives and businesses of American citizens. While the 2009 report published by the University of Wisconsin Center for Cooperatives provided the first comprehensive study of cooperative impacts in the U.S., the research was a time- and resource- intensive effort that was not sustainable for ongoing reporting and analysis.
Since 2009, the Center has worked with policy experts in federal agencies, cooperative stakeholders, and academics to lay the foundations for a data infrastructure that captures cooperative activity in the U.S. economy, and provides a basis for ongoing reporting over time.
Unique Role of Cooperatives
Cooperatives fill a unique niche in the U.S. economy. As enterprises owned by their member-patrons, cooperatives are a “bottom-up”, grass-roots response to market imperfections. They have been used to supply organic and natural foods to consumers, counteract asymmetric market power between farmers and agribusiness intermediaries, deliver broadband and utility services to households in rural areas, and provide basic banking and insurance services to consumers.
Defining the Cooperative to Build the Census
Depending on the context, different qualifying criteria can be used to categorize an organization as a cooperative. Incorporation status; self-identification; tax-filing status; adoption of a cooperative statement of principles; and a cooperative governance structure may all reflect aspects of cooperative organizations, although these criteria for an organization may sometimes conflict.
More important, however, is the availability of organizational data that includes one or more of these criteria. Building this cooperative census is based on the ongoing availability of national data that can be efficiently updated and reported on over time. Refinements based on other data sources can be incorporated into the census as they become available.
A review of these criteria boundaries is helpful to understand the complexities of both cooperative definitions and of data gathering.
Review of Criteria for Defining a Cooperative
Traditionally, the defining characteristics of a cooperative business are that the interests of the capital investor are subordinate to those of the business user, or patron, and returns on capital are limited. Cooperative control is in the hands of its member-patrons, who democratically elect the board of directors. Member-patrons are the primary source of equity capital, and net earnings are allocated on the basis of patronage instead of investment.
The USDA summarized these characteristics in its definition of a cooperative as a “user-owned, user-controlled business that distributes benefits on the basis of use.” A broader definition of a cooperative and its principles is promulgated by the The International Co-operative Alliance (ICA).
While these principles may be useful for evaluating the cooperative character of an individual organization, they are impractical to use for identifying organizations to build a census.
Like other businesses, cooperatives establish themselves as legal entities at the state level under statutes that provide parameters for governance and operation. State statutes are not uniform, and widely vary in their requirements. All states have at least one statute providing for agricultural producer cooperatives. States may have other cooperative statutes for particular sectors and types including healthcare, utilities, housing, credit unions, and worker cooperatives. In still other cases, state statutes have been written more broadly to enable cooperative association formation across multiple sectors.
State legislative code also varies in its categorization of cooperative statutes as for-profit or a type of nonprofit corporation or association. This inconsistency reflects different aspects of cooperative operations: providing goods or services to members, instead of a return on investment from profits, nonetheless requires some surplus or profit for future financial viability.
In some states, cooperative statutory provisions may be a subsection of broader business or nonprofit statute, instead of a standalone statute.
Depending on the specific entity’s needs, cooperatives may choose to organize under other business statutes not specific to cooperatives, such as corporation, limited liability company (LLCs), or nonprofit laws.
Use of state lists to identify cooperative legal entities is neither comprehensive nor efficient.
Nonetheless, there are some similarities across state statutes that reflect historical developments, especially in federal tax and antitrust law. These provisions relate to member governance and voting rights, and the distribution of surplus or profit based on patronage.
Given these statutory distinctions, many state statutes reserve the use of the term “cooperative” or “co-op” in the organization name for entities formed under state cooperative statute. Not all states require the use of the term in the name, however. Some cooperative statutes permit these terms if the entity is operating on a cooperative basis for federal tax purposes, independent of incorporation status.
Some state statues provide no standards or requirements for the term’s use. Organizations incorporated in those states may include the term “cooperative” in the business name, regardless of whether they are owned and controlled by patron members.
The federal tax code provides its own set of criteria for tax filings by organizations, which may or may not include an entity’s state incorporation status.
Many cooperatives, or businesses operating on a cooperative basis, file taxes under the federal tax code subchapter T provisions. These provisions allow businesses “operating on a cooperative basis” to qualify for single taxation treatment. Profits from business that is conducted with members or patrons, and that are proportionately allocated to those members or patrons, are taxed at the patron instead of the cooperative business level. While an entity’s use of this specific tax form would identify cooperative operations, individual IRS returns are confidential and are not available.
Tax forms for organizations that file federal taxes using nonprofit tax exemptions are part of the public record, however. Because their not-for-profit operations provide a larger collective benefit, there are specific federal tax exemptions for cooperative utilities, credit unions, mutual insurance companies, farm credit organizations, some farmer cooperatives and miscellaneous other organizations. The reported tax-exempt status typically identifies these organizations as cooperatives, although in some instances other non-cooperative, nonprofit organizations also provide these services.
The data for this first phase of the project come from three sources.
First is the annual file for the 2015 historical data report on all U.S. business establishments created by InfoGroup, a business intelligence service for business and academic analytics. The file provides North American Industrial Classification (NAICS) codes, and several other establishment-level characteristics, useful for locating and classifying 15.6 million establishments, including non-profits and non-employers. For some sectors, the data contain sales and employment figures. InfoGroup claims that their files contain the universe of American business establishments for each year, beginning in 1997.
Second, we acquired a number of sector-specific lists of firms (not including all establishments) from several authoritative industry sources:
- National Credit Union Administration (NCUA) for data about and on the credit union system.
- National Rural Electric Cooperative Association (NRECA) data. NRECA advocates for the interests of its rural electric cooperative membership, provides educational opportunities for its members, and oversees a cooperative employee benefits plan. NRECA shared data that included member names and addresses, and 2015 figures for sales, revenue, and employment.
- USDA list of agricultural cooperatives. The USDA annually distributes a survey to agricultural cooperatives to gather and compile statistics on agricultural cooperative activities. USDA shared the list of farmer cooperative names and addresses used for the annual survey effort.
- National Council of Farmer Cooperatives (NCFC) list of member names and addresses. NCFC advocates for the policy and business interests of its members, which are regional and national farmer cooperatives. Members are listed on the website.
- Farm Credit list of network organizations’ names and addresses. The Farm Credit network of wholesale banks and retail lenders are owned by their rural customer borrowers. Locations of network establishments are mapped on its website.
- National Co-op Grocers list of member names and locations. NCG is a business services cooperative that provides marketing and operational resources for retail food co-ops in the U.S. Its member stores and their branches are listed on its website.
- The National Cooperative Bank’s NCB 100 list for 2016. NCB reviews audited financial statements that are submitted to NCB from large cooperative businesses. It ranks the cooperatives by revenue and publishes a list of the 100 largest cooperative businesses for that year. Addresses for the cooperatives in the listing were researched on the web.
Third, we added information on over 400 startup co-ops that we identified in a nation-wide survey project funded by the Agriculture and Food Research Initiative of the National Institute of Food and Agriculture in the USDA. A description of survey project is described in the summary project report.
Cooperative businesses are not identified as such in any U.S. federal data source nor in the InfoGroup annual files. We therefore relied in the first instance on parsing the names of establishments to pull out those that were self-identifying as co-ops, credit unions, mutual insurance (or other) establishments or institutions, collectives, voluntary associations; in general, member-owned “businesses.”
We followed up that initial draw of data from the InfoGroup 2015 file with detailed and extensive investigation of individual establishments, most from information on their own or related websites. This process helped us to refine the initial list and to add establishments that we had not drawn from the data.
The scope of this research excludes housing cooperatives. Although many hundreds of housing co-ops do seem to be included in InfoGroup’s annual files, it is very unlikely that most housing co-ops have been captured there. Housing co-ops do not operate in all cases as businesses that would be readily identified as such, and they are not reliably identified by name in most cases. Although it may be possible at some point to add housing co-ops to this continuing census, the amount of ad hoc effort to identify a large proportion of American housing co-ops ruled out their inclusion in this phase of the project
We do have a head start on identifying a certain percentage of American housing co-ops because in order to exclude them from analysis in this phase we had to identify those that self-identified as co-ops in our first draw from the InfoGroup data. We removed the housing co-ops from the results of our AFRI survey for the purposes of this report.
All in all, we identified 37,435 cooperative businesses, not including housing co-ops, in the 2015 InfoGroup file; we compiled data on 1,712 co-ops from the various sector-specific authority lists; and we extracted 447 non-housing co-ops from the AFRI survey. The total is 39,594. The InfoGroup data is compiled at the establishment level. That is, it includes all branch and subsidiary locations in addition to headquarters or “parent” locations. However, the sources of our authority lists all supplied data on “firms” (parent locations only) and the AFRI survey of recent startups is also firm-based.