6 November 2015 External T.I. 2015-0611691E5 F - Member of a cooperative corporation -- translation
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This translation was prepared by Tax Interpretations Inc. The CRA did not issue this document in the language in which it now appears, and is not responsible for any errors in its translation that might impact a reader’s understanding of it or the position(s) taken therein. See also the general Disclaimer below.
Principal Issues: 1. Does the definition of member pursuant to subsection 135(4) apply to define a member of a cooperative corporation for the purpose of paragraph 136(2)(c)?
2. If the answer to question 1 is no, what is the definition of a member of a cooperative corporation?
Position: 1. No.
2. The term member will have the meaning ascribed in the statute under which the cooperative corporation was incorporated. It also depends on its charter and by-laws.
Reasons: 1. The preamble of subsection 135(4) clearly states that the definitions are for the purpose of sections 135 and 135.1.
2. There is no definition of the term member in the Act.
XXXXXXXXXX 2015-061169
Lucie Allaire, LL.B, CPA, CGA, D. Fisc.
November 6, 2015
Dear Sir,
Subject: Member of a cooperative corporation
This letter is in response to your email of October 1, 2015 in which you requested clarification of the meaning of the term member for the purposes of paragraph 136(2)(c) of the Income Tax Act (the "Act"). You also asked if the definition of that term in section 135 of the Act is applicable.
Unless otherwise stated, all statutory references are references to the provisions of the Act.
Our Comments
This technical interpretation provides general comments about the provisions of the Act and related legislation, where referenced. It does not confirm the income tax treatment of a particular situation but is intended to assist you in making that determination. The income tax treatment of transactions will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R5, “Advance Income Tax Rulings”.
Subsection 136(2) defines a cooperative corporation for purposes of the application of section 136. To this end, this definition requires that the conditions in paragraphs (a) to (d) be met. Paragraph 136(2)(b) provides that none of its members (except other cooperative corporations) have more than one vote in the conduct of the affairs of the corporation. In addition, paragraph 136(2)(c) specifies that at least 90% of its members are individuals, other cooperative corporations, or corporations or partnerships that carry on the business of farming. Furthermore, subsection 135(4) defines a member as a person who is entitled as a member or shareholder to full voting rights in the conduct of the affairs of the taxpayer (being a corporation) or of a corporation of which the taxpayer is a subsidiary wholly-owned corporation.
However, the preamble to subsection 135(4) states that the definitions in that section apply only for the purposes of section 135 and section 135.1.
Consequently, the definition of a member under subsection 135(4) thus cannot be applied to define what is a member of a cooperative corporation for the purposes of subsection 136(2).
In our view, for the purposes of subsection 136(2), the definition of member is determined according to the law under which the cooperative corporation was formed, as well as by the charter, articles or by-laws.
We hope that our comments will be of assistance.
Louise J. Roy, CPA, CGA
Manager
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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