21 January 2004 External T.I. 2003-0033371E5 - Credit Unions and Retail Associations

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: Whether a corporation that is continued as a retail association under the Cooperative Credit Associations Act will qualify as a credit union for the purposes of section 137.

Position: Factual determination

Reasons: A requirement in the credit union definition is that the particular corporation, association or federation be incorporated or organized as a credit union or cooperative credit society. While the term "cooperative credit society" is not defined in the Income Tax Act, it is defined in the Cooperative Credit Associations Act. If the retail association qualifies as a cooperative credit society under that Act, it would be regarded as a cooperative credit society for the purposes of the Income Tax Act.

"credit union" in subsection 137(6) are met.

XXXXXXXXXX 						2003-003337

January 21, 2004

Dear XXXXXXXXXX:

Re: Retail Association

This is in reply to your letter of July 28, 2003 in which you requested an interpretation on whether a trust company that is to be continued as a retail association under the Cooperative Credit Associations Act (the "CCAA") would be a "credit union" for the purposes of section 137 of the Income Tax Act (the "Act"). You note that a retail association comes within the definition of a "cooperative credit society" in the CCAA. It is therefore your view that a retail association that meets the condition in paragraph (b) of the definition of "credit union" in subsection 137(6) of the Act would qualify as a credit union for the purposes of the Act.

A "credit union" is defined in subsection 137(6) of the Act to mean a corporation, association or federation incorporated or organized as a credit union or cooperative credit society if it meets the requirements of any of paragraph (a), (b) or (c) of that definition. While the term "cooperative credit society" is not defined in the Act, it is defined in the CCAA. Pursuant to that definition, a cooperative credit society means "a cooperative corporation one of whose principal purposes is to provide financial services to its members."

Since we do not administer the CCAA, we are not in a position to make a determination as to whether a particular entity qualifies as a cooperative credit society under the CCAA. However, if an association as defined in the CCAA qualifies as a cooperative credit society under the CCAA, we would regard the association as a cooperative credit society for the purposes of the definition of "credit union" in subsection 137(6) of the Act. If the association receives the approval of the Minister of Finance to become a retail association as defined in section 375.1 of the Retail Associations Regulations to the CCAA, our view is that the retail association would be regarded as a cooperative credit society for the purposes of the definition of "credit union" in the Act provided that it satisfies the conditions in the definition of "cooperative credit society" in the CCAA.

With regard to the requirements in paragraphs (a), (b) and (c) of the definition of "credit union" in subsection 137(6) of the Act, it is a question of fact whether the requirements in any of these paragraphs are satisfied.

The foregoing comments represent our general views with respect to the subject matter. As indicated in paragraph 22 of Information Circular 70-6R5, the above comments do not constitute an income tax ruling and accordingly are not binding on the Agency.

Yours truly,

F. Lee Workman
Manager
Financial Institutions Section
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch