13 June 1991 Internal T.I. 9110307 F - Meaning of "Benevolent or Fraternal Benefit Society or Order"

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.

7-911030

24(1)

This is in reply to your memorandum of April 15, 1991, concerning the tax status of the  24(1) under subsections 149(1) & (3) of the Act.

We agree with your comments on page two of your memorandum that the

24(1)

would not qualify for tax exempt status under paragraph 149(1)(1) of the Act.   Also, we agree that the test for exemption under paragraph 149(1)(1) is one which must be considered annually.

In our previous memorandum dated October 18, 1990, we advised that although the 24(1) does not qualify for tax exempt status under paragraph 149(1)(1) of the Act it would qualify for tax exempt status under paragraph 149(1)(k) as a "benevolent or fraternal benefit society or order".  The   24(1)  representative requests reconsideration of our position regarding paragraph 149(1)(1) of the Act.

Subsection 149(1) of the Act provides that no tax is payable under Part 1 upon the taxable income of any entity described in paragraphs 149(1)(a) to (y).  However, subsection 149(3) of the Act provides that the exempting provisions contained in subsection 149(1) do not apply to the taxable income of a benevolent or fraternal order or society from carrying on a life insurance business.  As a result, pursuant to subsection 149(3) of the Act, benevolent or fraternal benefit societies are taxable in respect of their life insurance business irrespective that they may qualify for exempt status under any of the provisions in subsection 149(1). The provision of widows and death benefits would be considered a "life insurance business" within the meaning of that definition in subsection 248(1) of the Act.

In the present case since  24(1) qualifies as a "benevolent or fraternal benefit society or order" it is taxable in respect of its taxable income from carrying on a life insurance business regardless that it may otherwise qualify for exempt status under paragraph 149(1)(1) or (k) of the Act or any other provision in subsection 149(1). 24(1) in computing its income from carrying on a life insurance business would, in addition to the general deductions, be entitled to the special deductions provided in section 138 of the Act.  There is no requirement in the Act or Regulations that the amount of the section 138 deductions must be calculated by an actuary. These calculations may be done by the 24(1)  accountant or auditor.

We trust our comments will be of assistance to you.

for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch