12 May 1992 Internal T.I. 9210247 F - Cooperative Corporation

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.

May 12, 1992

K. MannionBusiness and GeneralChief of Audit       DivisionWinnipeg District Office

Attention: P. Hockenhull

Large Case Files 24(1)

This is in reply to your memorandum of March 26, 1992 concerning whether the above noted corporation qualifies, pursuant to subsection 136(2) of the Income Tax Act, as a "cooperative corporation". Attached to your memorandum were the Taxpayer's submission of March 24, 1992 and the requested adjustment, Rulings Directorate's opinion of April 16, 1986 and a copy of the opinion given to 24(1), a previous submission by 24(1), dated February 6, 1986 and your submission to the Rulings Directorate of February 26, 1986.

Our Comments

We remain of the opinion that in order to qualify as a cooperative corporation as defined in subsection 136(2) of the Act, a corporation must be or have been incorporated:

1)     under a federal or provincial Cooperative Corporation Act,

2)     under special provisions regarding the incorporation of cooperatives as contained in the Companies Act of certain provinces (this possibility no longer exists as we understand that each province now has its own Cooperative Corporations Act), or

3)     by a Special Act of the Parliament of Canada or of a province.

This is a long standing position that has been reiterated previously.  As stated in our April 16, 1986 memorandum, a corporation incorporated under the Canada Corporations Act cannot, in our opinion, be considered a cooperative corporation within the meaning of subsection 136(2) of the Act notwithstanding that the conditions in paragraphs 136(2)(a)-(c) of the Act may be met by virtue of the enactment of bylaws or changes to articles of incorporation.

In our view the "purpose" clause must be read in conjunction with both parts of the preamble in the following manner:

1)     In this section, "cooperative corporation" means a corporation that was incorporated by or under a law of Canada or a province providing for the establishment of the corporation....for the purpose of marketing etc., (i.e. this would provide for corporations created by a special Act) or 

2)     In this section, "cooperative corporation" means a corporation that was incorporated by or under a law of Canada or a province respecting the establishment of cooperative corporations for the purpose of marketing etc.

We note for the record that the position now being argued by the taxpayer is essentially the one taken by the Winnipeg D.O. Audit Division in 1986 and rejected by the taxpayer at that time for the reasons we have outlined above.

We trust these comments will be helpful.

E. Wheelerfor DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch