17 February 1997 Internal T.I. 9703257 - PARAGRAPH 149(1)(T) - HAIL INSURANCE

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 Department.

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

Principal Issues:

Whether growing crops constitute "property used in farming" for the purposes of the draft amendment to paragraph 149(1)(t) contained in the December 5, 1996 Notice of Ways and Means Motion.

Position:

Yes.

Reasons:

In light of the fact that the Department's view is that growing crops constitute "farm property" under existing paragraph 149(1)(t) and that the intent of the draft amendment is not to prevent insurers providing hail insurance from qualifying for the exemption, it is our view that, in the specific context of paragraph 149(1)(t), the expression "property used in farming" would include the growing of crops.

							February 17, 1997

	SASKATOON TAX SERVICES OFFICE     	HEADQUARTERS
	Client Services                    	J. Leigh
	                                   	952-1505
	Attention:  Angela Pedley
							7-970325

Paragraph 149(1)(t) - Hail Insurance

This is in reply to your round trip memorandum dated January 31, 1997 concerning the draft amendment to paragraph 149(1)(t) of the Income Tax Act (the "Act") contained in the December 5, 1996 Notice of Ways and Means Motion. Specifically, you asked for our views on whether insurers in the business of providing hail insurance to farmers on their growing crops would continue to qualify for the exemption from Part I tax under paragraph 149(1)(t) of the Act if the draft amendment is enacted into law as proposed.

The postamble to paragraph 149(1)(t) of the Act currently reads "was in respect of the insurance of farm property, property used in fishing or residences of farmers or fishermen". The Notice of Ways and Means Motion includes a proposal to revise the postamble to read "is in respect of insurance of property used in farming or fishing businesses or residences of farmers or fishermen who carry on such businesses". We note that the related explanatory notes indicate that the intent of the proposed wording change to the postamble is to "clarify that property must be used in the business of farming or fishing in order for the premium income arising from the insurance of such property to be counted towards the 20% threshold".

As you know, it is the Department's position that growing crops constitute farm property for the purposes of existing paragraph 149(1)(t) of the Act. In light of the fact that insurers providing hail insurance on growing crops currently qualify for the exemption and the fact that the Department of Finance has indicated to us on an informal basis that the change in wording from "farm property" to "property used in farming" was not intended to preclude such insurers from qualifying for the exemption, we would be prepared, in the specific context of paragraph 149(1)(t) of the Act, to interpret the expression "property used in farming" to include growing crops. Accordingly, if the draft amendment to paragraph 149(1)(t) of the Act is enacted into law as currently proposed, it is our view that growing crops would constitute "property used in farming".

We hope that our comments will be of assistance to you.

Chief
Financial Institutions Section
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch