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.
Subject: XXX
This is in reply to your memorandum of April 15, 1991, concerning the tax status of the XXX under subsections 149(1) & (3) of the Act.
We agree with your comments on page two of your memorandum that the XXX would not qualify for tax exempt status under paragraph 149(1)(l) of the Act. Also, we agree that the test for exemption under paragraph 149(1)(l) is one which must be considered annually.
In our previous memorandum dated October 18, 1990, we advised that although the XXX does not qualify for tax exempt status under paragraph 149(1)(l) 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 XXX representative requests reconsideration of our position regarding paragraph 149(1)(l) 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 XXX 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)(l) or (k) of the Act or any other provision in subsection 149(1). XXX 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 XXX accountant or auditor.
We trust our comments will be of assistance to you.
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1991
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1991
Email this Content