Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

Act current to 2017-11-20 and last amended on 2017-07-01. Previous Versions

Cooperative Corporations

Marginal note:Cooperative not private corporation
  •  (1) Notwithstanding any other provision of this Act, a cooperative corporation that would, but for this section, be a private corporation is deemed not to be a private corporation except for the purposes of section 15.1, paragraphs 87(2)(vv) and (ww) (including, for greater certainty, in applying those paragraphs as provided under paragraph 88(1)(e.2)), the definitions excessive eligible dividend designation, general rate income pool and low rate income pool in subsection 89(1), subsections 89(4) to (6) and (8) to (10), sections 123.4, 125, 125.1, 127 and 127.1, the definition mark-to-market property in subsection 142.2(1), sections 152 and 157, subsection 185.2(3), the definition small business corporation in subsection 248(1) (as it applies for the purposes of paragraph 39(1)(c)) and subsection 249(3.1).

  • Definition of cooperative corporation

    (2) In this section, cooperative corporation means a corporation that was incorporated or continued by or under the provisions of a law, of Canada or of a province, that provide for the establishment of the corporation as a cooperative corporation or that provide for the establishment of cooperative corporations, for the purpose of marketing (including processing incident to or connected to the marketing) natural products belonging to or acquired from its members or customers, of purchasing supplies, equipment or household necessaries for or to be sold to its members or customers or of performing services for its members or customers, if

    • (a) the statute by or under which it was incorporated, its charter, articles of association or by-laws or its contracts with its members or its members and customers held out the prospect that payments would be made to them in proportion to patronage;

    • (b) none of its members (except other cooperative corporations) have more than one vote in the conduct of the affairs of the corporation;

    • (c) at least 90% of its members are individuals, other cooperative corporations, or corporations or partnerships that carry on the business of farming; and

    • (d) at least 90% of its shares, if any, are held by members described in paragraph (c) or by trusts governed by registered retirement savings plans, registered retirement income funds, TFSAs or registered education savings plans, the annuitants, holders or subscribers under which are members described in that paragraph.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 136;
  • 1994, c. 7, Sch. II, s. 112;
  • 1998, c. 19, s. 161;
  • 2006, c. 4, s. 81;
  • 2013, c. 34, s. 283, c. 40, s. 61.

Credit Unions, Savings and Credit Unions and Deposit Insurance Corporations

Marginal note:Payments pursuant to allocations in proportion to borrowing
  •  (2) Notwithstanding anything in this Part, there may be deducted, in computing the income for a taxation year of a credit union, the total of bonus interest payments and payments pursuant to allocations in proportion to borrowing made by the credit union within the year or within 12 months thereafter to members of the credit union, to the extent that those payments were not deductible under this subsection in computing the income of the credit union for the immediately preceding taxation year.

  • Marginal note:Additional deduction

    (3) There may be deducted from the tax otherwise payable under this Part for a taxation year by a corporation that was, throughout the year, a credit union, an amount equal to the amount determined by the formula

    A × B × C

    where

    A
    is the rate that would, if subsection 125(1.1) applied to the corporation for the year, be its small business deduction rate for the year within the meaning assigned by that subsection,
    B
    is the amount, if any, determined by the formula

    D – E

    where

    D
    is the lesser of
    • (a) the corporation’s taxable income for the year, and

    • (b) the amount, if any, by which 4/3 of the corporation’s maximum cumulative reserve at the end of the year exceeds the corporation’s preferred-rate amount at the end of the immediately preceding taxation year, and

    E
    is the least of the amounts determined under paragraphs 125(1)(a) to (c) in respect of the corporation for the year, and
    C
    is the percentage that is the total of
    • (a) the proportion of 100% that the number of days in the year that are before March 21, 2013 is of the number of days in the year,

    • (b) the proportion of 80% that the number of days in the year that are after March 20, 2013 and before 2014 is of the number of days in the year,

    • (c) the proportion of 60% that the number of days in the year that are in 2014 is of the number of days in the year,

    • (d) the proportion of 40% that the number of days in the year in 2015 is of the number of days in the year,

    • (e) the proportion of 20% that the number of days in the year in 2016 is of the number of days in the year, and

    • (f) if one or more days in the year are after 2016, 0%.

  • Marginal note:Amount deemed deductible under s. 125

    (4) For the purposes of this Act, any amount deductible or any deduction under subsection 137(3) from the tax otherwise payable by a credit union under this Part for a taxation year shall be deemed to be an amount deductible or a deduction, as the case may be, under section 125 from that tax.

  • Marginal note:Payments in respect of shares

    (4.1) Notwithstanding any other provision of this Act, an amount paid or payable by a credit union to a person is deemed to be paid or payable, as the case may be, by the credit union as interest and to be received or receivable, as the case may be, by the person as interest, if

    • (a) the amount is in respect of a share held by the person of the capital stock of the credit union, other than an amount paid or payable as or on account of a reduction of the paid-up capital, redemption, acquisition or cancellation of the share by the credit union to the extent of the paid-up capital of the share;

    • (b) the share is not listed on a stock exchange; and

    • (c) the person is

      • (i) a member of the credit union, or

      • (ii) a member of another credit union if the share is issued by the credit union after March 28, 2012 and the other credit union is a member of the credit union.

  • Marginal note:Deemed interest not a dividend

    (4.2) Notwithstanding any other provision of this Act, an amount that is deemed by subsection 137(4.1) to be interest shall be deemed not to be a dividend.

  • Marginal note:Determination of preferred-rate amount of a corporation

    (4.3) For the purposes of subsection 137(3),

    • (a) the preferred-rate amount of a corporation at the end of a taxation year is determined by the formula

      A + B/C

      where

      A
      is its preferred-rate amount at the end of its immediately preceding taxation year,
      B
      is the amount deductible under section 125 from the tax for the taxation year otherwise payable by it under this Part, and
      C
      is its small business deduction rate for the taxation year within the meaning of subsection 125(1.1);
    • (b) where at any time a new corporation has been formed as a result of an amalgamation of two or more predecessor corporations, within the meaning of subsection 87(1), it shall be deemed to have had a taxation year ending immediately before that time and to have had, at the end of that year, a preferred-rate amount equal to the total of the preferred-rate amounts of each of the predecessor corporations at the end of their last taxation years; and

    • (c) where there has been a winding-up as described in subsection 88(1), the preferred-rate amount of the parent (referred to in that subsection) at the end of its taxation year immediately preceding its taxation year in which it received the assets of the subsidiary (referred to in that subsection) on the winding-up shall be deemed to be the total of the amount that would otherwise be its preferred-rate amount at the end of that year and the preferred-rate amount of the subsidiary at the end of its taxation year in which its assets were distributed to the parent on the winding-up.

  • Marginal note:Member’s income

    (5) Where a payment has been received by a taxpayer from a credit union in a taxation year in respect of an allocation in proportion to borrowing, the amount thereof shall, if the money so borrowed was used by the taxpayer for the purpose of earning income from a business or property (otherwise than to acquire property the income from which would be exempt or to acquire a life insurance policy), be included in computing the taxpayer’s income for the year.

  • Marginal note:Allocations of taxable dividends and capital gains

    (5.1) A credit union (referred to in this subsection and in subsection 137(5.2) as the “payer”) may, at any time within 120 days after the end of its taxation year, elect in prescribed form to allocate in respect of the year to a member that is a credit union such portion of each of the following amounts as may reasonably be regarded as attributable to the member:

    • (a) the total of all amounts each of which is the amount of a taxable dividend received by the payer from a taxable Canadian corporation in the year;

    • (b) the amount, if any, by which

      • (i) the total of all amounts each of which is the amount by which the payer’s capital gain from the disposition of a property in the year exceeds the payer’s taxable capital gain from the disposition

      exceeds

      • (ii) the total of all amounts each of which is the amount by which the payer’s capital loss from the disposition of a property in the year exceeds the payer’s allowable capital loss from the disposition; and

    • (c) each amount deductible under paragraph 137(5.2)(c) in computing the payer’s taxable income for the year.

  • Marginal note:Idem

    (5.2) Notwithstanding any other provision of this Act,

    • (a) there shall be deducted from the amount that would, but for this subsection, be deductible under section 112 in computing a payer’s taxable income for a taxation year such portion of the total referred to in paragraph 137(5.1)(a) as the payer allocated to its members under subsection 137(5.1) in respect of the year;

    • (b) there shall be included in computing the income of a payer for a taxation year an amount equal to that portion of the amounts referred to in paragraphs 137(5.1)(b) and 137(5.1)(c) that the payer allocated under subsection 137(5.1) in respect of the year to its members; and

    • (c) each amount allocated under subsection 137(5.1) to a member may be deducted by that member in computing the member’s taxable income for its taxation year that includes the last day of the payer’s taxation year in respect of which the amount was so allocated.

  • Marginal note:Definitions

    (6) In this section,

    allocation in proportion to borrowing

    répartition proportionnelle à l’importance de l’emprunt

    allocation in proportion to borrowing for a taxation year means an amount credited by a credit union to a person who was a member of the credit union in the year on terms that the member is entitled to or will receive payment thereof, computed at a rate in relation to

    • (a) the amount of interest payable by the member on money borrowed from the credit union, or

    • (b) the amount of money borrowed by the member from the credit union,

    if the amount was credited at the same rate in relation to the amount of interest or money, as the case may be, as the rate at which amounts were similarly credited for the year to all other members of the credit union of the same class; (répartition proportionnelle à l’importance de l’emprunt)

    bonus interest payment

    paiement d’intérêts supplémentaires

    bonus interest payment for a taxation year means an amount credited by a credit union to a person who was a member of the credit union in the year on terms that the member is entitled to or will receive payment thereof, computed at a rate in relation to

    • (a) the amount of interest payable in respect of the year by the credit union to the member on money standing to the member’s credit from time to time in the records or books of account of the credit union, or

    • (b) the amount of money standing to the member’s credit from time to time in the year in the records or books of account of the credit union,

    if the amount was credited at the same rate in relation to the amount of interest or money, as the case may be, as the rate at which amounts were similarly credited in the year to all other members of the credit union of the same class; (paiement d’intérêts supplémentaires)

    credit union

    caisse de crédit

    credit union means a corporation, association or federation incorporated or organized as a credit union or cooperative credit society if

    • (a) it derived all or substantially all of its revenues from

      • (i) loans made to, or cashing cheques for, members,

      • (ii) debt obligations or securities of, or guaranteed by, the Government of Canada or a province, a Canadian municipality, or an agency thereof, or debt obligations or securities of a municipal or public body performing a function of government in Canada or an agency thereof,

      • (iii) debt obligations of or deposits with, or guaranteed by, a corporation, commission or association not less than 90% of the shares or capital of which was owned by the Government of Canada or a province or by a municipality in Canada,

      • (iv) debt obligations of or deposits with, or guaranteed by, a bank, or debt obligations of or deposits with a corporation licensed or otherwise authorized under a law of Canada or a province to carry on in Canada the business of offering to the public its services as trustee,

      • (v) charges, fees and dues levied against members or members of members,

      • (vi) loans made to or deposits with a credit union or cooperative credit society of which it is a member, or

      • (vii) a prescribed revenue source,

    • (b) all or substantially all the members thereof having full voting rights therein were corporations, associations or federations

      • (i) incorporated as credit unions or cooperative credit societies, all of which derived all or substantially all of their revenues from the sources described in paragraph (a), or all or substantially all of the members of which were credit unions, cooperatives or a combination thereof,

      • (ii) incorporated, organized or registered under, or governed by a law of Canada or a province with respect to cooperatives, or

      • (iii) incorporated or organized for charitable purposes,

      or were corporations, associations or federations no part of the income of which was payable to, or otherwise available for the personal benefit of, any shareholder or member thereof, or

    • (c) the corporation, association or federation would be a credit union by virtue of paragraph (b) if all the members (other than individuals) having full voting rights in each member thereof that is a credit union were members having full voting rights in the corporation, association or federation; (caisse de crédit)

    maximum cumulative reserve

    provision cumulative maximale

    maximum cumulative reserve of a credit union at the end of any particular taxation year means an amount determined by the formula

    0.05 × (A + B)

    where

    A
    is the total of all amounts each of which is the amount of any debt owing by the credit union to a member thereof or of any other obligation of the credit union to pay an amount to a member thereof, that was outstanding at the end of the year, including, for greater certainty, the amount of any deposit standing to the credit of a member of the credit union in the records of the credit union, but excluding, for greater certainty, any share in the credit union of any member thereof, and
    B
    is the total of all amounts each of which is the amount, as of the end of the year, of any share in the credit union of any member thereof;

    member

    membre

    member, of a credit union, means

    • (a) a person who is recorded as a member on the records of the credit union and is entitled to participate in and use the services of the credit union, and

    • (b) a registered retirement savings plan, a registered retirement income fund, a TFSA or a registered education savings plan, the annuitant, holder or subscriber under which is a person described in paragraph (a). (membre)

  • Marginal note:Credit union not private corporation

    (7) Notwithstanding any other provision of this Act, a credit union that would, if this Act were read without reference to this section, be a private corporation is deemed not to be a private corporation except for the purposes of sections 123.1, 123.4, 125, 127, 127.1, 152 and 157 and the definition small business corporation in subsection 248(1) as it applies for the purpose of paragraph 39(1)(c).

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 137;
  • 1994, c. 7, Sch. II, s. 113, Sch. VIII, s. 79, c. 21, s. 64;
  • 2007, c. 2, s. 37, c. 35, s. 68;
  • 2013, c. 33, s. 15, c. 34, s. 284, c. 40, s. 62;
  • 2015, c. 36, s. 14.
 
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