Bill 31 (Legislature 12, Session 3)

L12 S3 6476

Alberta — Bills

Bill No. 31 of 1955 A BILL TO AMEND THE ALBERTA CORPORATION INCOME TAX ACT, 1949 NOTE This Bill amends The Alberta Corporation Income Tax Act, 1949, being

chapter 6 of the Statutes of Alberta, 1949. This amendment is intended to put in the law what was thought to be already there rather than to introduce any new policy of taxation. It was believed that the law made taxable any surplus arising from the insurance activities of mutual insurance corporations and not returned to the policyholders by way of dividends or refund of premiums, but the decision of the courts in the case of Stanley Mutual Insurance Company vs. Minister of National Revenue (1953 C.T.C. 187) showed that this was not so.

The amendment to the federal Income Tax Act authorized the method of taxing any surplus arising from insurance activities that had been used prior to this court decision. This amendment became effective only from the first day of January, 1954, for resident companies, but was made retro active for non-resident companies.

Accordingly for The Alberta Corporation Income Tax Act and The Alberta Corporation Income Tax Act, 194.9, which apply only to taxation years considerably prior to this date the amend ment dealing with the taxation of income arising from in surance activities will apply only to non-resident companies. It will be noted that paragraphs (

a) and (

b) of the amend ment prevent its coming into effect for resident mutual insurance corporations. At the sanle time, for greater certainty it is intended to provide specifically that income whi;ch mutual insurance companies received from investments in the taxation years covered by The Alberta Corporation Income Tax Act and The Alberta Corporation Income Tax Act, 1949, is taxable income. Any insurance corporation other than a life insurance corporation is permitted to deduct, in computing income, every amount paid or credited to a policyholder of the corporation by way of dividend, refund of p·remiums or refund of premium deposits (section 10 (

i) and

section 50). Therefore if a corporation is a truly mutual corporation and returns to its policyholders any premiums or other income left after paying all claims and operating expenses, it will have no taxable income and thus pay no corporation in come tax. It will be liable for tax only if it retains all or part of the excess of its income over the aggregate of claims and expenses. This applies to stock as well as mutual corporations,

ii The only corporations that will become liable for tax on this surplus by virtue of this amendment are those non resident mutual insurance corporations which had such a surplus in the years affected by the decision in the Stanley Mutual case, and whose inco.me tax returns fo.r those years have no.t been finally assessed o.r might o.therwise still be appealed. The taxatio.n years affected may include years back to. 1947.

Even fo.r these co.rpo.ratio.ns the amendment do.es no.t increase retro.actively the tax payable for they will pay o.nly what they tho.ught they had to. pay and what was intended they sho.uld pay_ It sho.uld be no.ted that no.n-resident mutual insurance co.rpo.ratio.ns o.ther than life insurance co.rpo.ratio.ns are no.t taxable under The Alberta Corporation Income Tax Act o.n their investment inco.me.

When a no.n-resident co.mpany carrying o.n business in Canada also. has investment inco.me the investment inco.me is no.rmally co.nsidered to. be earned by the head o.ffice o.f the co.mpany abro.ad and no.t by the operatio.ns o.f the co.mpany in Canada. Co.nsequently the tax o.n their surplus is the o.nly tax levied under The Alberta Corporation Income Tax Acts. Unlike no.n-resident co.mpanies, resident ,co.mpanies have always been co.nsidered to. be taxable under these Acts o.n their investment income.

While the Stanley Mutual case did no.t dispro.ve this understanding it is now co.nsidered desirable to. make the law specific. Fo.r resident co.mpanies, therefo.re, this amendment will clearly establish their liability fo.r tax o.n any investment in~o.me fo.r the years co.vered by these Acts. Again, the amendment will in practice affect o.nly tho.se co.mpanies who.se returns have no.t been assessed o.r whi.ch might o.therwise still be appealed. This Bill comes into. force upon assent. J. W.

RYAN, Acting Legi~lative Counsel. (This note does not form any part of the Bill but is offered in explanation of its provisions.)

BILL No. 31 of 1955

An Act to amend The Alberta Corporation Income Tax Act, 1949 (Assented to , 1955) HER MAJESTY, by and with the advice and consent of the Legislative Assembly of the Province of Alberta, enacts as follows: 1. The Alberta Corporation Income Tax Act, 191,.9, being

chapter 6 of the Statutes of Alberta, 1949, is hereby amended. 2.

(1) The following new

section is added immediately f.ew

section after s~ction 44: a "44a.

It is hereby declared that an insurance corporation Insurance other than a life insurance corporation, whether or not it corporations is a mutual corporation, that has, in a taxation year, ui~er than entered into insurance contracts or other arrangements or relationships whereby it can reasonably be regarded as undertaking to insure other persons, whether or not such persons are members or shareholders of the corporation, against loss, damage or expense of any kind, shall, regard- less of the form or legal effect of those contracts, arrange- ments or relationships, be deemed, for the purposes of this Act, to have been carrying on an insurance business in the year for profit, and, in any such case, for the purpose of computing the income from the business so deemed to have been carried on, the following rules are applicable: (

a) every amount received under, in consideration of, in respect of or on account of such a contract, arrangement or relationship shall be deemed to have been received by the corporation in the course of the business; (

b) the income shall, otherwise, be ~omputed in accor dance with the rules applicable in computing the income from a business for the purposes of this Act; and (

c) all income from property vested in the corporation shall be deemed to be income ,of the corporation.".

(2) This

section is applicable in the case of a non-resident corporation to the 1949 and subsequent taxation years.

(3) This

section (except paragraphs (

a) and (

b) thereof in the case of a mutual insurance corporation) is applicable in the case of a resident corporation to the 1949 and sub sequent taxation years. 3. This Act comes into force on the day upon which it pom1fg is assented to. nto orce

THIRD SESSION TWELFTH LEGISLATURE 4 ELIZABETH II 1955 BILL

An Act to amend The Alberta Corporation Income Tax Act, 1949 Received and read the First time ........................................ .. Second time ..... [,bird time ........................................ .. HON. MR. GERHART Title: 1955 (12th, 3rd) Bill 31,

An Act to amend The Alberta Corporation Income Tax Act, 1949

Document details

Collection	Alberta — Bills
Citation	L12 S3 6476
Type	bill
Volume / chapter	L12 S3 6476
Language	en
Format	json
Source	PROVINCIAL
Identifier	59c01156f84a4f7b0561b4e3c1f0d2a1e4c86796

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