Bill 30 (Legislature 12, Session 3)

L12 S3 6475

Alberta — Bills

Bill No. 30 of 1.955 A BILL TO AMEND THE ALBERTA CORPORATION INCOME TAX ACT NOTE This Bill amends The Alberta Corporation Income Tax Act, being

chapter 3 of the Statutes of Alberta, 1947. This amendment is intended to put in the law what was thought to be alre.ady 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 Com pany 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 of January,.1954, for" resident companies, but was made retroactive for non-resident companies. Accordingly for The Albe1'ta Corporation Income Tax Act and The Alberta Corporation Income Tax Act, 1949 which apply only to taxation· years considerably prior to this date the amendment dealing with the taxation of income arising from insurance activities will apply only to non-resident companies.

It will be noted that paragraphs (

a) and (

b) of the amendment prevent its coming into effect for resident mutual insurance corporations. At the same time, for greater certainty it is intended to provide specifically that income whi~h mutual insurance companies received from investments in the taxation years covered by The Alberta Corporation ~ncome 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 cor poration by way of dividend, refund of premiums or refund of premium deposits (section 10 (

i) and

section 50). There fore 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 income 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 corpora tions.

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 income tax returns for those years have not been finally assessed or might otherwise still be appealed. The taxation years affected may include years back to 1947. Even for these corporations the amendment does not increase retroactively the tax payable for they will pay only what they thought they had to pay and what was intended they should pay.

It should be noted that non-resident mutual insurance corporations other than life insurance corporations are not taxable under The Alberta Corporation Income Tax Acts on their inv~stment, income. When a non-resident company c~rrying Qn business in Canada also has investment income the' !l1,vestm~nt income is normally considered to be earned by the head" office of the company abroad and not by the operations .of the co~pany in Canada. Consequently the tax on their s,urplus is the only tax leviable under The Alberta Corpo'ration Income Tax Acts.

" Unlike non-resident companies, resident companies have always been considered to be taxable under these Acts on the~r investment income. While the Stanley Mutual case did llpt disprove this u~derstanding it is now considered desir 'able t.o make the law specific. For resident companies, therefore, thi,s amendment will clearly establish their liability for tax on any investment income for the years covered by these Acts. Again, the amendment will in practice affect only those c~)Inpanies whose returns have not been assessed or which might otherwise still be appealed. This Bill comes into force upon assent. J.

W. RYAN. Acting Legislative Counsel. (This note does not form any part of the Bill but is offered in explanaUon of its provisions.)

BILL No. 30 of 1955

An Act to amend The Alberta Corporation Income Tax Act (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, being chap ter 3 of the Statutes of Alberta, 1947, is hereby amended. 2.

(1) The following new

section is added immediately New

section after

section 20 : 200 "2Oa.

It is hereby declared that an insurance corporation Insurance other than a life insurance corporation, whether or not it is ~~~~rt~~~'8 a mutual corporation, that has, in a taxation year, entered life into insurance contracts or other arrangements or -relation- ships 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, regardless of the form or legal effect of those contracts, arrangements or relation- ships, 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 deenled 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, arrange ment or relationship shall be deemed to have been r~eived by the corporation in the course of the business; (

b) the income shall, otherwise, be computed 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 1947 and subsequent taxation years.

(3) This

section (except paragraphs (

a) and (

b) there of in the case of a mutual insurance corporation) is applic able in the case of a resident corporation to the 1947 and subsequent taxation years. 3. This Act comes into force on the day upon which it f~mi~g is assented to. n 0 orci'

THIRD SESSION lWELFrH LEGISLATURE , , 4 ELIZABETH II 1955 BILL

An Act to amend The Alb~rta Corporation Income Tax Act Received and read the First time" ............ . Second time ......... , .. , .......... . Third time. HON. MR. GERHART Title: 1955 (12th, 3rd) Bill 30,

An Act to amend The Alberta Corporation Income Tax Act

Document details

Collection	Alberta — Bills
Citation	L12 S3 6475
Type	bill
Volume / chapter	L12 S3 6475
Language	en
Format	json
Source	PROVINCIAL
Identifier	d62f47ef4334b8bfe1c2c26b4d0f631ef5a0d332

Source file is stored in the law ingest library (json).