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FEDERAL INCOME TAX - Exemptions

Tuesday, June 23, 2020 @ 5:53 AM  


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Appeal by the Lawyers’ Professional Indemnity Company from a Tax Court decision finding it was not entitled to the exemption from taxation under s. 149(1)(d.5) of the Income Tax Act because the appellant did not perform a function of government in Canada. The appellant was a Canadian-controlled private corporation. It was an insurance company, licensed to operate in Ontario and incorporated by the Law Society. The Society owned at least 90 per cent of that appellant’s capital. The appellant provided mandatory professional liability insurance for lawyers and paralegals licensed by the Law Society who engaged in the practice of law in Ontario. The Law Society required that all lawyers and paralegals engaged in the practice of law in Ontario pay levies for professional liability insurance provided by the Society through the appellant. The appellant claimed it qualified for the exemption under s. 149(1)(d.5)on the basis that its parent, the Law Society, was a public body performing a function of government in Canada. The Tax Court found the Law Society was not a public body performing a function of government in Canada.

HELD: Appeal dismissed. When read textually, contextually and purposively, s. 149(1)(d.5) of the Income Tax Act limited the tax exemption to entities owned by municipalities, municipal bodies and other public bodies analogous to municipalities and municipal bodies, such as entities charged with governance over a localized geographical area that governed the public. Self-regulating professional bodies such as the Law Society and their for-profit subsidiaries did not fall within that provision.

Lawyers' Professional Indemnity Co. v. Canada, [2020] F.C.J. No. 615, Federal Court of Appeal, D.W. Stratas, J.B. Laskin and A.L. Mactavish JJ.A., May 19, 2020. Digest No. TLD-June222020004