Tax wiki
s. 137
PART I — Income Tax · DIVISION F — Special Rules Applicable in Certain Circumstances · Credit Unions, Savings and Credit Unions and Deposit Insurance Corporations
Payments pursuant to allocations in proportion to borrowing
Not yet annotated · Text current to 2026-06-21 · section last amended 2024-06-20
Current text
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.
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
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,
is the amount, if any, determined by the formula
D – E
where
is the lesser of
the corporation’s taxable income for the year, and
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
is the least of the amounts determined under paragraphs 125(1)(a) to (c) in respect of the corporation for the year, and
is the percentage that is the total of
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,
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,
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,
the proportion of 40% that the number of days in the year in 2015 is of the number of days in the year,
the proportion of 20% that the number of days in the year in 2016 is of the number of days in the year, and
if one or more days in the year are after 2016, 0%.
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.
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
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;
the share is not listed on a stock exchange; and
the person is
a member of the credit union, or
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.
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.
Determination of preferred-rate amount of a corporation
(4.3)For the purposes of subsection 137(3),
the preferred-rate amount of a corporation at the end of a taxation year is determined by the formula
A + B/C
where
is its preferred-rate amount at the end of its immediately preceding taxation year,
is the amount deductible under section 125 from the tax for the taxation year otherwise payable by it under this Part, and
is its small business deduction rate for the taxation year within the meaning of subsection 125(1.1);
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
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.
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.
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:
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;
the amount, if any, by which
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
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
each amount deductible under paragraph 137(5.2)(c) in computing the payer’s taxable income for the year.
Idem
(5.2)Notwithstanding any other provision of this Act,
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;
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
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.
Definitions
(6)In this section,
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
the amount of interest payable by the member on money borrowed from the credit union, or
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 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
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
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 means a corporation, association or federation incorporated or organized as a credit union or cooperative credit society if
it is
a federal credit union, or
a provider of financial services that is organized on cooperative principles and incorporated by or under an Act of the legislature of a province,
all or substantially all the members thereof having full voting rights therein were corporations, associations or federations
incorporated as credit unions or cooperative credit societies, each of which is described in paragraph (a), or all or substantially all of the members of which were credit unions, cooperatives or a combination of those entities,
incorporated, organized or registered under, or governed by a law of Canada or a province with respect to cooperatives, or
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
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 of a credit union at the end of any particular taxation year means an amount determined by the formula
0.05 × (A + B)
where
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
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; (provision cumulative maximale)
member, of a credit union, means
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
a registered retirement savings plan, a registered retirement income fund, a TFSA, a FHSA or a registered education savings plan, the annuitant, holder or subscriber under which is a person described in paragraph (a). (membre)
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).
Source: Justice Laws Website. Not an official version.
Historic text
Immediately preceding version, in force from 2015-06-23 to 2024-06-19:
Show the text in force 2015-06-23 to 2024-06-19
Payments pursuant to allocations in proportion to borrowing
137 (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.
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
Ais 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,Bis the amount, if any, determined by the formulaCis the percentage that is the total ofD – E
where
Dis 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
(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%.
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.
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.
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.
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
Ais its preferred-rate amount at the end of its immediately preceding taxation year,Bis the amount deductible under section 125 from the tax for the taxation year otherwise payable by it under this Part, andCis 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.
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.
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.
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.
Definitions
(6) In this section,
allocation in proportion to borrowingallocation 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 paymentbonus 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 unioncredit 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 of a credit union at the end of any particular taxation year means an amount determined by the formula
member0.05 × (A + B)
where
Ais 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, andBis 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; (provision cumulative maximale)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)
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 and regulations.]
- 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
Earlier versions: Justice Laws point-in-time versions of the Act (from 31 August 2004), and CanLII (under “Versions”). On Justice Laws, each version of section 137 links to the one before it.
Enacting and amending legislation
- 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
- 2024, c. 15, s. 42
Text before 2004 is found in the annual Statutes of Canada cited above. Application and coming-into-force provisions are not part of the consolidation; see the amending Acts.
Cross-references
Citation
Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s. 137.