Simon's Legal Resources

Federal Tax - Fraternal Benefit Society

. Canada v. Independent Order of Foresters

In Canada v. Independent Order of Foresters (Fed CA, 2026) the Federal Court of Appeal allowed a Crown appeal, this involving the taxation of "life insurance and accident and sickness insurance (accident insurance)" operated by a fraternal benefit society (which themselves are tax-exempt under the ITA).

Here the court considered the income tax status of fraternal benefit societies, and of their insurance businesses:

[1] The Independent Order of Foresters is a fraternal benefit society that promotes charitable, educational, social, and volunteer activities to its members. It also offers them life insurance and accident and sickness insurance (accident insurance).

[2] The Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) exempts fraternal benefit societies—and thus the Order—from paying tax on their income. But this exemption does not apply to the Order’s taxable income from its life insurance business, and this taxable income must be computed on the assumption that the Order "“[has] no income or loss from any other sources”".

....

[29] .... because fraternal benefit societies are non-profit, voluntary associations, the Income Tax Act exempts their income from all activities other than their life insurance business—for example, their accident insurance business and other fraternal activities—from tax: s. 149(1)(k); Swales & Erinc at 3–4. But income from their life insurance business remains taxable, and that taxable income must be computed on the assumption that the fraternal benefit society has "“no income or loss from any other sources”": ss. 149(3), (4).

At paras 42-72 the court walks through a statutory interpretation analysis of ITA s.149(4) ("the provision requiring a fraternal benefit society to compute its taxable income from life insurance on the assumption that it had no income or loss from any other sources").