Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: The client requested that XXXXXXXXXX. be approved as a not-for profit corporation entitled for third party payments for SR&ED.
Position: The client's letter did not contain sufficient information. General comments provided.
Reasons: The determination as to whether a particular entity can be approved can only be made following a review of a particular applicant's submission and related documentation as outlined in Application Policy SR&ED 96-10.
2005-015958
XXXXXXXXXX Charles Rafuse
613-957-8967
May 12, 2006
Dear XXXXXXXXXX:
Re: Request for "Approved" Status under Section 37 of the Income Tax Act (the "Act")
This is in reply to your letter dated November 9, 2005, requesting that XXXXXXXXXX. be granted approved status for the purpose of subparagraph 37(1)(a)(ii) of the Act.
The information contained in your letter giving a brief overview of XXXXXXXXXX. does not provide sufficient detailed information required for determining the approval of XXXXXXXXXX. In order that an organization may obtain approved status, it is necessary that certain information and documents in respect of the organization be submitted to us for review. The term "organization" used below would also include a corporation.
The requirements in respect of the application for, and the granting of, such approved status are as follows:
1. An organization, in order to be considered "approved" for the purposes of section 37 of the Act, must receive written approval from our Minister.
2. To become "approved", an organization must (i) meet the criteria of a non-profit organization and (ii) be able to demonstrate that it is able to carry out scientific research and experimental development ("SR&ED") in Canada on an ongoing basis. More specifically, the organization must also meet all the following requirements:
(a) The organization must have the facilities, equipment and personnel capable of carrying out SR&ED as defined in the Act.
(b) It must carry on only activities that are unquestionably SR&ED.
c) The general public must be a beneficiary of the results of any successful research.
(d) The funding of the organization must be sufficient to ensure ongoing SR&ED.
(e) In order to satisfy the requirements for non-profit status, there must be (i) no personal benefit to members, (ii) no control of other associations, (iii) satisfactory provisions for the distribution of assets upon dissolution of the organization.
3. We would require copies of the following documentation relating to the organization and its activities:
(a) identification of the particular legislation under which the organization was created;
(b) copies of the organization's charter, letters patent, code of ethics and by-laws which should indicate (i) that the organization does satisfy all requirements described in clause 37(1)(a)(ii)(A) or (B) of the Act, as well as the requirements in the post-amble of those clauses regarding entitlement to exploit the SR&ED results and the related-to-business test and (ii) how the organization's property will be distributed in the event of a wind-up;
(c) a detailed description of the organization's arrangements for obtaining funds;
(d) a detailed description of the organization's arrangements for disbursing funds;
(e) financial statements for prior years;
(f) details of (i) the research activities/projects carried out currently and projected to be carried out in the future; (ii) estimates of funds available to cover such SR&ED activities/projects by the organization; and (iii) evidence that it has the staff, equipment and facilities to carry out such activities/projects, with a description of the organization's research and technical staff profile and extent of the available facilities; and
(g) any other document or information that in your opinion would be helpful in the circumstances.
We hope the above comments will be helpful to you. You may wish to refer to Application Policy SR&ED 96-10 for further information, it can be found on the Canada Revenue Agency website at http://www.cra-arc.gc.ca/taxcredit/sred/publications/sr9610-e.html . Should you require any further information concerning the requirements listed above, you may contact Charles Rafuse at (613) 957-8967.
Yours truly,
S. Parnanzone
Manager
Business Incentives and Capital Transactions Section
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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