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XXXXX
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File: 11894-7 (NM)
XXXXX Ref: S. 123
XXXXX Nov. 2, 1995
XXXXX
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This refers to your letters dated January 9 and June 6, 1995, in which you requested clarification as to whether the management bodies established by XXXXX under XXXXX qualify to be determined to be municipalities for GST purposes as "Special Purpose Provincially or Territorially Established Authorities" as outlined in Technical Information Bulletin B-046 published by Revenue Canada. On August 3, 1995, we received a fax transmittal from XXXXX of your office requesting that these management bodies be designated as municipalities pursuant to section 259 of the Excise Tax Act rather than be determined as municipalities pursuant to section 123 of the said Act.
Statement of Facts
A. XXXXX
1) Pursuant to XXXXX (the "Act"), XXXXX may "provide advisory, financial and other support and resources to persons, develop and support the development of housing accommodation, enter into agreements with the government of another jurisdiction or any person, or do any other thing not mentioned above" to enable the efficient provision of a basic level of housing accommodation for persons who because of financial, social or other circumstances require assistance in obtaining or maintaining housing accommodation.
2) Section 1 of the Act defines "housing accommodation " to mean buildings or units in buildings that are suitable and adequate for human habitation, including services that may be provided to residents of the buildings or units because of their circumstances, and includes lodge accommodation.
3) Section XXXXX of the Act defines "lodge accommodation" to mean a home for the use of senior citizens who are not capable of maintaining or do not desire to maintain their own home, including services that may be provided to them because of their circumstances.
4) Pursuant to subsection XXXXX of the Act XXXXX establish management bodies to operate and administer housing accommodation which includes lodge accommodation. Section XXXXX also provides that an existing corporation, may be established as a management body. You have stated that a management body will likely assume the responsibilities of several management agencies that were designated as municipalities pursuant to section 259 of the Act in an effort to decrease the number of housing accommodation administrators in XXXXX[.]
5) XXXXX under section XXXXX of the Act, as outlined above, shall set out the following:
a) the name of the management body and its members,
b) the number of persons comprising the board of the management body and the method of appointing or electing the members of the board,
c) a description of the housing accommodation that the management body is to operate and administer and if it is to provide lodge accommodation, the municipalities that are to make financial contributions to support its operation,
d) a description of any other powers, functions or duties with respect to the provision of housing accommodation that the management body is to have and be subject to.
6) Pursuant to section XXXXX of the Act a management body is a corporation and has the capacity and, subject to the Act, the rights, powers and privileges of a natural person. The same applies to an existing corporation that is established as a management body.
7) Under the provisions of section XXXXX of the Act, the province may direct a management body to take appropriate action if it determines that the affairs of the management body are being managed in an improper manner.
8) The province may rescind an order establishing a management body pursuant to section XXXXX of the Act.
9) Pursuant to section XXXXX of the Act the management body is required to appoint one or more auditors for the management body who must report to the board of the management body on the annual financial statements of the body and pursuant to section XXXXX the management body is required to prepare and present its annual financial statements to the province and any municipality that is required to contribute funding to support the housing.
10) Pursuant to section XXXXX of the Act the province may make regulations:
• respecting the type and amount of financial assistance it may make with respect to housing accommodation,
• respecting the management and operation of management bodies and the manner in which they are to exercise their powers, functions and carry out their duties,
• respecting eligibility requirements of tenants in housing accommodation,
• prescribing the rent and other charges or the manner of determining the rent or other charges that may be charged in respect of a tenancy in housing accommodation,
• governing the termination of tenancies, the terms and conditions that apply to tenancy in a housing accommodation, and
• prescribing additional activities that a management body may carry on and governing the manner in which it is to carry on those activities.
11) The appendix of a sample of a ministerial order creating a management body that we reviewed indicates that the management body is responsible for the operation and administration of housing accommodation, and for purposes of XXXXX the management body is subject to the regulations mentioned in B,C and D outlined below.
B. Management Body Operation and Administration Regulation
1) This regulation was made by XXXXX pursuant to section XXXXX of XXXXX[.]
2) Pursuant to section XXXXX of the above regulation, the board of a management body established under XXXXX is responsible for ensuring that the management body it governs efficiently operates and administers the housing accommodation under its authority and provides accommodation for those persons in greatest need of that type of accommodation.
3) Summary of business and financial operation and management requirements of a management body pursuant to sections XXXXX to XXXXX
a) a management body is required to prepare a three year business plan which is to include an estimate of its capital and operating expenditures and projected revenues and provide it to the province,
b) the management body board must present its yearly capital and operating budget to the province for approval. It must include the body's estimated expenditures along with its estimated revenues such as the amount of rent and all other payments or contributions it receives from its tenants and all other amounts received from any other source,
c) a board may only initiate or pay an expenditure that is included in its operating or capital budget that has been approved by the province,
d) the management body must transfer to the province all or any surplus from its budgets each year; the portion of the surplus that is transferable to the province is deemed to be held in trust by the management body for the province and the body shall not use any portion of this transferable surplus, and
e) a management body may borrow money to carry on its activities.
3. Summary of operation and administration of housing accommodation requirements pursuant to sections XXXXX to XXXXX
a) a management body must ensure that the housing accommodation that it operates and administers is properly maintained, and
b) it must provide inspection reports and carry out repairs to the buildings.
C. Housing Accommodation Tenancies Regulation
1) This regulation was made by XXXXX pursuant to section XXXXX of XXXXX[.]
2) Pursuant to section XXXXX a tenancy agreement entered into between an individual applying for housing accommodation and a management body shall contain a provision to the effect that the rent for the housing accommodation is based on the income, assets and characteristics of the household and that if the individual's income, assets, etc. changes this may result in an adjustment to the rent.
D. Social Housing Accommodation Regulation
1) This regulation was made by XXXXX pursuant to section XXXXX of the XXXXX[.]
2) Pursuant to subsection XXXXX, an individual may apply for social housing accommodation to the management body that provides social housing accommodation.
3) The basic rent charged an individual for social housing accommodation is set in accordance with the Schedules to this Regulation and is based on the income of the individual.
Interpretation Requested
You have requested clarification as to whether the management bodies that are established under XXXXX may be designated as municipalities pursuant to subsection 259(1) of the Excise Tax Act.
Interpretation Given
Pursuant to subsection 259(1) of the Excise Tax Act, the Minister of National Revenue may designate an organization to be a municipality but only in respect of activities, specified in the designation, that involve the making of supplies (other than taxable supplies) by the organization of municipal services. The supply of residential accommodation to tenants on a government subsidized basis, i.e., on a rent-geared-to-income basis, by a public sector body such as a non-profit organization or by an entity established by a government qualifies as a municipal service for purposes of subsection 259(1) of the Excise Tax Act. The supply of residential units to tenants other than on a rent-geared-to-income basis such as the supply of residential units at the full rental rate, commercial leases of space, etc. are not considered to be supplies of municipal services for purposes of subsection 259(1) of the Excise Tax Act and, therefore, organizations supplying these services will not be designated as municipalities with respect to these supplies.
Therefore, where an organization such as a non-profit organization or an entity established by a government is supplying government subsidized rent-geared-to-income housing, it will qualify for designation only in respect of this activity. As a result of this designation the organization will, pursuant to subsection 259(4) of the Excise Tax Act, be entitled to rebates of 57.14 per cent of the GST paid in respect of acquisitions which are consumed, used or supplied in the course of this designated activity.
Management Bodies
From the information you have provided the management bodies in question that are established by XXXXX pursuant to XXXXX to operate and administer housing accommodation supplied on a rent-geared-to-income basis will, on application, be designated to be municipalities for purposes of subsection 259(1) of the Excise Tax Act but only with respect to those residential units that are supplied on a rent-geared-to-income basis. As a result of this designation, these management bodies will be entitled to rebates of 57.14 per cent of the GST paid in respect of their acquisitions which are intended to be consumed, used or supplied in the course of managing and operating the rent-geared-to-income units. Please note that this designation will not apply to any other activities that these management bodies may be engaged in that are not related to the supply of residential units to tenants on a rent-geared-to-income basis such as the supply of residential units to tenants on other than a rent-geared-to-income basis, commercial leases of space in the housing project, etc..
Supporting Documents
Before municipal status will be granted to these organizations, they must apply to us in writing to be designated as a municipality. You have indicated in your above-noted letter, however, that you wish to apply on behalf of the management bodies. Please be advised that this procedure is acceptable. As part of our designation process with respect to these organizations we require a copy of the Ministerial Order creating each of the management bodies along with all the attachments such as any appendices, schedules, etc. We will also require the names of the management agencies that were previously designated as municipalities pursuant to subsection 259(1) of the Act that are being replaced by each of these new management bodies.
Filing for Rebates
The management bodies that are designated as municipalities pursuant to subsection 259(1) of the Excise Tax Act will be entitled to claim the municipal rebate of 57.14 per cent of the GST paid in respect of their acquisitions of goods and services which are intended to be consumed, used or supplied in the course of supplying housing on a rent-geared-to-income basis. Where the designated management body is providing social housing in more than one housing project in different locations it may file an election with its local tax services office to have each housing project file separately as a branch or division. If the management body does not file an election for separate filing for each branch or division it will be required to file the rebate application in their name for the organization as a whole.
If you require any further information regarding this letter please contact Joanne Houlahan at (613)954-7945 or Neil Minken at (613)954-4395.
Yours truly,
J.A. Venne
Director
Special Sectors
GST Rulings and Interpretation
| c.c.: |
J. Houlahan
N. Minken
B. James
C. Groulx
XXXXX |
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