21 March 1997 GST/HST Interpretation HQR0000431 - Qualifying as School Authority

                                                                        File: 11900-5

                                                                        Doc: HQR0000431(GN)

We are replying to your memorandum dated July 31, 1996. This letter will reply to your request which deals with the XXXXX[.] We will reply to your request concerning the XXXXX under separate cover at a later date.

The XXXXX XXXXX arranges sporting competitions between schools XXXXX obtains funding directly from these boards.

You have requested the following information:

1. Is the XXXXX considered a school authority under the Excise Tax Act (the ETA)?

2. If the XXXXX is not a school authority, would the association be considered a non-profit organization?

3. If XXXXX is considered a non-profit organization, would the funding received from the school boards be considered government funding for the public service body rebate?

Answer

1) The definition of "school authority" as proposed by the Notice of Ways and Means Motion of April 23, 1996, means an organization that operates an elementary or secondary school in which it provides instruction that meets the standards of educational instruction established by the government of the province in which the school is operated. As the association does not operate an elementary or secondary school, it does not qualify as a school authority.

2) The definition of "non-profit organization" as proposed by the Notice of Ways and Means Motion of April 23, 1996, means a person (other than an individual, an estate, a trust, a charity, a public institution, a municipality or a government) that was organized and is operated solely for a purpose other than profit, no part of the income of which is payable to, or otherwise available for the personal benefit of, any proprietor, member or shareholder thereof unless the proprietor, member or shareholder is a club, a society or an association the primary purpose and function of which is the promotion of amateur athletics in Canada.

You have provided us with a copy of the XXXXX XXXXX however they do not indicate if the association meets the requirements of a non-profit organization set out under subsection 123(1) of the Excise Tax Act.

More specifically, evidence was not provided that demonstrates that the association is organized and operated solely for a purpose other than profit nor that the association's income is not payable or otherwise available for the personal benefit of its members or any proprietor (unless the member or proprietor is a club, a society or an association which promotes amateur athletics in Canada). Please refer to Interpretation Bulletin 496 pursuant to the Income Tax Act for further information.

3) "Government funding" of a person, as defined in the Regulations, means an amount of money that is readily measurable and is paid or payable to a non-profit organization by a grantor for the purpose of:

i) financially assisting the particular person in carrying out its objectives and not as consideration for supplies made by the person, or

ii) payment for exempt supplies of property or services provided to persons other than the grantor or a person related to the grantor.

Payments made by an organization which is not a grantor (i.e., an intermediary) will be considered to be government funding under the following conditions:

i) the payments were originally made by a grantor for purposes of redistribution;

ii) the funds paid by the intermediary to the recipient were to assist the recipient in the pursuit of its objectives, or to pay for an exempt supply provided to other persons (i.e., persons other than the grantor, officers, employees, shareholders or members of the grantor or persons related to the grantor or to such individuals);

iii) the funds do not flow through more than two intermediaries to the final recipient;

iv) the intermediary provides a certificate in the form prescribed by the Minister (form GST-322) certifying to the non-profit organization that the payment is a flow-through of government funding;

v) the funds are recorded in the annual financial statements of the recipient non-profit organization as government funding.

We hope that the information provided above will help you to determine whether the XXXXX is a non-profit organization and if so, whether they are considered to be receiving government funding from the school boards. If you have any questions or comments, please do not hesitate to communicate with me at (613) 952-4157.

Gabrielle Nadeau
Ruling Officer
Charities, Non Profit Organizations and Educational Services
GST Rulings & Interpretations