31 August 1999 GST/HST Interpretation HQR0001825 - Municipal Grants to Minor Hockey Associations

This memorandum is in response to your e[-]mail of May 18, 1999, wherein you requested our opinion on whether a reduction in consideration constitutes "government funding" for purposes of the Public Service Bodies Rebate (GST) Regulations (the Regulations).

In your request you outlined the following scenario:

A non-profit minor hockey association provides recreational programs to children under 14 years of age. In the course of providing its programs, the association rents ice time from a municipality which owns and operates an arena. The association applies to the municipality for a grant to assist in the provision of its programs. The municipality approved the request and provided the grant in the form of subsidized ice time. That is, the consideration for the ice time is reduced by the amount of the grant. For example, if the charge for ice rental is $100, but the invoice indicates that this is reduced to $60, the difference (i.e., $40) is the "grant" from the municipality to the association.

Interpretation Requested

Is the amount by which the consideration for the ice rental is reduced considered "government funding" for purposes of the Regulations?

Interpretation Given

In general, "government funding" refers to financial payments (i.e., an amount of money) paid by a grantor (including federal, provincial and municipal governments) to an organization for the purpose of supporting the organization's objectives, or as consideration for exempt supplies of goods or services provided by the organization to a third party. The payments must be measurable and must be identified in the financial statements of the organization as government funding. Government funding does not include payments made to the organization as consideration for supplies of goods or services provided by the organization to the grantor (including officers and employees of the grantor, or persons related to the grantor), nor does it include non-financial forms of assistance, low-interest loans and loan guarantees, or any property or services supplied at a subsidized price.

Implicit in the definition of "government funding" is the requirement that money is transferred from the grantor to the non-profit organization. In the scenario outlined above, the municipality never makes a direct financial payment to the association and, in turn, the association never receives a payment from the municipality. In essence, the consideration payable by the association for the ice rental is reduced by the amount of the "grant." By reducing the consideration for the ice rental by the amount of the "grant", the municipality is providing property and services to the association for a subsidized price. As noted above, the provision of property and services at a subsidized price is not considered government funding.