15 February 1999 GST/HST Interpretation HQR0001554 - Tax Status of Intervenor Fees

This is in reply to our telephone conversations and your e-mail sent on January 14, 1999, concerning amounts awarded by a provincial board to a non-profit organization to cover the organization's legal costs in appearing before the board on behalf of consumers. Our understanding of the case at hand is as follows:

1. The XXXXX is a non-profit organization incorporated under the XXXXX[.]

2. Certain companies (usually utility companies) are required to appear before the XXXXX which is a XXXXX, to establish rates, terms and conditions of service. As part of this process, the XXXXX may appear before the XXXXX and make representations on behalf of consumers.

3. The XXXXX has claimed a rebate as a qualifying non-profit organization for the GST paid on legal fees and other similar costs to appear before the XXXXX[.] Departmental logs indicate that the XXXXX had met the government funding requirements (based on submitted financial statements) as a qualifying non-profit organization.

4. A recent audit assessment denied the rebates back to January 1, 1993, with the determination that the XXXXX did not qualify as either a charity or a qualifying non-profit organization.

5. The XXXXX has the authority (XXXXX to order the utility companies to reimburse the XXXXX for the costs of attending and making representations at these hearings. It appears that in most cases, such awards are made by the XXXXX[.]

6. The XXXXX has recorded the board-awarded payments as "intervenor fees." A large portion (in some years, 95%) of the XXXXX revenues are "intervenor fees."

You are requesting clarification on whether the amounts awarded by the XXXXX to the XXXXX represent consideration for a supply, and whether the XXXXX should include these amounts in the percentage of government funding calculation set out in the Public Service Body Rebate XXXXX (GST/HST) Regulations to determine whether it is a "qualifying non-profit organization" for the purpose of claiming a rebate under section 259 of the Excise Tax Act.

It is the Department's view that generally, judicial costs awarded by the courts are not consideration for a supply. This view also applies to legal costs awarded by a provincial public utilities board, as in the case at hand. Such payments fall outside the scope of the Excise Tax Act.

Consequently, as the costs awarded by the XXXXX are not consideration for a supply, then the XXXXX would not include these amounts, i.e., "intervenor fees," under "B" of the formula in paragraph 3(1)(a) of the Public Service Body Rebate (GST/HST) Regulations in determining whether the XXXXX meets the "percentage of government funding" test. Further, since such fees would also not be included elsewhere in the formula, these fees are ignored for purposes of determining the "percentage of government funding."

Should you have additional questions on this matter, please contact Michael Place at (613) 954-7936.