27 June 2000 External T.I. 2000-0020995 - Non-Profit Organization

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Whether certain income earning activities are taxable and whether reimbursement of members' travel costs from income earned would impair status of club as an NPO

Position: Not taxable as long as not a business (i.e. not for profit) - reimbursement is OK as long as costs are reasonable and incurred in course of club activities

Reasons: General criteria in IT - 496

XXXXXXXXXX 						2000-002099
Attention:  XXXXXXXXXX 	J. P. Dunn

June 30, 2000

Dear Sirs:

Re: Income Earning Activities of a Non-Profit Organization

We are writing in response to your correspondence of March 27, 2000 concerning certain activities to be undertaken by a sports club and whether, in the view of the Canada Customs and Revenue Agency, the income from those activities would constitute taxable income.

We are assuming, for the purpose of this response, that the club which you represent otherwise qualifies as a "non-profit organization" within the meaning of that term in paragraph 149(1)(l) of the Income Tax Act. The definition of a non-profit organization in that provision is a club, society or association that, in the opinion of the Minister, was not a charity within the meaning of that term in subsection 149.1(1) and that was organized and operated exclusively for social welfare, civic improvement, pleasure or recreation or for any other purpose except profit, no part of the income of which was payable to, or was otherwise available for the personal benefit of, any proprietor, member or shareholder thereof unless the proprietor, member or shareholder was a club, society or association the primary purpose and function of which was the promotion of amateur athletics in Canada.

We have enclosed a copy of Interpretation Bulletin IT-496 entitled "Non-Profit Organizations" and we would direct your attention primarily to paragraphs 8 and 12 of that publication which discuss income earning activities of non-profit organizations and distributions to members thereof, which, in the view of the Agency, would not jeopardize the status of a club as a non-profit organization.

Although we have not been provided with sufficient information to provide you with a definitive response with respect to your particular situation, we would consider that an income earning activity carried on by a club in the course of its authorized activities would not, generally, in and of itself, disqualify the club as a non-profit organization. Accordingly, any such income earned would not be subject to tax. Similarly, the use of such funds to reimburse members for reasonable travel expenses incurred in the course of attending competitive events would not jeopardize that status. There could be, however, situations in which the income earning activity is carried on to such an extent that it could be considered a "for profit" business or trade which would disqualify the club as a non-profit organization. These types of situations are discussed more completely at paragraphs 7 and 8 of the aforementioned interpretation bulletin.

We would finally note that the status of a club as a non-profit organization is an annual determination and, accordingly, the legislative criteria must continue to be met in order to maintain that status.

We trust that this information is of assistance.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch