19 December 2001 External T.I. 2001-0112535 - 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 CCRA.

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

Principal Issues:

Whether a certain corporation was organized for non-profit purposes.

Position: Yes

Reasons:

The corporation was organized for purposes similar to that of a condominium corporation having as its only purpose the management and administration of an apartment complex including the collection of fees for common expenses. Therefore, it would appear that the corporation was organized for non-profit purposes.

XXXXXXXXXX 						2001-011253

December 19, 2001

Dear XXXXXXXXXX:

Re: XXXXXXXXXX

We are writing in response to your correspondence of November 26, 2001, wherein you requested our views regarding whether a corporation qualifies as a non-profit organization pursuant to paragraph 149(1)(l) of the Income Tax Act (the "Act") and the filing requirements of a non-profit organization.

You have described a situation in which a corporation (the "corporation") was organized for purposes similar to that of a condominium corporation. The objects of the corporation include the management and administration of an apartment complex including the collection of fees for common expenses.

Our Comments

The situation outlined in your letter involves an actual fact situation. To the extent that it relates to a past transaction you should contact the appropriate Tax Services Office of the Canada Customs & Revenue Agency (the "CCRA"). Since the review of such transactions falls within their responsibility, it is the practice of the Income Tax Rulings Directorate not to comment on such transactions. In the case of a proposed transaction, assurance as to the tax consequences of actual proposed transactions will only be given in the context of an advance income tax ruling. The procedures for requesting an advance income tax ruling are outlined in Information Circular IC-70-6R4 dated January 29, 2001 issued by the CCRA. However, we can offer the following general comments.

149(1)(l) - Non-profit Organizations

The Canada Customs & Revenue Agency's ("CCRA") view on some of the factors to consider when determining whether a club, society or association would qualify as a non-profit organization are contained in Interpretation Bulletin IT-496 entitled "Non-profit Organizations." In general terms, the conditions set out in paragraph 149(1)(l) of the Act with which a club, society or association must comply in order to qualify for exemption as a non-profit organization are as follows:

(a) it must not, in the opinion of the Minister, be a charity;

(b) it must be organized exclusively for social welfare, civic improvement, pleasure, recreation or any other purpose except profit;

(c) it must in fact be operated exclusively for the same purpose in (b) for which it was organized or for any of the other purposes mentioned in (b); and

(d) no part of its income may be paid, payable or otherwise made available for the personal benefit of any proprietor, member or shareholder, except in connection with the promotion of amateur athletics in Canada.

The CCRA considers the expression "club, society or association," used in paragraph 149(1)(l) of the Act (hereinafter referred to as an association) to be wide enough to include an incorporated company. To qualify for exemption, an association must not only be organized exclusively for non-profit purposes, but it must, in fact, be operated in accordance with these purposes in each year for which it seeks exemption under paragraph 149(1)(l) of the Act. Therefore, based on the information provided by you, it would appear that the corporation was organized for non-profit purposes in accordance with paragraph 149(1)(l) of the Act.

Form T1044, Non-Profit Organization (NPO) Information Return

A corporation that qualifies as a non-profit organization under paragraph 149(1)(l) of the Act is exempt from Part I tax on its taxable income, but is required to file Form T1044 with its T2 income tax return. However, pursuant to subsection 149(12) of the Act, if the corporation has not earned more than $10,000 in interest, rentals or dividends, does not own more than $200,000 in assets, or was not required to file an information return for any preceding fiscal period then the corporation is not required to file a T1044, NPO Information Return for the period.

We trust our comments will be of assistance to you.

Paul Lynch
For Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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