19 February 2003 External T.I. 2003-0000215 - NON-PROFIT ORGANIZATION BENEFIT

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: Will the reimbursement of a portion of an insurance deductible to a member result in the non-profit organization losing its tax exempt status.

Position TAKEN: No

Reasons: Expense was incurred while on organizational business.

XXXXXXXXXX 	2003-000021
		Cornelis Rystenbil, CGA
February 19, 2003

Dear XXXXXXXXXX:

Re: Non-profit Organization and Personal Benefits to Members

This letter is in response to your letter dated January 26, 2003 in which you ask whether a payment made by a non-profit organization to a member to cover 50% of the deductible on an insurance claim, up to a maximum of $250, to cover any personal loss of a member when on organizational business will result in the organization losing its tax exempt status.

Comments

The Canada Customs and Revenue Agency's (CCRA) general views in respect of the non-profit organizations are found in Interpretation Bulletin IT-496, Non-profit organizations, a copy of which can be obtained on our website at

http://www.ccra-adrc.gc.ca/tax/technical/incometax/menu-e.html.

One of the requirements of paragraph 149(1)(l) of the Income Tax Act is that no part of the income of the organization can be payable to or is otherwise available for the personal benefit of any member. Paragraph 12 of IT-496 states that it is the CCRA's view "that certain types of payments made directly to members, or indirectly for their benefit will not, in and by themselves, disqualify an association from being exempted from tax pursuant to paragraph 149(1)(l). This view applies to payments such as salaries, wages, fees or honorariums for services rendered to the association, provided the amounts paid are reasonable and in line with those paid in arm's length situations for similar services. It also applies to payments made to employees or members of the association to assist them in covering their expenses to attend various conventions and meetings as delegates on behalf of the association, provided attendance at such conventions and meetings is to further the aims and objectives of the association."

In our view, where a member's personal loss resulted directly from activities performed on behalf of the non-profit organization, the payment by the non-profit organization of 50% of the member's deductible, up to a maximum of $250, on an insurance claim in respect of the personal loss will not result in the non-profit organization losing its tax exempt status under paragraph 149(1)(l) of the Act. We note that it is a question of fact whether or not a member's personal loss resulted directly from activities performed on behalf of the non-profit organization.

We trust that our comments will be of assistance. However, as stated in paragraph 22 of Information Circular 70-6R5, the opinion expressed in this letter is not a ruling and consequently is not binding on the CCRA.

Yours truly,

Mickey Sarazin, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate