30 March 2012 Internal T.I. 2011-0426001I7 - NPO- sport sponsorships

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.

Principal Issues: Can a recreational community sports organization receive sponsorships for equipment without jeopardizing its exemption under paragraph 149(1)(l)?

Position: Generally, yes.

Reasons:	Most community sports organization sponsorships for equipment are directly connected to the objectives of the organization and represent only incidental income to the team.
			

							March 30, 2012

	Specialty Audit Section			Headquarters
	Compliance Programs Branch		Income Tax Rulings
		 					Directorate

							P. Burnley
	Attention:  Rubin Dressler		(613) 957-2100

							2011-042600

Equipment Sponsorships in Recreational Community Sports

This is in response to your correspondence of October 31, 2011, requesting our views on whether certain organizations that are provided with free or subsidized equipment, such as team jerseys, by local businesses, jeopardize their exemption from tax provided by paragraph 149(1)(l) of the Income Tax Act (the “Act”). You have described these organizations as teams or clubs involved in amateur recreational sports within a community such as minor-level hockey, soccer or baseball, or speed or figure skating. The name of the local businesses providing or subsidizing the equipment may be displayed on the equipment in recognition the sponsorship.

The determination of whether a particular club, society or association is exempt from tax under paragraph 149(1)(l) of the Act is a question of fact in each situation. Among other criteria, to be tax-exempt under paragraph 149(1)(l), an organization must be organized and operated for any purpose other than profit, and no income of the organization may be available for the personal benefit of a member.

In our view, the receipt of free or subsidized equipment by a community sports organization or team generally will not jeopardize the organization’s ability to claim the exemption available under paragraph 149(1)(l) of the Act. Usually, this type of sponsorship arrangement is intended primarily to support the organization, is closely connected to and furthers the objectives and purpose of the organization, and represents only incidental income to the organization.

We trust that these comments will be of assistance.

For your information, unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency’s electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should the taxpayer request a copy of this memorandum, they may request a severed copy using the Privacy Act criteria, which does not remove taxpayer identity. Requests for this latter version should be made by you to Mrs. Celine Charbonneau at (613) 957-2137. In such cases, a copy will be sent to you for delivery to the taxpayer.

Eliza Erskine
Manager
Non-Profit Organizations and Aboriginal Issues Section
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch