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: Does the Park qualify as a municipal or public body performing a function of government for purposes of 149(1)(c) of the Act and the definition of a qualified donee in subsection 149.1(1).
Position: We require additional information in order to make a determination.
Reasons: They need to demonstrate that they are actually performing the functions of government they are empowered to perform.
December 10, 2014
Charities Directorate Headquarters
Policy, Planning and Legislation IT Rulings Directorate R. Meers
Attention: Ann Rénöus 613-957-2100
2014-053315
Public Body Performing a Function of Government
This is in response to your email dated May 27, 2014 asking for our comments on whether the XXXXXXXXXX (the "Park") is considered to be a "municipal or public body performing a function of government" in Canada for the purpose of paragraph 149(1)(c) of the Income Tax Act (the "Act") and therefore able to issue donation receipts as a qualified donee as defined in subparagraph 149.1(1)(a)(iii) of the Act.
FACTS
The following is our understanding of the facts:
- The XXXXXXXXXX ("XXXXXXXXXX Parks") were established in the XXXXXXXXXXs to encourage an appreciation and use of natural and recreational resources within XXXXXXXXXX communities.
- A XXXXXXXXXX Park is constituted under the XXXXXXXXXX.
- XXXXXXXXXX gives authority to the XXXXXXXXXX Park to make park bylaws that provide for the health, protection, safety and general welfare of persons within the XXXXXXXXXX Park, including appointing a constable for the purpose of enforcing the park bylaws. The XXXXXXXXXX Park is also responsible for providing fire protection and the removal of waste.
- XXXXXXXXXX requires the XXXXXXXXXX Park to submit audited annual financial statements to the represented municipalities and, upon request, to the Province of XXXXXXXXXX.
- XXXXXXXXXX's Municipalities Act discusses taxation in XXXXXXXXXX Parks. It provides that the XXXXXXXXXX Park and the council of a municipality shall authorize the levy of a uniform rate applicable to the entire XXXXXXXXXX Park including land, improvements or land and improvements (for example on long-term campers). The municipality is responsible to assess and collect the tax within the XXXXXXXXXX Park and then forward payment to the park along with any other amounts agreed to with the council of the municipality. The Park was constituted under the XXXXXXXXXX. The Park has the power as set out in the XXXXXXXXXX and regulations to pass bylaws within the Park boundaries, however, there is no evidence to support that it has passed any bylaws.
- The Park currently has XXXXXXXXXX members on its board. However, it is unclear which members were appointed by elected officials of the participating municipalities and which are members-at-large. It is also unclear as to which members are voting members.
- An "XXXXXXXXXX" manages the affairs of the Park. The XXXXXXXXXX is comprised of XXXXXXXXXX "Representatives". The bylaws of the Park define a Representative to mean a person appointed by a participating municipality or organization, or a volunteer as a representative to the Park.
The definition of a qualified donee in subsection 149.1(1) of the Act, for purposes of determining eligibility to issue charitable donation receipts, includes a "municipal or public body performing a function of government in Canada" that is registered. We are of the view that in order to be considered a "municipal or public body performing a function of government in Canada" two conditions must be met. The first condition is that the organization must be a municipal or public body and the second condition is that it must perform a function of government.
There is no definition of a "municipal or public body performing a function of government in Canada" in the Act. Therefore, whether any organization is a municipal or public body performing a function of government must be determined on a case-by-case basis.
The term "public body" is also not defined in the Act. A public body is typically a body that acquires both its existence and its authority from a statute enacted by a legislature, and whose functions and transactions are for the benefit of, and affect the whole community of, persons to whom its authority extends. Generally, a public body has a governance purpose and is accountable to those governed, regulated or represented by it.
In our view, if a public body is incorporated, the federal government or a provincial or territorial government or the "public" that the corporation is serving or representing should have some specific control over the actions and operation of the corporation and the corporation should be accountable to that government and that public.
The term "function of government" is also not defined in the Act and reference must be made to the ordinary usage of this term. In our view, the term "function of government" means an activity or group of activities undertaken to meet a governance role or purpose within a geographic area. Historically, we have required that to be performing a function of government an entity must have the ability and powers to govern, tax, pass by-laws and/or provide municipal- or provincial-type services to its members or citizens.
We have accepted that providing a range of municipal-type services or providing a key service traditionally offered by the provinces or territories such as social services, oversight of the environment, health services, and education is generally considered to constitute performing a function of government.
CONCLUSION
Based on the criteria discussed above, it is our view that the Park could be a municipal or public body performing a function of government in Canada for the purposes of paragraph 149(1)(c) of the Act and the definition of a "qualified donee" in subsection 149.1(1) of the Act. However, in order to confirm that the Park is a public body performing a function of government and for you to approve their registration, additional information and documentation is required.
The Park appears to be a public body; it was constituted by a statute, the XXXXXXXXXX. In order to confirm that the Park is in fact a public body, the composition and voting structure of the Park's membership and XXXXXXXXXX is required. Information about how the board and XXXXXXXXXX are determined; whether elected, appointed, ex-officio or otherwise is also necessary. This will help the Park further demonstrate how it is accountable to the public, the Province of XXXXXXXXXX and the municipalities from which it was created.
The Park must also demonstrate that it is performing a function of government. It is not sufficient to merely state that they are providing several municipal type services. A review of the Park's financial statements fails to show any significant expenditure on infrastructure such as roadways, buildings, and sewer systems it claims to be providing. To the extent that these services are provided, the Park should be able to document where such costs are included in the financial statements or provide other evidence of the services being provided.
In addition, while the Park has the ability to pass bylaws, it has not provided any evidence to support that they have in fact passed bylaws. A listing of the bylaws that have been passed should be provided.
Other evidence to support that the Park is performing a function of government may include:
- a copy of an agreement with a neighboring municipality to provide fire protection or waste removal services,
- invoices from organizations subcontracted to provide the municipal type services on behalf of the Park, and
- the name of the municipality that is charged with collecting taxes on behalf of the Park and the agreement that governs the relationship.
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, following a 90-day waiting period (unless advised otherwise to extend this waiting period), 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 e-mailed to: LPRA-PLAR ITR-DDI Access Team-Équipe d'Accès. In such cases, a copy will be sent to you for delivery to the taxpayer.
Roger Filion, CPA, CA
Manager
Non-Profit Organizations and Aboriginal Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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