1 September 1989 Ministerial Letter 58308 F - Non-profit Organization Status

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.

September 1, 1989

Dear Sirs:

Re:  Non-Profit Organization Status

This is in reply to your letter of May 15, 1989, and subsequent telephone conversations of July 24, and 25, 1989, 19(1) (Tremblay) concerning a contemplated course of action which may affect the non-profit status of a corporation.

You describe a situation where a corporation ("Association") which was established promote an 24(1)

It is your view that since the project is consistent with the stated exempt purposes of the Association, the Association would remain tax-exempt pursuant to paragraph 149(1)(l) of the Act.

Our Comments

Although you have asked for a technical interpretation, it would appear that a proposed transaction by a particular taxpayer is involved.  Thus this matter would appear to be more appropriately the subject of an Advance Income Tax Ruling.  We are, however, prepared to provide some general comments with respect to the income earning activities of non-profit organizations.

To qualify for exempt status under paragraph 149(1)(l), an organization must be both organized and operated exclusively for social welfare, civic improvement, pleasure or recreation or any other purpose except profit or any combination of these activities.

From a review of the purposes of the Association, it appears to be organized in such a way that it would meet the definition of "any other purpose except profit".  If the activities of the Association were consistent with these aims, then it would qualify for exemption provided all other conditions of paragraph 149(1)(l) of the Act were complied with in the year.  To maintain an exemption under paragraph 149(1)(l) of the Act, there must be a causal relationship between the profit-making activity and the exempt purpose of the organization.  There appears to be such a relationship between the Association's proposed course of action and its purposes.

A final determination of whether the Association was operated exclusively for and in accordance with its non-profit purposes in a particular taxation year cannot be made in advance of or during a particular year but only after the end of the year after reviewing all its activities for that year.

It would also appear that the Association would not be exempt as a non-profit corporation for scientific research and experimental development pursuant to paragraph l49(1)(j) of the Act as the Association would not meet the test of being constituted exclusively for the purpose of carrying on or promoting scientific research and experimental development.

The foregoing is an expression of opinion only and, as such, is not binding on the Department.

We trust this will be of assistance to you.

Yours truly,

for DirectorSmall Business and General DivisionSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch