19 June 1989 Ruling 73961 F - Society Qualifies as a Municipality

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.

Subject:  24(1)

This is in reply to your memorandum of May 24, 1989 asking whether in our opinion the Society qualifies as a municipality for purposes of subparagraph 110.1(1)(a)(iv), subsection 118.1(1) and paragraph 149(1)(c) of the Income Tax act (the "Act").

As we understand it, 24(1)

The legal opinions and rulings that you have reviewed generally indicate that a townsite may be regarded as a municipality for the purposes of the Income Tax Act even though it may not be incorporated under a provincial municipality act.  The determinative factor in respect of the status of such an entity is how the nature of the authority held by such body, and the nature and extent of services offered, compared to other Canadian municipalities.

In your view, the following factors support the contention that the Society should be considered a municipality for the purposes of the Income Tax Act.

(i)     13(1)(c)

(ii)      The Society has a structure similar to other municipalities, has the authority to enforce local by- laws, and provides municipal services common to other municipalities.

At one point you had concerns about their objects (assistance to members etc).   However, you have determined that all residents are members, that anyone may become a resident, and that the only inherent benefit of membership in the Society, as opposed to "residency", is the right to vote at the Society's general meetings.

Our Comments

24(1) We are of the view that the Society probably qualifies under paragraph 149(1)(c) of the Act as a municipal or public body performing a function of Government in Canada.  In any event, even if they do not qualify under paragraph 149(1)(c) they likely could qualify as a non-profit organization under paragraph 149(1)(1) of the Act.

With respect to your question of whether the Society qualifies as a Canadian municipality in paragraph (d) of the subsection 188.1(1) definition of "total charitable gifts" and in subparagraph 110.1(1)(A)(iv), the issue is not quite so clear.  It is our position that in order to be a Canadian municipality, an entity must be incorporated as such under the enabling legislation of the particular province of which the entity wishes to become a municipality.  Thus, in our view, although the Society may qualify as a non-taxable organization under either 149(1)(cv) or 149(1)(l) of the Act they are not a Canadian municipality for purposes of subsection 118.1(1) or subparagraph 110.1(1)(a)(iv) of the Act.  If, however, it is charitable donation receipts they are concerned about the question of whether they a re a "Canadian municipality" is irrelevant as they could accomplish this objective by qualifying as a charitable organization.

In this respect, the Society should not consider issuing donation receipts for contributions which in substance are equivalent to such municipal charges as property taxes, water rates, or other similar assessments.  Such payments would not be considered gifts, due to the benefits received.

If for some reason the Society cannot be registered as a charity and you feel that it is important to further pursue the matter of it being a Canadian municipality please write again and we will refer the matter to Legal Services.

B.W. Dath DirectorSmall Business and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch