31 August 1993 Income Tax Severed Letter 9303786 - Low-cost Housing Accommodation for Seniors

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 Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

                                         August 31, 1993

  Charities Division                     HEAD OFFICE
  R.A. Davis, Director                   Rulings Directorate
                                         J.D. Brooks
                                         957-2103
  Attention:  Marilyn Babcock

                                         930378

XXXXXXXXXX

We are writing to you in reply to your memorandum of February 9, 1993 in which you requested our opinion as to whether the XXXXXXXXXXshould be recognized as a tax-exempt corporation described in paragraph 149(1)(i) of the Income Tax Act ( the "Act"). The determination of the status of the Residence affects not only the Residence but also the XXXXXXXXXX We apologize for the delay in replying to you.

Facts

Our understanding of the relevant facts is as stated below:

                      XXXXXXXXXX

Your Concern

                      XXXXXXXXXX

Our Comments

To qualify under paragraph 149(1)(i) of the Act, an entity must meet three stated criteria:

        (i) the entity must be a corporation;

        (ii) the corporation must be constituted exclusively for
       the purpose of providing low-cost housing accommodation
       for the aged, and 

        (iii) no part of the income of the corporation may be
       payable to, or otherwise available for the benefit of, any
       proprietor, member or shareholder of the corporation.

Regarding the first criterion, Fact 2 indicates that the Residence meets this test.

Regarding the third criterion, Fact 5 indicates that the Residence meets this test. It may be of interest to you to determine who the members are (e.g. what are the criteria for membership?).

Regarding the second criterion, it is ordinarily appropriate to consider a corporation's enabling documents to determine the purpose of the corporation. Since the Objects provide for offering accommodation to persons other than seniors, it is apparent that the second criterion is not met (the criterion requires the accommodations to be exclusively, not primarily, for seniors). If the Objects do not reflect the true purpose of the corporation (XXXXXXXXXX), they should be revised.

Also dealing with the second criterion, it is noted that there is a lack of reference to "low-cost housing accommodation" being provided. The fact that the corporation will operate on a non- profit basis and that it may provide accommodations primarily to persons of low or modest income does not necessarily mean that the cost of such accommodation will be low. It could be that the accommodations are luxurious, in which case a high price may be required to offset high expenses. The phrase "low-cost housing accommodation" has been interpreted to include comfortable but modest rental accommodation at rent levels which are low relative to rent levels generally available for similar accommodations (other than subsidized or non-profit accommodations) in the same community. Again, a clarification in the corporation's Objects or By-laws should be made if the corporation's purpose is, in fact, to provide low-cost housing accommodation.

In considering the concern you expressed, XXXXXXXXXX would deny the corporation being recognized as an entity described in paragraph 149(1)(i) only if that paragraph imposed a public benefit requirement. However, we note that the only criteria are those stated above and that there is no apparent requirement to meet other tests which a charity has to meet. Thus, in our view, the XXXXXXXXXX does not, in and by itself, disqualify the Residence from paragraph 149(1)(i).

In conclusion, in our view, the current Objects of the Residence do not satisfy the requirements of paragraph 149(1)(i) of the Act since its stated Objects indicate that it was not constituted exclusively for the purpose of providing low-cost housing accommodation for the aged, but was constituted for the purpose of providing, on a non-profit basis, housing accommodation for the aged, the poor and the disabled.

R. Albert for Director Business and General Division Rulings Directorate Legislative and Intergovernmental Affairs Branch