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.
Principal Issues:
Whether a U.S. charity will qualify as a "qualified donee" under the Income Tax Act, in light of paragraph 6 of Article 21 of the Canada/U.S. Income Tax Convention.
Position TAKEN:
It will not qualify.
Reasons FOR POSITION TAKEN:
Paragraph 6 of Article 21 of the Convention does not deem a U.S. charity to be a Canadian registered charity for purposes of the Act. It merely treats a gift to a U.S. charity as a gift to a Canadian registered charity. Furthermore, "registered charity" is defined under subsection 248(1) of the Act and a U.S. charity would not meet this definition. Accordingly, it would not qualify as a "qualified donee".
5-942808
XXXXXXXXXX C.Chouinard
Attention: XXXXXXXXXX
December 22, 1994
Dear Sir:
Re: Article 21 of the Canada/U.S. Tax Convention and Qualified Donees
We are writing further to our meeting (Albert/XXXXXXXXXX/Chouinard/XXXXXXXXXX) of November 1, 1994 and in reply to your letter of October 28, 1994, wherein you requested our comments regarding the effect of paragraph 6 of Article 21 of the Canada/U.S. Income Tax Convention (the "Convention") as regards U.S. charities.
More specifically, you inquire whether a U.S. charity will qualify as a "qualified donee", within the meaning of subsection 149.1(1) of the Income Tax Act (the "Act"), in light of paragraph 6 of Article 21 of the Convention.
A "qualified donee" is defined in subsection 149.1(1) as "a donee described in any of paragraphs 110.1(1)(a) and (b) and the definitions "total charitable gifts" and "total Crown gifts" in subsection 118.1(1)". Inter alia, this definition includes a registered charity, which for purposes of the Act, is defined under subsection 248(1) of the Act, as:
(a)a charitable organization, private foundation or public foundation, within the meanings assigned by subsection 149.1(1), that is resident in Canada and was either created or established in Canada, or
(b)a branch, section, parish, congregation or other division of an organization or foundation described in paragraph (a), that is resident in Canada and was either created or established in Canada and that receives donations on its own behalf,that has applied to the Minister in prescribed form for registration and that is at that time registered as a charitable organization, private foundation or public foundation.
The definition also includes a charitable organization outside Canada to which Her Majesty in right of Canada has made a gift during a particular taxpayer's taxation year or the 12 months immediately preceding the taxation year.
Paragraph 6 of Article 21 of the Convention states that "For purposes of Canadian taxation, gifts by a resident of Canada to an organization which is resident in the United States, which is generally exempt from United States tax and which could qualify in Canada to receive deductible gifts if it were created or established and resident in Canada shall be treated as gifts to a registered charity".
In our view, the effect of paragraph 6 of Article 21 of the Convention is that qualifying gifts to U.S. charities, within the limits provided in that paragraph, will be treated as if they were made to a registered charity in Canada. This provision does not, however, deem a U.S. charity to be a Canadian registered charity for purposes of the Act, which purposes include the definition of "qualified donee". It merely treats a gift to a U.S. charity as a gift to a Canadian registered charity.
In our opinion, a U.S. charity would only qualify as a "qualified donee" for a particular taxpayer if Her Majesty in right of Canada had made a gift to it within the particular taxpayer's taxation year or the 12 months immediately preceding that taxation year.
We trust that these comments will be of assistance.
Yours truly,
R.A. Albert
for Director
Business and General Division
Rulings Directorate
Policy and Legislation Branch
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