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 local employment assistance and development ("LEAD") corporation will continue to maintain its exempt status by virtue of paragraph 149(1)(l) if, after an ownership change, it becomes a subsidiary of another non-profit corporation rather than a non-profit society.
Position TAKEN:
Providing the LEAD corporation continues to be organized and operated exclusively for the purpose of a LEAD corporation, its exempt status should not change.
Reasons FOR POSITION TAKEN:
A change in ownership of a LEAD corporation should not, in and by itself, cause a change to its exempt status. It is a question of fact which must be considered on a case by case basis.
L. Barrows
XXXXXXXXXX 952837
Attention: XXXXXXXXXX
January 26, 1996
Dear XXXXXXXXXX:
Re: XXXXXXXXXX
Your letter of June 19, 1995 addressed to Revenue Canada, Taxation, Surrey, B.C. was referred to this Directorate for response. We apologize for the delay in our response.
XXXXXXXXXX
We should advise that written confirmation of the tax implications inherent in a particular fact situation is only given by this Directorate when there is a proposed transaction which is the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R2. However, in response to your request, we can provide the following general comments which are not binding on the Department.
In our letter of May 6, 1985 to Employment and Immigration Canada which you attached, we expressed the opinion that, generally, LEAD corporations may be exempt under paragraph 149(1)(l) of the Act. Based on information provided at the time by Employment and Immigration Canada, we stated that:
-LEAD corporations were incorporated on a non-profit basis under federal or provincial law. Their purpose is to assist the local private sector to create permanent jobs;
-Provided LEAD corporations are organized exclusively for the stated purposes, they would be organized exclusively for "social welfare" or "civic improvement" thus meeting at least one of the requirements of paragraph 149(1)(l) of the Act;
-Provided all of the revenue generated by a LEAD corporation is used in carrying out the stated objects, such entity would probably be regarded as operating exclusively within the operational requirements of paragraph 149(1)(l) of the Act; and
-Provided LEAD corporations ensure that the revenue does not accrue to the benefit of the shareholders, they meet the requirement that "no part of the income of which was payable to ... any proprietor, member or shareholder" as required under paragraph 149(1)(l) of the Act.
As outlined above, it is a question of fact in respect of the organization and operation of a particular corporation whether it is exempt under paragraph 149(1)(l) of the Act and ownership is not a deciding factor. Moreover, provided that a LEAD corporation continues to be organized and operated exclusively for the purposes of a LEAD corporation, a change in ownership should not, in and by itself, cause a change to its exempt status in accordance with paragraph 149(1)(l) of the Act. It should also be noted that any determination in this regard cannot be made in advance of or during a particular year but can be made only after the end of the year when all the activities for that year can be reviewed.
Whether XXXXXXXXXX is a tax-exempt LEAD corporation or a corporation owned by a tax-exempt LEAD corporation, the tax status of which is not dependent on ownership by a tax-exempt LEAD corporation, is a question of fact upon which we make no comment.
We trust these comments will be of assistance.
Yours truly,
R. Albert
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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