20 March 1996 External T.I. 9600525 - BUSINESS ACTIVITIES - LABOUR ORGANIZATION

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 the selling of shirts, hats, jackets, etc. by a labour organization will affect its exempt status under 149(1)(k) of the Act.

Position TAKEN:

If an entity meets the requirements of a labour organization, paragraph 149(1)(k) would not, in and by itself, restrict profit generating activities.

Reasons FOR POSITION TAKEN:

Not restricted from profit generating activities by paragraph 149(1)(k) of the Act providing such activities are authorized.

L. Barrows
XXXXXXXXXX							960052

Attention: XXXXXXXXXX

March 20, 1996

Dear XXXXXXXXXX:

Re: Paragraph 149(1)(k) of the Income Tax Act (the "Act")

This is in reply to your letter of December 27, 1995 in which you requested an interpretation of the above-referenced paragraph as it relates to certain activities conducted by a labour organization.

Specifically, the labour organization is selling, at a profit, merchandise consisting of shirts, hats and jackets bearing the union logo to its members and other interested parties. The Act does not clearly define a labour organization and you are concerned that this profitable activity conducted by the union may affect its exempt status under paragraph 149(1)(k) of the Act.

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. In addition, where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office. However, in response to your request, we can provide the following general comments which are not binding on the Department.

Our Comments

Paragraph 149(1)(k) of the Act exempts from tax a labour organization or society or a benevolent or fraternal benefit society or order. A labour organization is generally an association of workers of the same trade, or of several allied trades, organized for the purpose of securing the most favourable conditions, wages or hours of work for its members. A labour organization is not, however, restricted to a trade union which is defined by the Canada Labour Code as "any organization of employees formed for purposes that include the regulation of relations between employers and employees".

In the case of O'Brien v The Queen, 85 DTC 5202, the court recognized that profits generated by the union belonged to the union and were exempt by virtue of paragraph 149(1)(k) of the Act, notwithstanding that the individual members received most of the money from the union tax- free and not as profits from a business carried on by the members.

In our view, if a particular entity meets the requirements of a labour organization, paragraph 149(1)(k) of the Act would not, in and by itself, restrict profit-generating activities conducted by a labour organization unless the activities were such that the organization was no longer, in fact, a labour organization. This, however, is a question of fact and can only be determined on a yearly basis following a review of its activities for the year it seeks to be a tax-exempt organization.

With respect to regulatory control of labour organizations and their activities, you may wish to contact the Canada Labour Relations Board at 604-666-6001 or by writing to the following address:

Canada Labour Relations Board
Suite 1660, 800 Burrard Street
Vancouver, British Columbia
V6Z 2G7

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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