5 September 1996 External T.I. 9615115 - Status as an NPO or Charitable Org?

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:

1. Whether Leasing of Real Property is a Charitable Activity?

2. Requirements for Exemption under paragraph 149(1)(l).

Position:

1. No.

2. Must be Both Organized & Operated exclusively for One of the Purposes described in 149(1)(l).

Reasons:

1. An organization which acts only as Landlord can not be considered Charitable.

2. Question of Fact. All Conditions in 149(1)(l) must be met.

									961511
XXXXXXXXXX							Wm. P. Guglich

Attention: XXXXXXXXXX

September 5, 1996

Dear Sirs:

Re: Charitable and Non-Profit Organizations

This is in reply to your letters of April 29, May 2 and May 3, 1996 concerning the determination of whether leasing of real property is a charitable activity and the requirements for qualification for exemption under paragraph 149(1)(l) of the Income Tax Act (the "Act").

Our Comments

The Department's view is that in a landlord\tenant relationship the renting of commercial real property to medical doctors by the corporate owner cannot be considered charitable. In our previous letter (document # 9520625), we stated in the last sentence of the first paragraph under the heading "Comments" that an organization which only acts as a landlord for medical practitioners or health oriented organizations could not be considered charitable.

With respect to the requirements of paragraph 149(1)(l) of the Act, we agree that health care could, depending on the specific facts of a particular case, be considered "social welfare". We also agree with your views that the provision of medical services would not, in and by itself, qualify an organization for exempt status under paragraph 149(1)(l) of the Act. To qualify for exemption under paragraph 149(1)(l) of the Act all the conditions therein must be met. These conditions include: the organization cannot in the opinion of the Minister be a charity, the organization must be both organized and operated exclusively for one or more of the purposes described therein and no part of the income was payable or otherwise available for the personal benefit of any proprietor, member or shareholder thereof. Although the purpose for which an organization was organized may be established in advance by examining the instruments by which it was created, which may include letters patent, articles of incorporation, memoranda of agreement, by-laws, articles and so on, the determination of whether an organization was, in a taxation year, operated exclusively for and in accordance with its non-profit purposes can only be made when all its activities for the year have been established and reviewed.

The determination of exempt status for a particular organization must be based on the specific facts respecting that organization. Consequently, where there are multiple entities involved in an activity it is possible that some may qualify as non-profit organizations and others will be taxable entities that are carrying on a business. Paragraph 7 of IT-496 describes some characteristics of an activity that might be indicative that it is a business.

We trust our comments will be of assistance to you.

Yours truly,

R. Albert
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch