7 May 1997 External T.I. 9636515 - NON-PROFIT HOUSING

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.

                                          963651
XXXXXXXXXX                                B. Kerr

Attention: XXXXXXXXXX

May 7, 1997

Dear Sirs:

Re: Non-profit Housing Co-operatives

This is in response to your letters of May 29, October 24, and December 16, 1996, concerning non-profit housing co-operatives.

You are concerned with whether non-profit housing co-operatives have to file information returns under subsection 149(12) of the Income Tax Act (the "Act"). You have referred to three letters from Revenue Canada which you feel provide contradictory advice.

Our Comments

By virtue of subsection 150(1) of the Act, all corporations are required to file T2 returns even if tax exemption is being claimed. In addition, subsection 149(12) of the Act requires a person that was exempt from tax under Part I by virtue of paragraph 149(1)(l), inter alia, to file a Non-Profit Organization ("NPO") Information Return if:

(a)the total of all amounts each of which is a taxable dividend or an amount received or receivable by the person as, on account of, in lieu of or in satisfaction of, interest, rentals, or royalties in the period exceeds $10,000;

(b)the total assets of the person (determined in accordance with generally accepted accounting principles) at the end of its immediately preceding fiscal period exceeded $200,000; or

(c)an NPO information return was required to be filed by the person for a preceding fiscal period.

Generally, paragraph 149(1)(l) of the Act provides that no tax is payable under Part I on the taxable income of a person for a period when that person was a club, society or association that was organized and operated exclusively for social welfare, civic improvement, pleasure or recreation or for any other purpose except profit, no part of the income of which was payable to, or was otherwise available for the personal benefit of, any proprietor, member or shareholder thereof. A determination of whether a particular organization would meet these conditions is a question of fact that can only be determined by reviewing the organizations enabling documents and all of its activities for the particular year.

You enclosed a letter which the Rulings Directorate issued on February 21, 1996 concerning a particular non-profit housing co-operative and whether it was exempt from tax by virtue of paragraph 149(1)(l) or (n). Several pieces of pertinent information were examined and referred to in that response. Our comments on the provisions of paragraphs 149(1)(l) and (n) included in that letter remain the same. In summary, in our view, the housing co-operative failed to meet the requirements for exemption provided under paragraph 149(1)(n) for limited dividend housing companies. It appeared that the entity was organized as an entity exempt under paragraph 149(1)(l), however, whether the entity was operated as such was a factual determination which could only be made at the end of a particular period. As noted above, any entity which is exempt under paragraph 149(1)(l) would be required to file an information return as required by paragraph 149(12).

You enclosed two other letters authored by Revenue Canada. The July 8, 1994 letter from the Vancouver Island Tax Services Office contains no description of the documentation or facts upon which the comments were provided. In addition, you should note that the penultimate paragraph in the December 6, 1996 letter from the Vancouver Tax Services Office which you enclosed states only that "a Housing Cooperative Corporation...would not be required by subsection 149(12) of the I\ncome Tax Act to file an NPO Information Return if it met the definition of a Limited Dividend Housing Company", that is, if it was exempt by virtue of paragraph 149(1)(n) of the Act.

We trust that these comments will be of assistance.

Yours truly,

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