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. Does XXXXXXXXXX qualify as a non-profit corporation as per 149(1)(l) ?
2. Is the use of a non-profit corporation (XXXXXXXXXX) to do the borrowing for the XXXXXXXXXX an avoidance transaction ? Should the borrowing be considered to be, in substance, a liability of XXXXXXXXXX ?
Position:
1. Yes
2. No and no.
Reasons:
1. Reviewed by Charities Division which decided that it is not a charity. Ruling provided that as long as XXXXXXXXXX does as its charter states, then it will qualify as a non-profit corporation - with the proviso that this determination is an annual test.
2. Referred to GAAR Committee - decision that there are legitimate business reasons for the interposition of XXXXXXXXXX as the borrower for the project. Consequently, it is not an avoidance transaction and the borrowing will not be considered to be a liability of XXXXXXXXXX.
XXXXXXXXXX
XXXXXXXXXX 980434
XXXXXXXXXX
Attention: XXXXXXXXXX
XXXXXXXXXX, 1998
Dear Sirs:
Re: XXXXXXXXXX
We are writing in response to your correspondence of XXXXXXXXXX wherein you had requested an advance income tax ruling on behalf of the above noted corporation. We also acknowledge your additional submissions and comments in furtherance of this matter.
You have advised that, to the best of your knowledge, none of the issues in respect of this request is currently under consideration by a Taxation Services Office or Taxation Centre in connection with a tax return or a notice of objection already filed.
In this ruling, "Aco" refers to XXXXXXXXXX a recently incorporated corporation XXXXXXXXXX does not, as yet, have a Revenue Canada business number.
In this ruling, "Bco" refers to XXXXXXXXXX a "public corporation" and a "taxable Canadian corporation" within the meaning of those terms in subsection 89(1) of the Income Tax Act (the "Act"). The business number of XXXXXXXXXX and it files its return of income with the XXXXXXXXXX Taxation Centre of Revenue Canada.
HISTORICAL BACKGROUND
1.
XXXXXXXXXX
2.
XXXXXXXXXX
3.
XXXXXXXXXX
4.
XXXXXXXXXX
5.
XXXXXXXXXX
PROPOSED STRUCTURE
6. Aco was incorporated as a corporation with no share capital under Part II of the Canada Corporations Act.
7. XXXXXXXXXX
XXXXXXXXXX
8. The Letters Patent of Aco provide that Aco will carry on its operations without pecuniary gain to its members and that none of its income is to be paid to or otherwise benefit its members.
9. The Letters Patent of Aco also provide that, in the event of dissolution or winding-up of Aco, all its remaining assets after payment of its liabilities and obligations will revert to a "registered charity" or "qualified donee", within the meaning of those terms in subsections 248(1) and 148.1(1) of the Income Tax Act (Canada), respectively, or to another non-profit organization selected by the board of directors of Aco.
10. The head office of Aco will be in XXXXXXXXXX.
11. The members of Aco will be individuals.
12.
XXXXXXXXXX
13.
XXXXXXXXXX
14.
XXXXXXXXXX
15.
XXXXXXXXXX
16.
XXXXXXXXXX
17.
XXXXXXXXXX
18.
XXXXXXXXXX
19.
XXXXXXXXXX
20.
XXXXXXXXXX
21.
XXXXXXXXXX
22.
XXXXXXXXXX
23.
XXXXXXXXXX
24.
XXXXXXXXXX
25.
XXXXXXXXXX
26.
XXXXXXXXXX
27.
XXXXXXXXXX
PURPOSE OF THE PROPOSED TRANSACTIONS
28. The purpose of the proposed transactions is to implement XXXXXXXXXX.
RULINGS PROVIDED
Provided that the above statements constitute a complete and accurate disclosure of all of the relevant facts, the proposed transactions and the purpose of the proposed transactions, and provided that the proposed transactions are implemented as described above, the following rulings are provided:
A. Aco will be considered to be an association organized exclusively for a purpose except profit with no part of its income payable to or otherwise available for the personal benefit of any member so that, in any year in which it, in fact, operates on such basis, Aco will qualify as a non-profit organization as described in paragraph 149(1)(l) of the Act and will, accordingly, be exempt from tax under Part I of the Act upon its otherwise taxable income for that year.
B. The XXXXXXXXXX will not be considered to be a liability of Bco and, accordingly, no amount in respect of the XXXXXXXXXX will be required to be included in computing the capital of Bco pursuant to subsection 181.2(3) of the Act.
C. Subsection 245(2) of the Act will not be applicable as a result of the proposed transactions, in and by themselves, to redetermine the tax consequences confirmed in the rulings given.
With respect to Ruling "A" above, we note that the question of whether a corporation does, in fact, operate exclusively for any purpose except profit with no part of its income payable to or otherwise available for the benefit of any member or shareholder is a question of fact the determination of which can only be made retrospectively for any particular taxation year.
These rulings are provided subject to the limitations and qualifications set out in Information Circular 70-6R3 issued by Revenue Canada on December 30, 1996 and are binding upon the Department provided that the proposed transactions are completed by XXXXXXXXXX. These rulings are based on the Act and the Income Tax Regulations in their present form and do not take into account the effects of any proposed amendments thereto.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
- 8 -
.../cont’d
.../cont’d
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1997
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1997