16 July 1998 External T.I. 9808975 - APPROVED ASSOCIATION

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: Requirements requested for "approved" status.

Position: List of requirements provided

Reasons: As requested

XXXXXXXXXX F.B. Fontaine, FCCA
980897

Attention: XXXXXXXXXX

July 16, 1998

Dear Sirs:

Re: Application for Approved Association

This is in reply to your letters dated April 9, 1998 and May 6, 1998 in which you asked for the requirements under which XXXXXXXXXX may become an "approved" association for the purpose of subsection 37(7) and subparagraph 37(1)(a)(ii) of the Income Tax Act (the "Act").

In order that an association or organization may obtain "approved" status, it is necessary that certain information and documents in respect of the association be submitted to this Department for consideration and approval. The terms "association" or "organization" used below would also include a corporation.

The requirements in respect of the application for, and the granting of, such approved status are as follows:

1. An association, in order to be considered "approved" for the purposes of section 37 of the Act, must receive written approval from our Minister.

2. To become an approved association, an organization must meet the criteria of a non-profit organization and be able to demonstrate that it is able to carry out scientific research and experimental development ("SR&ED") in Canada on an ongoing basis. More specifically, the organization must also meet all the following requirements:

a) It must have the facilities and personnel capable of carrying out SR&ED as defined in the Act.

b) It must carry on only activities that are unquestionably SR&ED.

c) In order to satisfy the requirements for non-profit status there must be: no personal benefit to members, no control of other associations, satisfactory provisions for the distribution of assets upon dissolution, etc.

d) The general public must be a beneficiary of the results of any successful research.

e) The funding of the association must be sufficient to ensure ongoing SR&ED.

3. There is no charge by our Department to approve an association. However, in order to do so, we would require copies of the following documentation relating to the organization and its activities:

a) identification of the legislation under which the association was created;

b) copies of the organization's charter, code of ethics and by-laws which should indicate (i) that the organization does satisfy all requirements described in clause 37(1)(a)(ii)(A) or (B) of the Act and the post-amble thereto and (ii) how its property will be distributed in the event of a wind-up;

c) a detailed description of the association's arrangements for obtaining funds;

d) a detailed description of the association's arrangements for disbursing funds;

e) financial statements for prior years; and

f) details of the research activities to be carried out by the association in the future and evidence that it has the staff and facilities to carry out such activities.

For information concerning the Department’s interpretation of SR&ED and the tax incentives relating to SR&ED, you may refer to Information Circular 86-4R3 and Interpretation Bulletin IT-151R4, respectively.

We hope the above comments will be helpful to you. Should you require any additional information in respect of the above comments, you may contact the writer at (613) 957-4364.

Yours truly,

for Director
Resources, Partnerships and
Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
.../cont’d

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