25 September 1998 External T.I. 9815005 - NPO INFORMATION RETURNS

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: -information returns for npo
-withholding for honorariums

Position: general comments

Reasons: 149(12)

153(1)(a)

XXXXXXXXXX 							981500
B. Kerr
September 25, 1998

Dear Sirs:

Re: Information Returns

This is in response to your fax of June 5, 1998, concerning information returns and withholdings for a non-profit organization that receives government funding that is used for educational or employment purposes. The beneficiaries of this funding are not members of the organization or related in any way to the organization. You also state that honorariums are paid to board members.

Our Comments

Paragraph 149(1)(l) of the Income Tax Act (the "Act") generally provides an exemption from Part I tax for an association that is organized and operated exclusively for social welfare, civic improvement, pleasure or recreation or any other purpose except profit. It is a question of fact whether any particular organization would qualify for such an exception. In general terms, as stated in paragraph 5 of Interpretation Bulletin IT-496, social welfare means that which provides assistance for disadvantaged groups or for the common good and general welfare of the people of the community. Civic improvement includes the enhancement in value or quality of community or civic life.

Subsection 149(12) of the Income Tax Act (the "Act") provides that a non-profit information return must be filed by a non-profit organization if:

• the organization received or is entitled to receive taxable dividends, interest, rentals, or royalties totaling more than $10,000 in the fiscal period;
• the total assets of the organization were more than $200,000 at the end of the immediately preceding fiscal period; or
• the information return had to be filed for a preceding fiscal period.

The total amount of scholarships, fellowships or bursaries, or a prize for achievement, received by a taxpayer in a taxation year are included in income under paragraph 56(1)(n) of the Act. However, the total amount received is reduced by $500.

The withholding requirements under paragraph 153(1)(a) of the Act apply to every person paying at any time in a taxation year salary or wages or other remuneration. The word "honorarium" is defined in Webster's dictionary as "a reward usually for services on which custom or propriety forbids a price to be set. Any receipts for services rendered would fall under the provisions of subsection 5(1) of the Act in that it would constitute remuneration received in the year from an office or employment. In our opinion, even if members of the board of directors do not receive director's fees, they could nonetheless be considered to be holding an office or employment, in view of the definition of these terms in subsection 248(1) of the Act.

The Department considers that expenses refunded or an allowance paid to an employee for travel costs incurred to travel from his residence to his workplace are taxable in the absence of specific provisions to the contrary. For example, subsection 81(3.1) of the Act provides that travel expenses reimbursed in respect of part-time employment when the duties of the part-time employment are performed at a location not less than 80 kilometers from both the individual's ordinary place of residence and his place of employment, shall not be included in computing the individual's income.

It should be noted that in order for an organization to be exempt under paragraph 149(1)(l) of the Act, inter alia, no part of its income may be made available for the personal benefit of any proprietor, member, or shareholder of the organization. An organization may fail to comply with this requirement if it distributed income during the year, either directly or indirectly, to or for the personal benefit of any member. However, as stated in paragraph 12 of Interpretation Bulletin IT-496, certain types of payments such as salaries, wages, fees or honorariums for services rendered to an entity will not, in and by themselves, disqualify the entity from being exempted, provided that the amounts paid are reasonable and in line with those paid in arm's length situations for similar services. It also applies to payments made to employees or members of the organization to assist them in covering their expenses to attend various conventions and meetings as delegates on behalf of the association, provided attendance at such conventions and meetings is to further the aims and objectives of the organization.

We trust these comments will be of assistance.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch