26 August 1999 External T.I. 9900495 - NPO - CANADIAN BRANCH

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:

A U.S. corporation that is exempt from federal taxation under section
501(c)(3) of the Internal Revenue Code has established a Canadian

branch office to extend its activities in Canada. The issue is whether

the U.S. corporation is a non-profit organization for purposes of

paragraph 149(1)(l).

Position:

Since a requirement of paragraph 149(l)(l) is that, in the opinion of
the Minister, the entity not be a charity within the meaning of
subsection 149.1(1), this matter was referred to our Charities
Division. In their opinion, the U.S. corporation is a charity within

the meaning of subsection 149.1(1) although it would not qualify for
registration as it would not meet the residency requirements in the
definition of registered charity in subsection 248(1). Given
Charities' views, the U.S. corporation would not qualify as a non-
profit organization for the purposes for the purposes of paragraph

149(1)(l).

Reasons

Factual determination.

XXXXXXXXXX

Attention: XXXXXXXXXX

August 26, 1999

Dear Sirs:

990049
Re: XXXXXXXXXX. ("US Co")

This is in reply to your letter dated January 5, 1999 and further to our telephone conversations (Leigh/XXXXXXXXXX) concerning US Co, a non-share capital corporation incorporated under the laws of the State of XXXXXXXXXX and based in XXXXXXXXXX, USA. You have requested our views as to whether US Co is a charity within the meaning assigned by subsection 149.1(1) of the Income Tax Act (the "Act") and whether US Co qualifies as a non-profit organization for the purposes of paragraph 149(1)(l) of the Act.

You advise that US Co has recently established a Canadian branch office in XXXXXXXXXX to extend its activities in Canada, You note that US Co has obtained a ruling from the Internal Revenue Service that it is exempt from federal taxation under section 501(c)(3) of the Internal Revenue Code.

Your request concerns an actual fact situation related to transactions and events which have taken place. The review of such a situation is generally the responsibility of the local tax services office. However, since your first question involves a referral to our Charities Division, we made the referral directly to expedite matters.

In this regard, we have received confirmation from our Charities Division that, in their opinion based on the information that you provided, US Co is a charity within the meaning assigned by subsection 149.1(1) of the Act, notwithstanding that it is not eligible to be registered as a charity because it does not meet the residency requirements in the definition of a "registered charity" in subsection 248(1) of the Act. In their view, US Co is not constituted for profit, and its corporate objects appear to be charitable.

Its activities also appear to be charitable.

As you are aware, one of the tests in determining whether an entity is exempt by virtue of paragraph 149(1)(l) of the entity "in the opinion of the Minister, was not a charity within the meaning assigned by subsection 149.1(1)...”. Accordingly, given the views of our Charities Division, US Co would not qualify as a non-profit organization for the purposes of paragraph 149(l)(l) of the Act.

We note that we have not made any determination as to whether US Co meets the other tests set out in paragraph 149(1)(l) of the Act since, as noted above, such a determination is the responsibility of the local tax services office.

In any event, such a determination would be necessary only if US Co is not a charity.

Should you wish to submit further representations on this matter, please send your submission to the XXXXXXXXXX Tax Services Office.

We trust that our comments will be of assistance to you.

Yours truly,

Manager
Financial Institutions Section
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate