1999 Ruling 9910863 - NPO - XXXXXXXXXX

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:

Whether the non-profit status of XXXXXXXXXX would be jeopardized if it XXXXXXXXXX to generate revenue to offset the costs of providing a XXXXXXXXXX.

Position:

No, based on the facts presented.

Reasons:

The XXXXXXXXXX is operated on a cost recovery basis and the revenue generated from XXXXXXXXXX will be used to further the association's not-for-profit objects.

XXXXXXXXXX        							991086

XXXXXXXXXX, 1999

Dear Sir:

Re: Advance Income Tax Ruling
XXXXXXXXXX

This is in reply to your letter dated XXXXXXXXXX in which you requested an advance income tax ruling on behalf of XXXXXXXXXX (the "Association"). We also acknowledge receipt of your letter dated XXXXXXXXXX and a facsimile letter from the Association dated XXXXXXXXXX.

You advise that to the best of your knowledge and that of the taxpayer referred to above, none of the issues involved in the ruling request is:

I. in an earlier return of the taxpayer or related persons;

II. being considered by a taxation services office or a taxation centre in connection with a previously filed tax return of the taxpayer or related persons;

III. under objection by the taxpayer or related persons;

IV. before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has not expired; or

V. the subject of a ruling previously issued by the Directorate.

In this letter, unless otherwise indicated, all statutory references are to the provisions of the Income Tax Act (R.S.C. 1985, 5th Supplement, c.1, as amended) (the "Act").

Our understanding of the facts, proposed transactions and their purposes is set out below.

FACTS

1. The Association provides XXXXXXXXXX.

2. The head office of the Association is located in XXXXXXXXXX. Its tax account number is XXXXXXXXXX and its tax services office is in XXXXXXXXXX.

3. The objects of the Association as provided in its Memorandum of Association include the following:

a) XXXXXXXXXX.

b) To promote organizations of community and regional interest, having like aims, giving them aid, counsel and support in resolving problems of local, community or provincial import.

c) To make contributions of excess funds toward the support of recreational, educational, sports and other cultural activities in XXXXXXXXXX, and that such funds will be utilized to purchase and/or construct fixed assets and equipment. Such equipment must remain and continue to be utilized in either community.

d) The income, profits and property of the Association wheresoever derived, shall be applied solely towards the promotion of the objects of the Association as set forth in this Memorandum of Association and no portion thereof shall be paid or transferred directly or indirectly by way of dividend, bonus or otherwise howsoever by way of profit, to the members of the Association. Provided that nothing herein contained shall prevent the payment in good faith, or remuneration to any officers or servants of the Association in return for any services rendered, or goods delivered to the Association.

e) If on the winding up or dissolution of the Association there remains after the satisfaction of all of its debts and liabilities any property whatsoever, the same shall not be paid or distributed amongst the members of the Association, but shall be given or transferred to some other institution, or institutions having the same or similar objects of this Association, and which shall prohibit the distribution of its or their income and property amongst its members or their members to be determined by the members of the Association at or before the time of dissolution.

4. You advise that in your opinion the Association is a non-profit organization that qualifies for the exemption under paragraph 149(1)(l) of the Act.

5. XXXXXXXXXX.

6. XXXXXXXXXX.

PROPOSED TRANSACTIONS

7. In order to provide the XXXXXXXXXX, the Association incurs substantial costs. Given that it is the Association's intent to operate the XXXXXXXXXX on a cost recovery basis, the Association proposes to XXXXXXXXXX.

8. The Association proposes to amend its objects to clearly state that the XXXXXXXXXX will be operated on a cost recovery basis.

PURPOSE OF THE PROPOSED TRANSACTIONS

9. The purpose of the proposed transactions is to generate revenue to offset the costs incurred by the Association in providing the XXXXXXXXXX.

RULING GIVEN

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions, and purpose of the proposed transactions, we confirm the following:

Provided the Association is a non-profit organization within the meaning of paragraph 149(1)(l) of the Act, the implementation of the proposed transactions will not, in and of themselves, cause us to consider that the Association has ceased to meet the conditions described in paragraph 149(1)(l) of the Act at that time.

We note that the question of whether a corporation does, in fact, operate exclusively for any purpose other than profit with no part of its income payable to or otherwise available for the personal benefit of any member or shareholder is a question of fact which must be determined on an ongoing basis. In this case, the operation of the XXXXXXXXXX on a cost recovery basis will be a significant factor in making this determination.

This ruling is given subject to the general limitations and qualifications set forth in Information Circular 70-6R3 issued on December 30, 1996 and is binding on Revenue Canada provided the transactions are carried out by XXXXXXXXXX. This ruling is based on the Act in its present form and does not take into account the effect of any proposed amendments.

Yours truly,

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