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.
February 12, 1990
Head Office Technical Interpretations
Division
Appeals Branch G.D. Middleton
Attention: L.C. Tremblay (613) 957-9230
A/Director
Appeals and Referrals
Division 8719
- Subject: A.C. Simmonds and Sons Limited Adverse Decision of Tax Court of Canada
We are replying to J. Yu's memorandum of January 23, 1990 concerning the above mentioned adverse decision.
We agree with the recommendations of your Branch that his decision should not be appealed to the Federal Court since the judgement is based on a finding of fact and is not contrary to the law.
Bernhard Buetow
Director
Technical Interpretations Division
Legislative and Intergovernmental
Affairs Branch
Document Disclosed Pursuant to the Access to Information Act Document Divulgué en vertu de la loi sur l'accès à l'information LANGIND E DOCNUM ACC8720 REPLACES TYPEKEY R AUTHORDV LEGS AUTHOR SPARNA DESCKEY 6 RATEKEY 1 REFDATE 900115 ETADYEAR ETADSORT ADMINACC LEGS ACCESSLV LEGS99 SUBJECT Draft Revenue Canada charity brochure SECTION none SECTION SECTION SECTION SECTION $$$$
Barbara Darling
Director General
Registration Directorate S. Parnanzone
957-9232
Attention: D. McRae
8720
February 12, 1990
Re: "Registering your Charity"
Pamphlet - Revision 1989
Your File HAU 1486-3-1
This is in reply to the memorandum of November 28, 1989 and confirmation of our draft of January 15.
We have reviewed above-noted pamphlet based on the provisions of the Income Tax Act as proposed to be amended by Bill C-28 as passed by the House of Commons on December 20, 1989.
In our review we have ignored layout, typographical errors, language style, unless they were believed to result in misleading information being given to taxpayers. Furthermore, we have not verified telephone numbers and addresses.
Our comments are set out in the attached appendix. Unless otherwise indicated, the references to sections, subsections, etc., are to the Income Tax Act.
If you have any questions, please call us.
Bernhard Buetow
Acting Director
Technical Interpretations Division
Legislative and Intergovernmental
Affairs Branch
APPENDIX
(S. Parnanzone)
REGISTERING YOUR CHARITY
Does your organization need to be registered?
- 1. In the second sentence the reference only to "tax credits" is not adequate to cover the deduction in computing taxable income allowed to corporate taxpayers. We suggest a reference to a reduction in taxes.
2. Third paragraph.
- (a) First sentence. First, the statement "it is likely that it could qualify" appears to be too strong. For example, it would be misleading to suggest that an organization that fails to qualify as a charity under subsection 149.1(l) because part of its income is available for the personal benefit of its members is likely to qualify as a non-profit organization under paragraph 149(1)(1). We suggest a reference to may qualify. If "non-profit organization" is intended to be that described in paragraph 149(1)(1), the reference to "registration" should be deleted since the mentioned organization need not be registered.
- (b) We suggest that the paragraph clearly state that non-profit status, as opposed to registered charitable status, results in the organization not being subject to taxation under Part I of the Income Tax Act. While the benefits associated with registered charitable status are clearly spelled out under "what are the benefits of registered charitable status?", those of non-profit status are not so obvious (apart from the inability to issue official donation receipts).
What are charitable purposes?
- 3. Third bullet. Replace "and" with "or" since the pamphlet refers to alternatives.
What factors would disqualify your organization from registration?
- 4. Profit Distribution. We suggest that the paragraph be rewritten to specifically describe the actions or events that result in no registration. The present wording appears to be ambiguous. For example, both paragraphs 149.1(1)(a) and (b) provide that an entity will not qualify as a charitable foundation and charitable organization, respectively, if any "part of the income is payable to, or is otherwise available for, the personal benefit of any proprietor, member, shareholder, trustee or settlor thereof", which is a broader prohibition than that provided in the pamphlet.
- In addition, we suggest both replacing "profit" with "income" and avoiding the reference to distribution (which is more restrictive than "payable" and "available").
5. Political purposes or activities.
- (a) First paragraph. It incorrectly suggests that registered charity status is denied only if the political activities are substantial - this implies that if the activities are not substantial, even though they may be of a partisan nature, registration will be granted. We suggest that the pamphlet deal with the subject by stating that all political activities, except ancillary and incidental activities of a non-partisan nature that are discussed in IC 87-1 [Information Circular 87-1], disqualify an entity from registration as a charity.
- (b) Second paragraph. In view of the fact that some ancillary and incidental political activities are considered to be "charitable" pursuant to subsections 149.1(6.1) and (6.2), we suggest that the examples in the bullets refer only to activities which are beyond any doubt of the non-charitable type. It would appear to us that the wording of the third and fourth bullets could encompass political activities of the "charitable" kind.
What types of organizations or activities are publicly perceived as charitable but do not meet with the common-law requirement of the term?
What should you know about completing the application form for registration, form T2O50?
- 9. Is the information under this heading not too detailed considering that it is in a pamphlet as opposed to a guide or information circular?
10. Fifth paragraph.
- (a) First bullet. Replace "directing officers are related" with "directors, trustees, officers or like officials ("directing officers") do not deal at arm's length with each other and with each of the other directing officers".
The suggested changes clarify the meaning of "directing officers", replace "related" with the broader reference to dealings not at arm's length, and add a reference to dealing with the "other" directing officers.
(b) Second bullet.
- (i) the words "income" and "source" should be replaced with "capital" and "person", respectively.
- (ii) The reference to "group of related persons" is not broad enough to encompass all members of a group of persons who do not deal at arm's length.
- (c) Sixth paragraph. While the fifth paragraph deals with situations where the organization is designated as a "charitable foundation", neither it nor this paragraph clearly indicates when an organization is classified as a "charitable organization".
What is the difference between a charitable organization and charitable foundation?
- 11. We suggest replacing "whether it is privately controlled and whether it is privately funded" with "control and source of capital".
- 12. Charitable organization. The second sentence is technically-deficient with respect to the description of control as well as unclear with respect to the source of capital. See paragraph 149.1(1)(b).
- 13. Public foundation. Comment 12 above is also valid for the last sentence.
- 14. Private foundation. Comment 12 above is also applicable here.
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© Her Majesty the Queen in Right of Canada, 1990
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