News of Note

CRA ruled that a registered charity receiving a portion of its operating funding from the Ontario Ministry of Health and Long-Term Care (MOHLTC), through the Local Health Integration Networks (LHIN), but relying mainly on donations, to operate a palliative care hospice, qualified for the enhanced 83% federal and 87% Ontario public service body rebates. It reasoned that stipulated requirements for ”chronic care” - such as that the residents be in receipt of “therapeutic care” each day - were not required to be met by such a facility because “palliative care differs from chronic care.”

The minority funding received by the hospice from its LHIN pursuant to an “Accountability Agreement” was sufficient to satisfy the requirements in ETA ss. 259(2.1)(b) and (c) that it receive more than nominal “qualifying (government) funding” and that it be “authorized” by the Province.

Neal Armstrong. Summaries of 24 July 2019 GST/HST Ruling 162099 under ETA s. 259(1) – facility supply and s. 259(2.1)(c).

S. 149(1)(o.2)(ii)(C) stipulates that a s. 149(1)(o.2)(ii) corporation has “borrowed money solely for the purpose of earning income from real property or an interest [therein].” Reg. 8502(i) provides that a registered pension plan (RPP) shall not borrow money, subject to what CRA correctly describes as “two very narrow exceptions.”

The CECRA program contemplates the making of loans to commercial landlords to partially fund their providing rent relief to qualifying tenants, followed by forgiveness of such loans on December 31, 2020 if the landlord has complied with the program terms. CRA states:

• Participating in the CECRA with respect to commercial property held by a pension real estate corporation will not contravene the borrowing restriction in clause 149(1)(o.2)(ii)(C).
• Although participating in the CECRA by an RPP will contravene the narrower borrowing restriction in paragraph 8502(i), the CRA will exercise its discretion to not revoke the registration of an RPP for failure to comply with this condition.

Neal Armstrong. Summaries of 15 June 2020 External T.I. 2020-0850981E5 under s. 149(1)(o.2)(ii)(C) and Reg. 8502(i).

Members of a health care spending account (“HCSA”) may not be able to use the credits allocated to the HCSA before they expire which, in accordance with IT-529, can generally be carried forward only for a period not exceeding 12 months. CRA has provided a second technical interpretation, similarly worded to the first, indicating that, in this context:

[A]n HCSA that qualifies as a PHSP and which has unused credits expiring between March 15 and December 31, 2020, can temporarily permit the carry forward of those unused credits for a reasonable period to allow plan members to access services that were otherwise restricted during the COVID-19 outbreak. A carry-forward period of up to six months would generally be considered reasonable and would not, in and of itself, disqualify the HCSA from being a [private health services plan].

Neal Armstrong. Summary of 2 June 2020 External T.I. 2020-0847081E5 F under s. 248(1) – private health services plan.

The Societies Act enacted in B.C. in 2015 contemplated a “member-funded society” that is funded primarily by its members to carry on activities for their benefit, e.g., sports clubs, golf courses and professional associations, and that is permitted to distribute assets to its members if the society winds up. S. 2(2) of the Act provides: “A society must not have, as one of its purposes, the carrying on of a business for profit or gain, but carrying on a business to advance or support the purposes of a society is not prohibited by this subsection.”

The ETA definition of a non-profit organization provides (similarly to the definition in ITA s. 149(1)(l)) that a qualifying NPO must be “organized solely for a purpose other than profit” and that “no part of [its] income is payable to, or otherwise available for the personal benefit of, any … member.” Respecting the first quoted requirement, CRA stated:

Per Policy Statement P-215, an “entity may carry on an income-generating activity and still qualify as a non-profit [organization]. To qualify, the income-generating activity must be carried on, and the resulting income must be used by the entity, to achieve its declared non-profit objectives.” A society would need to ensure that the business is not its purpose, but a means to an end, and is not carried on for profit.

Respecting the last sentence in the above passage, CRA did not explain how a business can be “a means to an end” (i.e., presumably, generating funds for its non-profit objects) while at the same time not being “carried on for profit.”

Respecting the second quoted requirement, CRA stated:

[I]f the facility of a member-funded society is used by non-members and the income resulting from the non-members’ fees is used to subsidize the members’ fees … income of the entity is considered to be payable to, or otherwise available for the personal benefit of, its members and the entity would not qualify as [an NPO].

However, CRA indicated that the potential for the society to distribute its property to its members does not adversely affect its NPO status prior to the decision to wind up.

CRA stated that a supply of memberships in the society for a fee would not be exempted under Sched. V, Pt. VI, s. 17 where such memberships are “in professional associations that give the right to practice a profession or to use a title … as these benefits exceed the allowable benefits listed in paragraphs (a) to (f)” of s. 17.

Neal Armstrong. Summaries of 21 August 2019 GST/HST Interpretation 195314 under ETA s. 123(1) – NPO and Sched. V, Pt. VI, s. 17.