17 May 2007 GST/HST Ruling 64868 - Tax Status of Fees in XXXXX

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letters XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the XXXXX (the Society). We apologize for the delay in our response.

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

As you have not provided us with any final agreements between the Society and non-profit organizations (NPOs) to whom money has been given, we are unable to provide a ruling as requested. We are, however, pleased to provide you will the following interpretation.

We understand that

1) The Society was incorporated, without share capital under the XXXXX.

2) According to the Society's Constitution, the purposes of the Society are to:

XXXXX ^[xii]*.

3) The Society receives direct funding and/or grants from the Province and the Government of Canada, both of whom meet the definition of "grantor" ^[xiii]footnote 2 in section 2 of the Public Service Body Rebate (GST/HST) Regulations (the Regulations). In turn the Society enters into various agreements to provide the funds:

-    directly to NPOs, or

-    to third parties, who then enter into agreements to redistribute the funds to NPOs.

Interpretation Requested

You would like to know if the funds the Society provides directly to NPOs will be considered government funding in accordance with paragraph 2(b) of the definition of "government funding" ^[xiv]footnote 3 in the Regulations.

You would also like to know if the funds the Society provides to third parties who then redistribute the funds to NPOs would be considered government funding in accordance with paragraph 2(b) of the definition of government funding in the Regulations.

Interpretation Given

Typically, only an amount of money (including a forgivable loan but not including any other loan or a refund, rebate or remission of, or credit in respect of, taxes, duties or fees imposed under any statute) paid or payable by a grantor may qualify as government funding. However, under paragraph 2(b) of the definition of "government funding" in the Regulations, an amount paid or payable by a person who is not a grantor may qualify if it meets very specific requirements. An amount paid or payable by an organization (such as the Society, or a third party) to an NPO will meet these requirements if the amount is readily ascertainable and the following conditions are met:

1) If the amount of money were paid by the grantor directly to an NPO for the same purpose the amount was paid by the organization to the NPO, it would have been:

a) provided to financially assist the NPO in carrying out its purpose and not as consideration for supplies made by the NPO, or

b) provided as consideration for exempt supplies made to other persons (i.e., a person other than the organization who paid the amount to the NPO);

2) The amount originates from a grantor and does not pass through more than two funding organizations; and

3) The organization paying the amount to the NPO certifies that the amount has met all the requirements of the definition of government funding. This is done by providing, at the same time the amount is paid, a completed form GST322 Certificate of Government Funding to the NPO. The NPO is not required to submit this certificate with its request for a public service body (PSB) rebate, but must keep the certificate as part of its books and records.

Further information on the PSB rebate and government funding is available in the Canada Revenue Agency (the CRA) guide RC4034 GST/HST Public Service Bodies Rebate available at www.cra-arc.gc.ca/E/pub/gp/rc4034/README.html. The form GST322 Certificate of Government Funding is also available on the CRA web site at www.cra-arc.gc.ca/E/pbg/gf/gst322/README.html.

The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 954-4206.

Yours truly,

Carol A. Gaudet
Charities, Non-profit organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

Appendix A

Section 2 of the Public Service Body Rebate (GST/HST) Regulations

2. In these Regulations,

government funding

"government funding" of a particular person means

(a) an amount of money (including a forgivable loan but not including any other loan or a refund, rebate or remission of, or credit in respect of, taxes, duties or fees imposed under any statute) that is readily ascertainable and is paid or payable to the particular person by a grantor

(i) for the purpose of financially assisting the particular person in carrying out the purposes of the particular person and not as consideration for supplies made by the particular person, or

(ii) as consideration for making property or services available for consumption or use by other persons (other than the grantor, individuals who are officers, employees, shareholders or members of the grantor, or persons related to the grantor or to such individuals), where supplies of the property or services made by the particular person to such other persons are exempt supplies, and

(b) an amount of money paid or payable to the particular person by an organization (in this paragraph referred to as the "intermediary") that received the amount from a grantor or by another organization that received the amount from an intermediary, where

(i) in the case of an amount that, after 1990, becomes payable or is paid to the particular person, the intermediary or the other organization, as the case may be, provides to the particular person, at the time the amount is paid to the particular person, a certificate in a form prescribed by the Minister certifying that the amount is government funding, and

(ii) the amount would be government funding of the particular person because of paragraph (a) if the amount were paid by the grantor directly to the particular person for the same purpose as it was paid to the particular person by the intermediary or the other organization, as the case may be, and if the reference to "grantor" in subparagraph (a)(ii) included a reference to that intermediary or other organization, as the case may be;

grantor

"grantor" means

(a) a government or municipality, other than a corporation all or substantially all of whose activities are commercial activities or the supply of financial services or any combination thereof,

(b) a corporation that is controlled by a government or by a municipality and one of the main purposes of which is to fund charitable or non-profit endeavours,

(c) a trust, board, commission or other body that is established by a government, municipality or corporation described in paragraph (b) and one of the main purposes of which is to fund charitable or non-profit endeavours, and

(d) a band of Indians within the meaning of any Act of Parliament;

2007/05/11 — RITS 77586 — Supplies of Approvals for Subdivision and Other Services