Words and Phrases - "incidental"
13 May 2024 External T.I. 2022-0944461E5 - NPO - Residential housing co-operative
Would a residential housing co-operative (Co-op) continue to qualify under s.149(1)(l) if it earned profits from renting its common areas to third-parties (e.g., film companies) – and would the answer change if it did so through a wholly-owned taxable subsidiary? After citing Tourbec for the proposition that “the word exclusively must be given its full effect,” CRA went on to note that, however, “a tax-exempt NPO can earn a profit, as long as the profit is incidental,” i.e., “not significant and arises from activities directly connected to the organization’s not-for-profit objectives.” For example it was acceptable that the Co-op earned “modest revenues from providing laundry machines for use by residents of the Co-op.”
In contrast, “the anticipated profits from renting out the Co-op’s common areas to third parties … [were expected] to be considerable enough to assist the Co-op in paying for major repairs, ongoing maintenance of the building, maintaining a reserve fund, and lowering monthly maintenance fees for the residents.” Accordingly, such activity would disqualify it under s. 149(1)(l). If it carried on this activity through a subsidiary, the expected dividend income would have the same effect.
29 February 2012 External T.I. 2012-0435151E5 - Installation of Solar Panels
Respecting the question as to whether income earned by an individual taxpayer from the sale of electricity generated from a solar photovoltaic system to the Ontario Power Authority would be included in the computation of the income of the taxpayer from his business of operating a roofing business, CRA stated:
The CRA will generally consider income from activities undertaken outside the normal business operations of a taxpayer to be from the same business if the activities are incidental to the taxpayer's normal business operations and the income generated by these activities is not material in relation to the taxpayer's business revenue. The expression "incidental" is not defined in the Income Tax Act...but implies a subordinate relationship or "having a minor role in relation to". Factors that may be relevant in the determination of whether a particular activity is incidental to another would include the income generated and the capital or labour invested in each activity.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Regulations - Schedules - Schedule II - Class 43.2 | 11 |
18 August 2014 External T.I. 2014-0528171E5 - Condominium Corporations and 149(1)(l)
A condominium corporation (the "Corporation") enters into a leasing agreement with a solar company, which would lease several roofs within the complex for the use of solar panels, with the output sold to the public electrical grid. The solar company would assume all costs of the arrangement, and the Corporation would receive annual income of approximately $XX or a percentage of the revenues generated, which would be contributed to the Corporation's reserve fund thus potentially offsetting or freezing any annual reserve fund increase, and/or reducing annual reserve fund contributions and/or reducing property owner's monthly maintenance fees. Would this jeopardize its s. 149(1)(l) exemption? CRA stated:
[I]ncidental income from the rental of common areas may be treated as income of the Corporation and generally will not affect [its] tax-exempt status… . Incidental, in this context, means both minor and directly related to activities undertaken to meet the Corporation's not-for-profit objectives of managing and maintaining the condominium property and required reserves. …
Income that is not incidental will usually be considered to be income of the unit owners, if this is appropriate under the relevant provincial law. Subsection 11(2) of the Condominium Act of Ontario (S.O. 1998, c.19) provides that "the owners are tenants in common of the common elements…". …
Where the relevant provincial law indicates that the income is the income of the Corporation, then we would agree that the Corporation may not be tax-exempt pursuant to paragraph 149(1)(l)… .
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 9 - Exempt Receipts/Business | condominium solar revenue treated as members' income | 243 |
Vancouver Society of Immigrant and Visible Minority Women v. M.N.R., 99 DTC 5034, [1999] 1 S.C.R. 10, [1999] 2 CTC 1
The purposes of the appellant were not exclusively charitable because they included not only education of immigrant women but also doing that which was "conducive" to the attainment of such objects (which was a broader term than "incidental").
After noting (at p. 5043) that the educational charitable head should not be restricted to the "formal training of the mind" and that any knowledge or training that "is provided in a structured manner and for a genuinely educational purpose - that is, to advance the knowledge or abilities of the recipient - and not solely to promote a particular point of view or political orientation" would qualify, he went on to note that the intended purposes (and the actual activities that were carried out) were not restricted to such matters as training the beneficiaries how to apply for a job but also extended to establishing a job skills directory, networking, liaising for accreditation of credentials, soliciting job opportunities and offering referral services. These were not educational, and did not fall under the fourth head.