Charity Registration Process
On October 9, 2015, Canada Revenue Agency (“CRA”) released French language view 2015-0589001C, which contained general comments made by the Charities Directorate about the charities registration process. On January 6, 2016, a McCarthy Tetrault Analysis (“Analysis”) published its English commentary on the contents of the view. The Analysis clarified that the view addresses several questions concerning charitable registration that had previously been raised during a roundtable discussion at the 2015 Association de Planification Fiscale et Financiere (“APFF”) Conference. Questions focused on the registration process itself and factors which contribute to delays in obtaining charitable status.
Specifically, the Analysis describes CRA’s clarification that the charitable registration process is the same whether the organization is a charity or a foundation. Similarly, legal structure of an organization will not affect the registration process either. The Analysis confirmed CRA’s statement that there is no “fast lane” for processing applications for registration, and that applications are processed on a first-come, first-served basis. The analysis reported that, simple applications can expect answers within two months of submission, while regular applications can be answered within six months. More information about the process, and what may contribute to delays, may be found on CRA’s website.
Transfer of NPO Assets to a Municipal Authority
On August 6, 2015, Canada Revenue Agency (“CRA”) released a French language technical interpretation that addressed the issue of whether an entity that is a non-profit organization pursuant to paragraph 149(1)(l) of the Income Tax Act (“ITA”) will lose tax-exempt status if its constitution provides that all of its assets are to be transferred to a municipal authority within the meaning of paragraph 149(1)(c) in the event of the winding-up, amalgamation, or dissolution. A municipal authority is defined at paragraph 149(1)(c) of the ITA as “a municipality in Canada, or a municipal or public body performing a function of government in Canada.”
On January 11, 2016, Taxnet Pro, published its comments on the technical interpretation and indicated that CRA maintains that it is first necessary to determine if the municipal authority is a member of the non-profit. This is necessary since, to maintain tax-exempt status, no part of a non-profit organization’s income may be payable or available for the personal benefit of any member. Accordingly, the analysis reported that if the municipal authority is not a member of the organization, tax-exempt status, pursuant to paragraph 149(1)(l), would not be lost provided that the other requirements of that paragraph had been met.