Corporations Canada, under Industry Canada, has started sending out default notices to organizations that are under the new CNCA but have not filed their Form 4022 - Annual Return.  The Annual Return is quite easy to complete. Here is a link to it:
http://www.ic.gc.ca/eic/site/cd-dgc.nsf/vwapj/FRM-4022-e.pdf/$file/FRM-4022-e.pdf  It can also be filed online at http://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs04956.html

The CRA has been sending out a “Notice of Filing Omission” to charities who don’t file their financial statements with the T3010.  This is an important reminder that you don’t have to just file the T3010 - you also need to complete it properly and attach necessary schedules and financial statements. 

In Gateway City Church and The Minister of National Revenue, the Federal Court of Appeal dismissed Gateway’s appeal to prevent the Minister from revoking its charitable status. CRA revoked the registered charity’s registration for 3 reasons namely “Failure to maintain adequate books and records, failure to devote all of its resources to its own charitable activities, and provision of personal benefits to a proprietor, member, shareholder, trustee or settlor”. The Court noted ”...the Church’s application can be granted only if the Church meets the test for the granting of stays and injunctions. The Church must show as per (RJR-MacDonald v. Canada (Attorney General): it has an arguable case against the revocation, it will suffer irreparable harm if the revocation is allowed to happen, and the balance of convenience lies in its favour.” The FCA found that Gateway did not meet the test for irreparable harm and dismissed the application. The FCA provided a detailed analysis of the irreparable harm requirement including some tangible examples of why Gateway did not meet the test.

CRA has released a letter providing responses to the questions posed at the 2011 Canadian Tax Foundation National Conference. CRA provides comments on the NPO Risk Identification Project and various comments on previous Interpretation Bulletin’s regarding NPO’s that have been released.  It is interesting to note CRA identifies that there “39,000 entities that file T2, T3 and/or T1044 returns.”  There are a large number of non-profits that do not need to file such returns and presumably some NPOs that are supposed to file but don’t.  The bulletin also discusses profit that is “incidental” and what are reasonable operating reserves for a non-profit. 

CRA recently released a letter that provides general comments and suggested information that needs to be submitted to the Charities Directorate of the CRA when municipal or public bodies performing a function of government in Canada are applying to be a ‘qualified donee’. This new requirement to apply and be registered on a publicly available list of qualified donees came into effect on January 1, 2012.  This category is particularly relevant to the Aboriginal community such as Indian bands. The CRA is still developing the process for applying for registration. However, this letter provides groups with an idea of the information that CRA would require.

The Charities Directorate is launching a new Charities Program Update bulletin.  It will be sent to the 23,000 subscribers to the Charities Directorate email list. Lots of interesting information and statistics are contained in the Update.

Today the Ontario government announced the release of the plain language guide to the ONCA.

The CRA has revoked the registration of The Life Centre Word of Faith Ministries Inc. as a charity. The Globe and Mail covered this story in “Toronto pastor, wife charged in alleged $8.6-million Ponzi scheme” http://soa.li/mVtmmlY

The Canada Revenue Agency has revoked the charitable registration of the Canadian registered charity Trinity Global Support Foundation.  The London Free Press has written extensively on this charity and we have covered here: “FCA case on Trinity Global Support Foundation - CRA wins again”  http://www.globalphilanthropy.ca/index.php/blog/comments/fca_case_on_trinity_global_support_foundation_-_cra_wins_again

On October 15, 2013 we will be having the 2nd Annual Blumbergs’ Canadian Charity Law Institute in Toronto. It will be a full day of practical legal and ethical compliance information geared toward charities, professional advisors and those interested in regulatory issues affecting charities.
 

Industry Canada today announced today that “The forms under the Canada Not-for-profit Corporations Act have been modified to ensure a high level of Web accessibility to which the Government of Canada is committed. Only the format and look have been modified. The content of the forms remains unchanged. Corporations Canada will continue to accept applications that use the old versions of the forms. Please refer to our website to find specific forms.”

In this case Trinity Global Support Foundation (the “Foundation”) asked the court to delay CRA publishing a notice of intention to revoke the registered charity status until the Foundation’s other legal claims have been dealt with.  The FCA ruled against the Foundation because the Court determined that “there is no substantive evidence that the Foundation or its clients will be forced to shut down or be significantly affected prior to its notice of objection being considered.”  The Court also did not think that losing its charitable status caused irreparable harm as “It is clear from the evidence that the reputation of the Foundation has already been subject to intense public scrutiny for reasons distinct from the notice of intention to revoke.  As such, I see no basis upon which to conclude that any possible further harm to the Foundation’s reputation will be such as to amount to irreparable harm.” The judge does not mention the London Free Press coverage but presumably that is what is being referred to.  The conclusion of the FCA decision is important “Given my conclusions with respect to irreparable harm, I need not consider the balance of convenience element of the test.  However, it is clear that serious allegations have been raised in the context of the proposed revocation.  It is clear from the Foundation’s own evidence that it has been engaged in fundraising activities using tax shelter arrangements, which have been an activity of legitimate concern generally to the Minister.  As such, in my view the public interest in the Minister protecting the integrity of the charitable sector outweighs the Foundation’s interest in staying revocation and I see no reason for the Court to grant an equitable remedy to the Foundation.”

CRA released a letter that discussed the issue of whether a member of the clergy who performs occasional liturgical services would satisfy the “function test” of ministering to a congregation, diocese or parish on a part-time or assistant basis. The CRA said no and stated that, “Where ministering duties performed by a member of the clergy are incidental to and not an integral part of his or her overall job responsibilities, it is our view that the function test would not be satisfied and that he or she would not be eligible to claim the clergy residence deduction provided for in paragraph 8(1)(c) of the Act.”

Last month CRA released an updated Guide which explains how the goods and services tax/harmonized sales tax (GST/HST) applies to non-profit organizations. This includes registration requirements, exemptions, rebates, and simplified methods of accounting that may apply to a non-profit organization.

Last month the CRA released an updated Guide which explains how the goods and services tax/harmonized sales tax (GST/HST) applies to registered charities or registered Canadian amateur athletic associations.

Today the Department of Finance released the “Notice of Ways and Means Motion to amend the Income Tax Act, the Excise Tax Act and Related legislation”.  This will introduce the First-Time Donor Credit, improve the efficiency of the Tax Court of Canada which has been bogged down with charity gifting cases and allowing CRA with abusive gifting tax shelters to collect 1/2 of the taxes allegedly owed. 

The Ontario government has published an ONCA draft organizational by-law.

On April 18, 2013 we will have the first Blumbergs’ Charity Law Boot Camp in Toronto.  It will be a one day boot camp on compliance and standards issues for Canadian charities led by charity lawyer Mark Blumberg.

The CRA has provided more information on the provision in the 2013 Federal Budget dealing with taxes in dispute and abusive charity gifting tax shelters. 

In the 2013 Federal Budget there was a small tax incentive for first time charitable donors called the “First-Time Donor’s Super Credit”.  CRA has provided additional information on the administration of this small tax incentive for giving.

I wish it was an April Fool’s joke but unfortunately there are still Canadians investing in the ‘abusive charity gifting tax schemes’.  The Globe and Mail had an article today by Paul Waldie discussing “New Canada Revenue rules target charitable tax shelters”.  The article discusses a measure in the 2013 Federal Budget dealing with donation tax shelters.  Over the last decade over $6 billion in receipts have been issued as part of abusive charity gifting tax schemes.  As a result billions of dollars have either not been collected or have been delayed in collection.  The CRA has been winning these cases (for example Marechaux) and now the CRA will be given an increased ability to collect funds on disputed amounts related to donation tax shelters.  In the past CRA could not collect until the process was completed (sometimes 10 or more years later).  Now CRA can collect on 50% of potential taxes if CRA disputes the charity donation tax shelter.  If the taxpayer wins they would get their 50% back.  This just makes these schemes a little less attractive. It also reduces the likelihood of someone trying to avoid a large amount of taxes and then skipping off to Bermuda or Panama or wherever people skip off to these days. 

In an article today in the Globe & Mail entitled “Canada Revenue Agency struggling to put a lid on tax fraud”  Kathryn Blaze Carlson discusses false receipting schemes. 

The following text is from the Ontario government website: “ONCA is targeted to come into effect no earlier than January, 2014. Existing not-for-profit corporations will have a three-year transition period once ONCA is in effect.  Community Legal Education Ontario (CLEO) will provide support to not-for-profit corporations as they make the transition to ONCA.”  Therefore, the July 1, 2012 target date has been delayed by at least 6 months.  Also the Ontario government is noting that CLEO will be providing support but no details have been provided at this time.

On March 21, 2013 at 4pm, Finance Minister Jim Flaherty delivered the 2013 Canadian federal budget. There were a number of interesting proposals relating to charities.  Some of the highlights include a new temporary First-Time Donor’s Super Credit (FDSC) designed to encourage new donors to give to charity.  “The FDSC will increase the value of the federal Charitable Donations Tax Credit by 25 percentage points if neither the taxpayer nor their spouse has claimed the credit since 2007”  Flaherty has ignored many suggestions for increased tax incentives that would have been expensive and disproportionately benefitted the rich such as the elimination of capital gains on donations of land or private shares. 

Jeff Gray of the Globe and Mail is reporting today in an article “Tax-scheme case revived against Bay Street law firm” that the class action lawsuit against Cassels Brock & Blackwell LLP has been certified by a decision of the Ontario Court of Appeal. 

The Charities Directorate of the Canada Revenue Agency has announced the revocation of Marketplace Ministries International as a registered charity for its involvement in the “Insured Giving Donation Program tax shelter gifting arrangement”.

CRA has provided some comments on registered charities and political activities.

The CRA has two upcoming Charities Information Webinars being offered in the month of March. Upcoming webinar topics include Completing Form T3010 (13), Registered Charity Information Return, and Arts Activities and Charitable Registration (Guidance CG-018).

In January, CRA released a revised T4033 Guide which we blogged on earlier, which assists Canadian registered charities with completing the Registered Charity Information Return..  Now they have slightly revised the T4033 again. 

In The World Job and Food Bank Inc. (WJFB) CRA revoked the registered charity’s registration for 3 reasons namely “WJFB failed to demonstrate that it devotes all of its resources to charitable activities carried on by itself, it failed to keep information in such form so as to enable the Minister to determine whether there are any grounds for the revocation of registration, and it failed to keep a duplicate of each receipt containing prescribed information for donations received by it.” The Court noted ” In order to succeed in this appeal, WJFB had to demonstrate that all three bases for the Minister’s and the CRA’s conclusion are unreasonable, as each of them is sufficient to justify the decision to revoke. WJFB has evidently not done so. There is evidence in the record to support the decision on all three grounds. It is not this Court’s role to re-weigh the evidence. ”

Andy Levy-Ajzenkopf recently posted an article on Charity Village providing some comments and information regarding the Ontario Not-for-Profit Corporations Act (ONCA).

CRA recently released a letter which discussed whether a Corporation qualified for tax exemption when it held a reserve. In this case, the Corporation was receiving funds as a result of a funding agreement and could only expend them for specific purposes such as community, educational and charitable works or purposes. In CRA’s view, the Corporation was not running on a for-profit basis because, “...the Corporation has no control over the amount of funding it receives, nor over the framework under which it operates to determine qualified projects to fund.  The Corporation receives minimal passive investment income, does not solicit other income, and is actively looking for appropriate projects to fund while honouring the objects of the Corporation.”

CRA recently released a letter that discussed the tax implications of an entity that distributes revenue to its members from the sale of auction items. CRA stated, “With respect to the sale of auction items, it is not clear to us whether the items to be sold continue to be owned by the contributing members or whether the items are donated to the 149(1)(l) entity and then some profits from the sale of such items are distributed to the contributing members.  If the contributing members retain ownership of the items then, in our view, the income of the 149(1)(l) entity is not available for the personal benefit of a member and the tax-exempt status of the organization is not jeopardized for this reason.  However, if the items are owned by the 149(1)(l) entity and the revenue of such items, and therefore the revenue of the 149(1)(l) entity, is distributed to its members then the organization could lose its status as a tax-exempt organization pursuant to paragraph 149(1)(l).” CRA did not provide a definitive answer for this organization however they did indicate that “...if the members retain ownership of the auction items, as long as the auction is related to its objectives, and the profits are not material, the income would likely be considered to be incidental income of the organization and would not jeopardize the tax-exempt status of the organization.”

Here is a CRA press release on a Brampton tax preparer sentenced after “A CRA investigation discovered that false charitable donation claims totalling $858,897 were made on 129 income tax returns prepared by Mr. Adebukunola for clients for the 2004 to 2009 tax years.”

Statistics Canada has recently released donor information for 2011.  Every year Stats Can puts out this information and people write about it.  Stats Can notes:  “Charitable donations reported by taxfilers increased 2.6% from 2010 to just under $8.5 billion in 2011. At the same time, the number of people reporting charitable donations on their 2011 income tax return decreased by 0.6% to 5.7 million.”  Looking at what tax filers claim as the basis for charitable donations is problematic on a number of levels and the “Note to Reader” is completely inadequate and getting worse.  You have about $300 million dollars per year are now claimed as part of abusive gifting tax schemes in which almost none goes to charity.  Furthermore,  Canadians often give to charity in circumstances in which receipts are not issued.  As well, not all Canadians who receive receipts use them on their tax filing.  Canadian charities in 2011 issued approximately $13 billion in receipts and only $8.5 billion were claimed on tax returns.

On June 5, 2013, Trevor Clark and myself will be delivering the “Planned Giving Institute” for AFP Toronto’s Fundraising Day. 

I will be speaking at an upcoming Ontario Bar Association conference on April 8, 2013 dealing with “Not‐for‐Profit and Charitable Organizations in the Health Sector: Evolving Governance & Compliance Issues”.  My topic will be: “Tax issues – Canada Revenue Agency’s new fundraising guidance, receipting and inter‐charity transfers”

We recently reviewed the T3010 Registered Charity Information Return database for 2011 as part of the Sean Blumberg Transparency Project.  The database covers 82,000 of the 86,000 registered charities in Canada that had filed their T3010 and were processed into CRA’s Charity Listing database by November 2012.  This article provides a snapshot of the registered charity sector based on the 2011 T3010 filings. 

CRA recently released a letter which provided comments on the rules relating to the voluntary gifting of property to a registered charity and whether a qualified donee is required to issue a donation receipt.

CRA recently released a letter that discussed whether an entity that operates a private high school for the purposes of earning profit qualifies as a non-profit organization. CRA held that the Academy was not operating exclusively for a purpose other than profit. They stated, “Where an entity realizes significant profits and accumulates surplus funds in excess of its current needs or where it engages in a trade or business that is not directly attributable to, or connected with, pursuing the non-profit goals and activities of the entity, we may consider that the entity is not operated exclusively for non-profit purposes.” CRA also provided a brief summary of the characteristics that might indicate an activity is a ‘trade or business”.

CRA recently issued a letter on whether an NPO will jeopardize its exemption from tax where it incorporates a Community Contribution Company (C3) to carry on for-profit activities. The CRA took the position that, “where an NPO incorporates a C3 and holds the shares of a taxable C3 subsidiary, this will not, in itself, cause the organization to lose its exemption under paragraph 149(1)(l) or the Act”.

The Charities Directorate has just published a new page which sets out how members of the public can obtain information about registered charities. 

I have been concerned that it is not easy for people interested in Ontario non-profit and charity sector to obtain information on Ontario non-profit corporations.  With the Federal government the information is available online and free.  I have been requesting from the Ontario government a list of Ontario corporations, to publish the list, and to make it easier for the public to verify if an organization is an Ontario corporation.  I recently received an e-mail from the Ontario Ministry of Government Services.  They advised “when the new Ontario Business Information System (ONBIS) is launched (tentatively scheduled for July 1, 2013), most of the data you are requesting will be available to the public online and free of charge.  Fundamental information about a corporation such as the name, corporation number, date of incorporation, type and status will all be available.  The Ontario Not-for-Profit Corporations Act, 2010 is currently targeted to come into effect at the same time as the new ONBIS system.” Making some basic information from the ONBIS system available to everyone free of charge is a small but important step in assisting Ontario non-profits with the ONCA.

Today the House of Commons Standing Committee on Finance (FINA) released its much anticipated report on Tax Incentives for Charitable Giving in Canada.  The report discuss “Charitable Donations and Donors in Canada”, “The Regulation of Charities”, “Tax Incentives and their Estimated Federal Fiscal Cost”  as well as specific proposals such as Charitable Donations Tax Credit Thresholds and Rates and Donations of Real Property and Shares of Private and Public Corporations.  There is also discussions of bequests and tax fairness as well transparency and accountability of charities. 

The Charities Directorate of the Canada Revenue Agency has announced the revocation of The Voice of the Cerebral Palsied of Greater Vancouver as a charity for allegedly high fundraising costs while using a third party fundraiser.  The press release is not clear about the other grounds of revocation.  Perhaps the CRA letters will shed more light on the CRA concerns. 

In this article entitled “Atheist Activist Group Sues IRS Over ‘Preferential Treatment of Churches’” in the Christian News Network it discusses the exemption that churches having to filing the US form 990 and how one group is challenging that preferential treatment.  In Canada, generally churches along with all other registered charities have to file the T3010.  The article also describes the same group challenge housing benefits for the clergy in the US and lack of IRS enforcement against churches who engage in partisan political activities.   

Here is an interesting article entitled “Watchdog Cracks Down on Misleading Statements on Fundraising Costs”

Here is an important article in the Chronicle of Philanthropy outlining an initiative to try and have charities electronically file their annual returns in the US and have this information more easily accessible online at no charge.  Although Canadian charities cannot file their T3010s online they are put online by CRA and available in electronic format for anyone to search at no charge. 

Vancouver Sun investigative reporter David Baines has just written a followup article entitled “Vancouver museum’s “Michelangelo” sculptures fail to sell at auction”.  In this article he discusses how the valuations of the sculptures exaggerated their fair market value and how the Canadian Cultural Property Export Review Board validated the inflated figures.  Interesting that “In an email Friday, the Canadian Cultural Property Export Review Board—which certified both transactions—said it has the legislative authority to reopen files and Canada Revenue Agency “has the legislative authority to reassess taxpayer returns.”  Who should care if property is donated by people as part of a transaction, they receive over $30 million in tax receipts and about $13 million in tax savings and the property is actually only worth 100 - 200,000.  The answer is that taxpayers should be concerned - normal Canadians, who don’t get involved in tax schemes are paying billions in extra taxes and receiving billions in less services as a result of these tax schemes.  As well if you are concerned with the cultural and arts sector in Canada - it is distressing that all sorts of questionable objects are being provided to Canadian charities who are then spending large amounts of money storing them etc.

The Tax Court of Canada has denied more charitable donation receipts because they did not have all the mandatory elements.  The judge also was concerned that the cash ‘donations’ may never have in fact taken place. 

Here is my article on the new Ontario Not-for-Profit Corporations Act (“ONCA”) that I prepared for the Ontario Trillium Foundation blog http://www.scribd.com/doc/124033018/Opportunity-Knocks

Here are comments from the Association of Fundraising Professionals on the Private Members Bill of Mr. Peter Braid, MP from Kitchener-Waterloo.  The AFP expresses some concern about the part of the Bill which would change the deadline for donations to charities from the end of December to the end of February.  I have blogged on this issue before. 

It is actually quite hard to find out how to get on the CRA newsletter (EML) list.  Our firm’s charity law newsletter is far better than the CRA newsletter - our newsletter has all the info from CRA and a whole lot more.  Plus our newsletter has elements of comedy.  The CRA newsletter does not have any intentional comedy!  To sign up for the CRA newsletter see http://www.cra-arc.gc.ca/esrvc-srvce/mllst/sbscrbchrts-eng.html  To sign up for the Blumbergs’ Charity Law Newsletter see: http://www.globalphilanthropy.ca/index.php/pages/subscribe/

I missed this article by Vancouver Sun columnist David Baines last summer entitled “Baines: Couple who cheated tax department suffer litany of woes: Chartered accountant Martin Johnson and estranged wife Celia Martin failed to declare fees earned on art donation”.  The story talks about some of those involved with a donation to a major Toronto university. 

The T3010 is a great resource on the Canadian charity sector.  We recently reviewed the T3010 Registered Charity Information Return database for 2011 as part of the Sean Blumberg Transparency Project.  The database covers 82,848 of the approximately 86,000 registered charities that had filed their T3010 and were processed into the CRA’s Charity Listing database by November 2012. Canadian registered charities are currently required to disclose on the T3010 in Section D or Schedule 6 certain financial information on assets and liabilities, as well as revenue and expenditures.  We thought it would be interesting to look at the total financial figures for all the Canadian registered charities.  They are presented as both excel format and also inserted into the T3010 itself at the end.  The Canadian charity sector is a vital part of Canadian society and economy.  As you can see from this article it has revenue of over $212 billion and expenditures of over $205 billion.

The Charity Commission of England and Wales has put out a statement on a major scheme involving UK Gift Aid.  From a Canadian perspective it is interesting to see the Charity Commission dealing with this sort of abuse.  In Canada, we have had “abusive charity gifting tax schemes” that over the last decade have issued over $6 billion in tax receipts and according to CRA less than 1% of that amount was spent on charitable activities.  Another interesting point from a Canadian perspective is that unlike what the Charity Commission has done in releasing a statement, CRA cannot make a statement about an existing registered charity.  Under s. 241 of our Income Tax Act (Canada), the Charities Directorate of CRA is prohibited from commenting on a perceived massive abuse of the system by a registered charity until after such charity has lost its registered status (which could take 5-10 years in some cases).  So if CRA sees a major scheme, such as this and if they have concerns they are not allowed to say anything to the public (to protect the reputation of the sector or to protect individual taxpayers from involvement.)  I have made a number of presentations to the Finance Committee were I have encouraged them to change s.241 to allow for CRA to comment on serious abuses by a registered charity. 

The Hamilton Spectator in an article entitled “Redeemer settles $6-million lawsuit with families” is reporting that Redeemer University College has made a payout to settle a lawsuit over receipts it issued as part of a forgiveable loan program. 

For many Canadian non-profits under the CNCA it is easier to file the annual return online.  This can now be done at the Industry Canada’s Online Filing Centre.

In the case of Glooscap Heritage Society v. The Queen, a charity had its charitable status revoked for improperly issuing tax receipts and operating for the benefit of a tax shelter. The Charity filed an objection to the revocation and applied for an order delaying the revocation until their challenge was heard but this objection was ultimately dismissed.  The Court acknowledged that “Glooscap’s activities are socially worthy and important to the community” but the Court noted that “Glooscap’s involvement with the tax shelter is central.”  There is a very important discussion about the issue of reputation.  There is also an interesting recognition by the FCA on the subject of “the regrettable, often abysmal, sometimes unspeakable events surrounding Canada’s history of aboriginal/non-aboriginal relations: Report of the Royal Commission on Aboriginal Peoples: Looking Forward, Looking Backward, vol. 1 (Ottawa: Canada Communication Group Publishing, 1996)”.  In this case the Court noted that Glooscap issued $19,775 in total donations during 2007-2011 that were not related to the tax scheme but issued $116 million in tax receipts related to the scheme.

The Charities Directorate has released a new T3010 (13) Registered Charity Information Return for Canadian registered charities with fiscal year ends after January 1, 2013.  The changes on the T3010 (13) are basically more questions about the political activities of Canadian charities as a result of the 2012 Federal Budget.    Canadian charities will need to answer more questions on political activities in Section C5; and fill out a new Schedule 7, Political Activities.  If your fiscal year end is in 2012 then use the old T3010-1 - otherwise, for those with fiscal year ends after January 1, 2013 use the new T3010 (13). As pointed out to me by Steven Ayer of Common Good Strategies there are also an additional question on receipted foreign funds, more country codes and other small changes.

The Vancouver Sun has recently written an article “Blockbuster donation of ‘Michelangelo’ sculptures turns into multi-million-dollar bust: Sotheby’s says tiny terracotta sculptures are worth $200,000 to $300,000, a fraction of their appraised value”.  The article discusses the valuation of certain sculptures donated to a Canadian registered charity and using the Cultural Property Export Review board for the donation. 

The CRA recently wrote a letter in French on whether charitable foundations are allowed to make gifts to section 501(c)(3) US charities, because of paragraph 7 of article XXI of the U.S. Tax Convention?  The CRA answered no.  Their reason is that American charities are not deemed to be qualified donees under paragraph 7 of article XXI of the Canada-U.S. Tax Convention.

The CRA provided its view on whether a non-profit organization meets the requirements of paragraph 149(1)(l) of the Income Tax Act. CRA found that the organization was not operating for a purpose other than profit and income was being made available to its members, so it did not meet the requirements under the ITA. In this case, the corporation had a large amount of excess income and was using that income for purposes unrelated to the organization’s non-profit purposes (such as providing loans to members or shareholders and long-term investments). A not-for-profit organization under paragraph 149(1)(l) can earn a profit but it must be incidental and arise from activities connected to its non-profit objectives. Also, an organization that retains excess funds in order to invest them and earn income is not considered to be operating exclusively for a purpose other than profit.

Here is a recent letter from CRA dealing with whether a non-profit organization meets the requirements of paragraph 149(1)(l) of the Income Tax Act. In this case, the organization purchased and financed a taxable organization, and it appeared that there was a consistent amount of excess revenues in comparison to expenditures in some years. This suggests there may be a profit purpose. CRA found that the organization was not organized and operating for a purpose other than profit so it did not meet the requirements of paragraph 149(1)(l) of the ITA.

Here is a CRA letter on payment plans in respect of membership fees for dining, recreational or sporting facilities