Non-Profits that are not registered charities

October 27, 2014

The Commissioner of Competition v. The Toronto Real Estate Board -non-profit abuse of market power

It is common to have a non-profit organization whose members are various business delivering a product or service.  For example, real estate agents, mortgage brokers, and others.   In a recent case the Commissioner of Competition v. The Toronto Real Estate Board the Federal Court of Appeal held that the abuse of dominance provisions in the Competition Act are not limited to competitors in a relevant market. Trade associations, large suppliers or customers and other persons with market power can also be found to be engaging in anti-competitive acts, notwithstanding the fact that they do not compete in the relevant market. Persons with influence or control over a market should be careful that their actions do not result in anti-competitive acts that are predatory, exclusionary or disciplinary.

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June 06, 2014

Ontario Ministry confirms delay of ONCA until 2016

The Ontario Ministry has provided an update on their website with respect to the Not-for-Profit Corporations Act, 2010 ("ONCA") under 'ONCA: Frequently Asked Questions" which indicates that the ONCA is not expected to come into force before 2016. Initially there were discussions that the ONCA may come into force in 2015 but it appears that this is no longer the case.

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May 30, 2014

Societies Act in Alberta is amended to allow continuances to/from other jurisdictions

On May 14, 2014, Alberta's Bill 12 - Statutes Amendment Act, 2014 received Royal Assent (it has not yet come into force). The Alberta Societies Act  which governs many not-for-profit corporations in Alberta is one of the statutes that was amended as a result of the Bill. There has been a significant amendment to the Societies Act which allows for not-for-profit organizations incorporated in Alberta to continue to other jurisdictions (such as the Federal Canada Not-for-profit Corporations Act (CNCA)) and allows for those not-for-profit organizations incorporated in other jurisdictions to continue in Alberta.

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April 09, 2014

Bill 85 enters its Second Reading on Thursday in the Ontario Legislature

This Thursday, Bill 85 - An Act to amend various companies statutes and to amend other statutes consequential to the Not-for-Profit Corporations Act, 2010 will enter its Second Reading by the Ontario Legislature and then be referred to a Standing Committee. This Bill, which had its first reading on June 5, 2013, proposes some amendments to the Ontario Not-for-Profit Corporations Act ("ONCA").  This Bill is similar to the earlier version.   There has been a significant delay of the implementation of ONCA and passing this Bill will be an important step in moving the process forward.  

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March 19, 2014

List of Ontario Non-Profit Corporations finally revealed for the first time

Here is a list of the Ontario non-profit corporations under the Ontario Corporations Act.  There are 59,605 Ontario corporations on the list.  The list is 1084 pages long.  Some of the Ontario corporations are active and some are inactive.  We think that it is important for organizations to be able to have a public list so that they can easily determine whether or not they are an Ontario corporation.  

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March 02, 2014

Time is not on your side – A Primer on the CNCA Continuance with Mark Blumberg

Federal non-profit corporations under the Canada Corporations Act (CCA) have until October 17 to continue/move over to the new CNCA.   Here is a short webinar with 15 slides and takes 15 minutes on the CNCA continuance process.  If you have not completed the process you need to get moving. Federal non-profits that are dissolved will also end up losing their charitable status with all the related consequences.     View WEBINAR

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February 28, 2014

Kérouac v The Queen - municipality in charity scheme cannot safeguard dignity, honour, reputation

Here is an interesting case in which a municipality, that was allegedly involved in a charity scheme, wanted leave to intervene in a Tax Court of Canada matter involving a donor who had made a donation to the municipality. The TCC maintained “The Municipality is in no way subject to a tax assessment related to the one at issue in this appeal and the judgment in this appeal cannot have a financial impact on the Municipality.”

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February 22, 2014

CRA “Non-Profit Organization Risk Identification Project Report” released

The CRA has just released its Non-Profit Organization Risk Identification Project Report.  The relatively short report makes for interesting reading.  It deals with the 80,000 or so non-profits that are not registered charities.  This will have an impact on groups involved with amateur athletics, business associations, social clubs etc.  The report discusses the requirements for these type of entities and how there is some minor and also serious non-compliance with those current requirements.  The 2014 Federal Budget had promised a review of these type of non-profits and the release of this report is one piece of that discussion.

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February 10, 2014

2014 Federal Budget and its Impact on Canadian Charities

Today Finance Minister Jim Flaherty introduced the Canadian Federal Budget 2014.  The budget had a large number of provisions dealing with non-profits and charities. Here are some excerpts from the Federal Budget in one PDF document.    Overall I was very pleased with the provisions of the budget dealing with charities.

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January 05, 2014

CRA releases list of “municipal or public body performing a function of government in Canada”

There is a category of qualified donee, ie. organizations that can issue tax receipts, called “municipal or public body performing a function of government in Canada”.  This group is largely first nations bands but also could include school districts or certain other types of entities.  CRA has just released the list and it contains 60 groups.  Hopefully the number will rise.  It is important for Aboriginal groups that need funding from foundations or wish to issue official donation receipts for gifts consider obtaining this status.  Here is a list of “municipal or public body performing a function of government in Canada”:

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October 19, 2013

Updated Canada Not-for-profit Corporations Act Suitcase from Blumbergs

Here is an updated from Blumbergs Canada Not-for-profit Corporations Act (CNCA) Suitcase .  The Canada Not-for-profit Corporations Act (CNCA) came into force on October 17, 2011.  Organizations now have less than one year to continue to the new act or face involuntary dissolution and if you are a charity then loss of registered charitable status.  You might find the CNCA Suitcase a useful resource.

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September 22, 2013

CRA letter on receiving donations from members to fund a capital project

CRA released a letter which discusses whether an organization that is exempt from income tax can receive donations from its members and businesses affiliated with its members to fund a capital project. CRA ruled that this was acceptable provided that the capital project is funded with member contributions and gifts. An increase in services to its members will not indicate that income has been made available to its members if the donation is made through a member contribution or gift.

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September 04, 2013

Ontario Ministry of Consumer Services releases updated information and resources on the ONCA

The Ontario Ministry of Consumer Services has provided an update today on the implementation status of the Not-for-Profit Corporations Act, 2010 (ONCA). The Ministry notes:  “The Act is targeted to come into effect in 2014. Amendments to more than 80 statutes including the Act were introduced in the legislature in June 2013. It is anticipated that these amendments will be debated in the legislature in fall 2013. If the amendments are passed by the legislature, the Act is anticipated to come into force no earlier than six months after passage in order to ensure adequate time for not-for-profit corporations to prepare for transition.”  In other words the ONCA is slated probably to come into effect around July 1, 2014!

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August 09, 2013

CRA letter on capital gain on sale of property by NPO

CRA recently released a letter which discusses whether a capital gain resulting from the sale of real property by an NPO qualifies for the exemption from tax under subparagraph 149(5)(e)(ii) of the Income Tax Act. Income from property (including capital gains) earned from investments and other assets that are not exclusively and directly used in providing the services of the organization will be taxed. The NPO in this circumstance was providing recreational and sporting facilities to its members, however in order to determine whether this was the ‘main purpose’ of the organization is a question of fact. CRA stated the following:

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July 31, 2013

New numbers on the CNCA and continuances from Industry Canada

I recently received updated numbers from Industry Canada on the CNCA.  they show some progress but a lot more needs to be done.

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July 04, 2013

Is your Band or Aboriginal group affected by recent Canada Revenue Agency changes

Many Aboriginal groups or bands either currently receive or could receive funding from Canadian charities and foundations.  Some of these Aboriginal groups who are receiving funding do so on account of their special status of being a “municipal or public body performing a function of government in Canada”.  There are important changes recently announced by CRA that will affect over a thousand Aboriginal groups in Canada receiving funding or donations from Canadian charities or individuals.  Many of the groups may need to make an application to CRA in order to preserve their ability to issue official donation receipts and accept gifts under the Income Tax Act (Canada).

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June 28, 2013

GST/HST Ruling - Determining if an entity is a non-profit organization

The Excise and GST/HST Rulings Directorate of the CRA released a ruling in March regarding the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) in determining whether an entity is a non-profit organization. The GST/HST Rulings Directorate held that the Corporation was not organized solely for a purpose other than profit and therefore the Corporation is not a non-profit organization under the ETA.

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May 31, 2013

CRA letter on 149(1)(l) non-profit interest expense

Here is a letter from CRA dealing with a non-profit that has an interest expense.  The main issue was “Whether the interest expense incurred to renovate a building of a 149(1)(l) entity may be deducted from interest income earned on various GIC investments that is to be taxed in the deemed trust under 149(5).”  CRA’s position was that it could not.  The summary was that “Interest expense incurred to renovate a building is not incurred to earn the revenue earned on GIC investments.”

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May 24, 2013

Industry Canada starts sending out default notices under the CNCA

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

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May 12, 2013

CRA letter responding to questions from 2011 CTF National Conference CRA Round Table

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.

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April 24, 2013

CRA releases updated Guide on GST-HST information for Non-Profit Organizations

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.

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March 28, 2013

ONCA delayed again - implementation no earlier than January 2014

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.

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March 12, 2013

CRA letter on whether organization qualifies as a non-profit when it has a reserve

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.”

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March 12, 2013

CRA letter on non-profit providing funds to members and whether it affects status

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.”

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February 27, 2013

CRA View - Qualifying as a non-profit

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”.

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Do you require legal advice with respect to Canadian or Ontario non-profits or charities?

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Charity Lawyer Mark Blumberg

Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.

mark@blumbergs.ca
416.361.1982
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