CRA released a letter which discusses whether a member of a not-for-profit corporation without share capital is a “shareholder” within the meaning of that term in subsection 248(1) for purposes of subsection 15(1) of the Income Tax Act. CRA’s view was that members of a non-profit corporation without share capital, in this case a family recreational club, will be considered shareholders thereof for purposes of subsection 15(1) of the Act, notwithstanding that they are not entitled to receive dividends.

CRA stated the following:

“…as indicated in our technical interpretation 2011-0415831E5 dated November 17, 2011, the CRA has adopted the interpretation that “a member of a society incorporated or continued under the Canada Not-for-profit Corporations Act, under Part II of the Canada Corporations Act, under a provincial societies Act or equivalent provincial legislation would generally be considered a shareholder under subsection 248(1), and therefore subject to the application of subsection 15(1) of the Act, notwithstanding that the society or corporation is prohibited from paying dividends to its members.”

View CRA letter – Is a member a shareholder of a not-for-profit corporation [PDF]