CRA recently released a letter which discusses whether certain agencies and boards are considered municipalities or municipal or public bodies performing a function of government and therefore exempt from income tax under paragraph 149(1)(c) of the Income Tax Act  (the “Act”). CRA indicated that it was unlikely that the agencies or boards being inquired about would meet the criteria to be considered a municipal or public body performing a function of government.

However, according to paragraph 149 (1)(d.5) of the Act, there is an exemption from tax for the income of a corporation, commission or association if:

*           not less than 90% of the capital of the corporation is owned by one or more 149(1)(c) entities (e.g., a municipality); and

*           during the period, the income of the corporation from activities carried on outside the geographical boundaries of the 149(1)(c) entities (e.g., boundaries of the municipality) does not exceed 10% of its income for the period.

To read the full CRA letter, please click here.