Principal Issues: [TaxInterpretations translation] Can an agricultural organization come within the provisions of paragraph 149(1)(e) or 149(1)(l)
Position: Question of fact.
Reasons: The conditions for the application of paragraph 149(1)(e) or 149(1)(l) must be satisfied.
XXXXXXXXXX 2007-025294 Michel Lambert CA, M.Fisc. October 12, 2007
Dear Sir,
Purpose: Creation of a non-profit organization
This is in response to your email of August 31, 2007, in which you asked how an agricultural organization can qualify as a not-for-profit organization for income tax purposes.
Unless otherwise indicated, all statutory references herein are to provisions of the Income Tax Act (the "Act").
The situation described in your letter appears to us to be an actual situation involving taxpayers. As stated in paragraph 22 of Information Circular 70-6R5 dated May 17, 2002, it is the practice of the Canada Revenue Agency not to issue written opinions on proposed transactions otherwise than through advance rulings. Furthermore, when it comes to determining whether a completed transaction has received appropriate tax treatment, that determination is made first by our Tax Services Offices as a result of their review of all facts and documents, which is usually performed as part of an audit engagement. However, it is not the Agency's function to conduct an exhaustive study of a particular transaction to determine its tax treatment. This is a task for the taxpayer when planning the transaction or preparing the tax return. The services of a private sector tax professional may sometimes be required. However, we can offer the following general comments that we hope may be helpful to you. These comments may, however, under certain circumstances, not apply to your particular situation.
Paragraph 149(1)(e) provides that no tax is payable under Part I on the taxable income of a person for a period when that person was an agricultural organization no part of the income of which was payable to, or was otherwise available for the personal benefit of, any proprietor, member or shareholder thereof.
In order to benefit from the tax exemption provided for in paragraph 149(1)(e), the taxpayer is not required to obtain a registration. However, the taxpayer must satisfy all the necessary requirements. The Act does not define the term "agricultural organization". Therefore, the term must be given its ordinary meaning.
Paragraph 149(1)(l) provides an exemption from tax under Part I on the taxable income of a club, society or association that, in the opinion of the Minister, was not a charity within the meaning assigned by subsection 149.1(1) and that was organized and operated exclusively for social welfare, civic improvement, pleasure or recreation or for any other purpose except profit, no part of the income of which was payable to, or was otherwise available for the personal benefit of, any proprietor, member or shareholder thereof.
As with paragraph 149(1)(e), the taxpayer is not required to be registered in order to qualify for the exemption from tax under paragraph 149(1)(l). However, the taxpayer must not, in the opinion of the Minister, be a charity and must satisfy all the other requirements of that paragraph. For more information on the application of paragraph 149(1)(l), please refer to Interpretation Bulletin IT-496, which is available on the Agency's Web site at http://www.cra-arc.gc.ca/E/pub/tp/it496r/READ-ME.html. You can also consult the Income Tax Guide to the Non-Profit Organization (NPO) Information Return at http://www.cra-arc.gc.ca/E/pub/tg/t4117/READ-ME.html and the pamphlet Registering a Charity for Income Tax Purposes at http://www.cra-arc.gc.ca/E/pub/tg/t4063/.
As stated in Information Circular 70-6R5, this opinion is not an advance income tax ruling and is not binding.
Best regards,
Manager
Financial Sector and Exempt Entities Section
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch.