Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
XXXXXXXXXX
Dear XXXXXXXXXX:
Thank you for your letter of November 20, 1998, concerning XXXXXXXXXX.
The confidentiality provisions of the Income Tax Act preclude me from commenting on either the activities of XXXXXXXXXX, or its tax status. However, I can describe Revenue Canada's approach to non-profit organizations.
A number of conditions must be complied with before an organization can qualify as a tax-exempt non-profit organization under the Income Tax Act. I enclose a copy of Interpretation Bulletin IT-496 Non-Profit Organizations, which explains these conditions. Primarily, the organization must be organized and operated exclusively for social welfare, civic improvement, pleasure, recreation or any other purpose except profit. As well, any income that is earned must not be paid or made available for the personal benefit of any proprietor, member or shareholder thereof.
In cases challenged by this department, the courts have generally adopted the view that non-profit organizations are not prevented from earning profits from commercial endeavours, provided such profits are used by the organization for the purpose of achieving its declared goals and objectives.
While this department recognizes that non-profit organizations can earn profits, I assure you that it does question the non-profitable status where the profits earned appear to be excessive for the purposes for which the organization was originally created. A non-profit organization's tax exempt status is not jeopardized where commercial activities are carried out in taxable subsidiaries of the non-profit organization. In such cases, the commercial activity does not enjoy a competitive advantage on the basis of the organization being tax exempt.
I trust this information is of assistance.
Yours sincerely,
Herb Dhaliwal, P.C., M.P.
Attachment
C.C. Minister's Office
Political Assistant
C.B. Darling
957-9767
December 8, 1998