6 September 1990 Income Tax Severed Letter ACC9676 - Application of Large Corporations Tax to Non-profit Organizations

SEP - 6 1990

Current Amendments                         7-902237
  Regulations Division                     Rulings Directorate
                                           Business and General
                                             Division
B.J. Bryson                                R.D. Mundell
Acting Director                            (613) 957-2139

Application of the Large Corporations Tax to Non-Profit Organizations This is in reply to your memorandum of August 24, 1990 requesting our views on the application of the Large Corporations Tax ("LCT") to non-profit organizations.

Proposed paragraph 181.1(3)(c) contained in Bill C-28, exempts from LCT a corporation that was throughout the year exempt from tax under section 149 on all its taxable income. Subsection 149(5) deems the property of a corporation, described in 149.(1)(1), which has as its main purpose the provision of dining, recreational or sporting facilities for its members, to be property of a trust. Tax under Part I is payable by the trust upon its taxable income computed on its income from property. As the corporation has no taxable income, it would be reasonable to conclude that the existence of subsection 149(5) income would not affect a non-profit corporation's taxable status for LCT. Therefore in our view, where a corporation, which is exempt from Part I tax by virtue of paragraph 149(1)(1) of the Act, earns income which is subject to tax pursuant 149(5), the corporation would be exempt from Part I.3 tax.

Based on the above discussion, as there would be no LCT (Part I.3 tax) and any tax liability arising would be in a trust, it would appear that proposed section 125.3 would have no application.

We trust our comments will prove helpful.

Yours truly,

for Director Business and General Division Rulings Directorate Legislative and Intergovernmental Affairs Branch