11 January 1993 Income Tax Severed Letter 923594 - Surplus funds used to subsidize membership fees

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.

                                           923594
XXXXXXXXXX                                 W.P. Guglich
                                           (613) 957-2102

Attention: XXXXXXXXXX

January 11, 1993

Dear Sirs:

Re: Exempt Status of Local Chapters

This is in reply to your letter of November 16, 1992 which was referred to us by the XXXXXXXXXX District Taxation Office, for a reply.

You indicate in your letter that the membership of the national organization is made up of local chapters. The local chapters have as their members individual persons who join. For each individual member the local chapters are required to submit $x to the national organization. The local chapter may collect membership fees of $x plus and retain the excess for operational expenses.

Some local chapters realize a surplus from their community activities (e.g., Santa Claus parade). Such surplus is used to subsidize the membership fees for all members. You are concerned that the use of the surplus to subsidize the membership fees may jeopardize the local chapter's non-profit status under paragraphs 149(1)(e) or 149(1)(l) of the Income Tax Act (the "Act").

In our view a local chapter would not be denied exempt status under paragraphs 149(1)(e) or 149(1)(l) of the Act, merely because its surplus funds are used to finance its non-profit activities for which members would ordinarily be required to pay by way of membership fees.

We trust our comments will be of assistance.

Yours truly,

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