Moore Stephens
Canadian news

Revenue diversification by non-profit organizations

This article is taken from our quarterly overview of Canadian news, a newsletter published by the Canadian member firms of Moore Stephens North America. These articles are part of our mission to become the partner of choice for your success by keeping you up to date.

The Income Tax Act (ITA) defines a non-profit organization as “a club, society or association that, in the opinion of the Minister, was not a charity within the meaning of subsection 149.1(1) and that is established and operated exclusively for the purpose of social welfare, local improvement, recreation or entertainment, or any other non-profit activity….”.

In recent years, the CRA has had to rule on numerous occasions, through its technical interpretation process, as to whether, in its opinion, activities carried out by non-profit organizations, such as parking space rentals, revenues generated by the fibre optic network or other similar activities, could affect the organization’s tax status. However, in each of its technical interpretations, the CRA repeats the Court’s argument that profit must be incidental and in support of the organization’s objects.

Possible changes to the ITA

When the 2014 Federal Budget was presented, the Minister of Finance announced his intention to review the tax exemption for not-for-profit organizations, to determine whether it continues to be appropriately targeted, and whether sufficient transparency and accountability provisions have been put in place. To this day, it remains unclear whether the Liberal government elected in 2015 will hold this consultation. The Minister of Finance indicated in November 2016 that holding the consultation was still a possibility, but not a priority at the moment.

Case law

Case law has clarified that it is possible for a non-profit organization to diversify its sources of revenue, while maintaining its non-profit status for the purposes of the ITA. However, as the Court pointed out, in order for the organization’s status to remain unchanged, its activities must be linked to its mission and ancillary to it.

In recent years, it seems that the CRA has taken the same position as the Court. However, the CRA often takes a much stricter view of what is considered an incidental activity related to the organization’s mission.

Conclusion

We believe that non-profit organizations should exercise a certain degree of caution before diversifying their activities. We think it wise to first demonstrate that these activities are related to their mission and that they are ancillary to their activities. This is to ensure that your non-profit status will not be questioned by the CRA.

Written by Marcil Lavallée. This text was written as part of our quarterly overview of Canadian news, a newsletter published by the Canadian member firms of Moore Stephens North America.

Subscribe to receive our advice.

RECENT NEWS

Always well informed

Social Involvement: When Millennials Shake Up Practices

The social involvement of millennials: how this generation is transforming the modern company   The transformation of the business world is taking a new turn under the impetus of millennials. This generation, which represents around 50% of the active workforce in Canada, is redefining the criteria for making purchasing decisions and selecting employers. Social and [...]
READ

Innovation: All You Need to Know About the New CRIC Tax Credit

R&D, innovation and pre-commercialization tax credit: an opportunity for Quebec companies   The Québec 2025 budget introduced a new strategic tax tool for innovative companies: the Refundable Tax Credit for Scientific Research and Experimental Development, Innovation and Precommercialization (CRIC). Designed to boost research and development (R&D) activities and support pre-commercial initiatives, this credit can provide [...]
READ

Financial fraud: pitfalls to avoid to protect your business

The director of an SME specializing in industrial design has just received an e-mail bearing the logo of a government intellectual property agency. The document, adorned with a familiar-looking letterhead, reminds him that his trademarks are expiring, and that an urgent payment of $30,800 is required to maintain his rights. Concerned about protecting his intellectual [...]
READ

How a dashboard can revolutionize your business

In a business world where data is king, companies face a major challenge: transforming their data into strategic decisions. Your organization generates a wealth of valuable information every day, but without the right tools to exploit it, this data often remains under-utilized or misinterpreted. The modern dashboard is much more than a simple reporting tool. [...]
READ

What Is Business Intelligence Powered by Power BI?

Unlock the power of your data! A new business intelligence solution joins DB's arsenal. This new data visualization and interpretation service, powered by Power BI, gives you greater visibility of your performance and enables you to track trends, so you can make informed decisions. The power of business analytics Did you know that: 85% of [...]
READ

Artificial intelligence, machine learning and the accounting profession

This article, written by Scott Nabozniak CPA at Mobrey Gil, is taken from the quarterly overview of Canadian news, a newsletter published by Moore North America's Canadian member firms. The article, on the use of artificial intelligence tools in the accounting profession, is part of our mission to be the ultimate partner in your success [...]
READ

Deferral of Capital Gains Inclusion Rate Changes

The federal government has just announced important news regarding the taxation of investment profits (also known as capital gains): the new capital gains legislation announced in the fall of 2024 has been postponed until January 1st, 2026. The provincial government will follow the same direction as the federal government.

READ
  • Montréal
  • Brossard
  • Close to you wherever you go
  • Laval
  • Montréal
  • Brossard
  • Close to you wherever you go
  • Laval
  • Montréal
  • Brossard
  • Close to you wherever you go
  • Laval
  • Montréal
  • Brossard
  • Close to you wherever you go
  • Laval