Non Profit Tax Exempt Entities

March 29, 2012

Absent from the Budget is any proposal to alter the current regime that exempts non-profit organizations that are not charities, from tax on their income.

Organizations that do not otherwise qualify as charitable but are otherwise organized for social welfare, civic improvement, recreation or any purpose other than profit, are exempt from tax under paragraph 149(1)(l) of the Income Tax Act.  This long standing exemption from tax (it was originally enacted in 1917) has come under much
greater Canada Revenue Agency scrutiny in the past few years.

The Canada Revenue Agency is engaged currently in a program of auditing non-profits across Canada.  It is understood at this time that the audit initiative would target 1400 organizations and is an information gathering program to give the government a better understanding of the revenue generation activities pursued by tax exempt non-profit organizations.

Some in the sector were concerned that the Government would introduce changes to the non- profit tax exemption provisions in this Budget.  It did not.  We continue to encourage the Department of Finance and the Canada Revenue Agency to consider entering into a dialogue with sector organizations if they have concerns in this area before making ill-conceived changes to the current regime.

Those who are interested in reading about other sections of the Budget may wish to consult Miller Thomson’s general Budget Release.

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