2015-0580541E5 T1044 Filing Requirements

Principal Issues: Whether the Association is required to file form T1044.

Position: Yes.

Reasons: See below.

Author: Meers, Rob
Section: 149(12)

XXXXXXXXXX                                      2015-058054
                                                              R. Meers
                                                              (613) 670-9037

April 23, 2015

Dear XXXXXXXXXX:

Re: T1044 Filing Requirements

This is in response to your letter dated March 22, 2015, inquiring as to whether XXXXXXXXXX (the “Association”) of which you are the treasurer is required to file form T1044, Non-Profit Organization (NPO) Information Return. In particular, you want to know whether the Association’s decision to elect to measure its tangible capital assets at the date of transition at the assets’ fair market value (“FMV”) and to use that FMV as its deemed cost in transitioning to the Canadian Accounting Standards Board’s new accounting standards for NPO’s impacts its requirements to file form T1044. In this letter, unless otherwise expressly stated, all statutory references are to the provisions of the Income Tax Act (the “Act”).

This technical interpretation provides general comments about the provisions of the Act. It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R6, Advance Income Tax Rulings and Technical Interpretations. Although we cannot comment on your specific situation, we are able to provide the following general comments, which may be of assistance.

Subsection 149(12) states that every person who, because of paragraph 149(1)(e) or (l), is exempt from tax under this Part on all or part of the person's taxable income shall, within 6 months after the end of each fiscal period of the person and without notice or demand therefor, file with the Minister an information return for the period in prescribed form and containing prescribed information, if:

(a) the total of all amounts each of which is a taxable dividend or an amount received or receivable by the person as, on account of, in lieu of or in satisfaction of, interest, rentals or royalties in the period exceeds $10,000;
(b) at the end of the person's preceding fiscal period the total assets of the person (determined in accordance with generally accepted accounting principles) exceeded $200,000; or
(c) an information return was required to be filed under this subsection by the person for a preceding fiscal period.

Based on the information provided, by electing to measure its assets at FMV at the date of transition and using that FMV as its deemed cost from that date, the Association’s total assets now exceed $200,000. Given that this is the cost in accordance with generally accepted accounting principles (“GAAP”), it is our position that the Association is required to file form T1044.

You indicate in your submission that the Association has taken the view that it is not required to file form T1044 as it does not meet any of criteria requiring it to file. You reference that T4117, Income Tax Guide to the Non-Profit Organization (NPO) Information Return, states:

      “Line 114 – Fixed Assets
Fixed assets include land, buildings, and equipment. Report fixed assets on hand at the end of the organization’s fiscal period at their book value. For depreciable assets, book value equals the cost of the asset minus accumulated depreciation. For all other assets, it equals the cost.”

However, as indicated above and in T4117 under the section “Does the organization you represent have to file a NPO Information Return?,” the amount of the organization’s total assets is the book value of these assets calculated using GAAP. By making the election on the transition to the new NPO Accounting Standards the deemed cost is the FMV at the transition date. As a result, the Association’s total assets exceed $200,000 and it must file form T1044.

We trust that these comments will be of assistance.

Yours truly,

Roger Filion, CPA, CA
Manager
Non-Profit Organizations and Aboriginal Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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