Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Is a non-profit organization allowed to run charitable fundraising events under paragraph 149(1)(l) of the Act?
Position: It depends on the scope of the fundraising activities of the NPO. If the scope is limited, the NPO is allowed to run fundraising events under 149(1)(l) of the Act. However, if the scope of the fundraising activities is significant, fundraising can be considered a purpose of the organization, in which case the organization may not qualify as a paragraph 149(1)(l) entity.
Reasons: Limited fundraising activities involving games of chance, including lotteries or draws, or sales of donated or inexpensive goods, including bake sales, plant sales, or chocolate bar sales, generally do not indicate that the organization as a whole is operating for a profit purpose.
Author: Mahendran, Ananthy
June 7, 2019
The Honourable Diane Lebouthillier, Minister of National Revenue, received your correspondence about the tax situation of a non-profit organization, XXXXXXXXXX. She has asked me to reply on her behalf. Thank you for your understanding regarding the delay of this response.
I note your specific concerns about the non-profit organization’s eligibility requirements to be a tax-exempt entity. While the confidentiality provisions of the Income Tax Act prevent me from discussing the affairs of other taxpayers with you, I assure you that the Canada Revenue Agency (CRA) is committed to applying the tax laws consistently and fairly.
The CRA’s general views regarding non-profit organizations are contained in Interpretation Bulletin IT-496R, Non-Profit Organizations, available at canada.ca/en/revenue-agency/services/forms-publications/publications/it496r. This bulletin explains that, in general terms, paragraph 149(1)(l) of the Act provides that a club, society, or association is exempt from tax under Part I of the Act for a period throughout which it complies with all of the following:
a) It is not a charity.
b) It is organized exclusively for social welfare, civic improvement, pleasure, recreation, or any other purpose except profit with no income available for the personal benefit of its members or shareholders.
c) It is operated exclusively for the same purpose for which it was organized or for any of the purposes mentioned in (b).
d) It does not distribute or otherwise make available for the personal benefit of a member or shareholder any of its income, unless the organization is an association whose primary purpose and function is the promotion of amateur athletics in Canada.
In particular, you ask for a clarification as to whether a non-profit organization is allowed to run charitable fundraising events under the Act. Generally, fundraising, by its very nature, is considered a for-profit activity. However, the CRA accepts that certain fundraising activities can be carried on directly by a paragraph 149(1)(l) entity without jeopardizing its tax-exempt status. Limited fundraising activities involving games of chance, including lotteries or draws, or sales of donated or inexpensive goods, including bake sales, plant sales, or chocolate bar sales, generally do not indicate that the organization as a whole is operating for a profit purpose. However, the scope of the fundraising activities, especially by comparison with other activities, should not be so significant that fundraising can be considered a purpose of the organization, in which case the organization may not qualify as a paragraph 149(1)(l) entity.
I appreciate the opportunity to respond to your concerns and trust the information I have provided is helpful.
Legislative Policy and Regulatory Affairs Branch
Canada Revenue Agency
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