In a recent ruling, the Canada Revenue Agency ("CRA") confirmed that a not-for-profit organization ("NFP") making payments to members under what appears to be a program relating to employment insurance would not lose its tax-exempt status under paragraph 149(1)(l) of the Income Tax Act (Canada). The redactions in the ruling make it difficult to determine precisely what the program of the relevant NFP covers, but the ruling request appeared to be triggered by changes to the Employment Insurance Act dealing with benefits for self-employed individuals. As a result of those changes, the NFP amended the eligibility criteria for its program, under which payments were made to members who meet the program's eligibility criteria and who made the appropriate application. The facts in the ruling specifically note that the NFP's program is funded solely by member's fees and "no income, interest or otherwise, is or will be attributed" to the funds used to make payments to the members. Given that the payments at issue seem to be funded solely by member contributions, and not income of the NFP, it is reasonable to conclude that the ruling is in line with the express wording of the paragraph 149(1)(l) exemption, which only prohibits an NFP's income from being made available to an NFP's members. Further, distributions of member's contributions to the members of an NFP have generally not been problematic from the CRA's point of view. Interested readers can view the full ruling here: http://taxinterpretations.com/?p=23460.
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