During the Canada Revenue Agency (“CRA”) roundtable session at the recent 65th Canadian Tax Foundation Annual Conference, the CRA was asked to provide an update with respect to its Non-Profit Organization Risk Identification Project. This project was commenced three years ago and wrapped up just this past summer.
During the course of the project, the CRA examined 1437 non-profit organizations (“NPOs”) out of the 35,000 it reportedly has in its database. The purpose of the project, said the CRA, was to see if there were any risks with respect to NPOs and to identify those risks, warning signs of which include a high level of business activity and huge reserves. When discussing red flag areas in the NPO sector, the CRA specifically mentioned NPOs involved in the insurance industry. Signalling that the project is now complete, the CRA commented that paragraph 149(1)(l), which is the provision in the Income Tax Act (Canada) providing NPOs with an exemption from tax, is very old and “needs attention”. Now that the project is complete, the CRA indicated that its next steps are to discuss its findings with the Department of Finance and the results of the project will be shared “soon” – so stay tuned!