September has brought with it the release of two new technical interpretations regarding not-for-profit organizations from the Canada Revenue Agency ("CRA").
- a condo corporation can sell its caretaker suite at fair market value without jeopardizing its tax-exempt status;
- the CRA will likely consider a condo corporation renting out its caretaker suite at fair market value to have a profit purpose, which would jeopardize the condo corporation’s tax-exempt status (this is consistent with previous statements made by the CRA on the issue);
- a condo corporation can convert its caretaker suite into a guest suite and rent it out to condo guests without jeopardizing its status as long as the rental income is “not material”. Conversely, if the suite is rented out at fair market value, the condo corporation’s tax-exempt status could be at risk as it may be considered to have a profit purpose. The CRA went on to note that rental of the guest suite out to members at cost or for an amount less than fair market value could result in a taxable shareholder benefit to members, which are considered to be shareholders for the purposes of the shareholder benefit provisions in the Income Tax Act;
- a condo corporation can convert its caretaker suite into a facility to be used for other purposes, such as a fitness centre and charge a fee for access to the facility. However, if this is done in a manner that allows the corporation to make a profit, this could jeopardize the corporation’s tax-exempt status.