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: Does the Authority qualify as a municipal or public body performing a function of government for purposes of 149(1)(c) of the Act and the definition of a qualified donee in subsection 149.1(1)?
Position: Yes.
Reasons: See below.
July 17, 2015
Charities Directorate IT Rulings Directorate
Policy, Planning and Legislation R. Meers
Place de Ville, TWR-A, 613-670-9037
320 Queen Street, 7th Flr, Rm 07-17,
Ottawa ON K1A 0L5
Attention: Ann Rénöus 2014-055832
Public Body Performing a Function of Government
This is in response to your email dated November 3, 2014 asking for our comments on whether XXXXXXXXXX (the “Authority”), XXXXXXXXXX, is considered to be a “municipal or public body performing a function of government” in Canada for the purpose of paragraph 149(1)(c) of the Income Tax Act (the “Act”) and therefore able to issue donation receipts as a qualified donee as defined in subparagraph 149.1(1)(a)(iii) of the Act. In particular you wanted to know if amendments to the XXXXXXXXXX would change the conclusion in our previous ruling that the Authority was a public body performing a function of government in Canada.
FACTS
The following is our understanding of the facts:
We have previously issued a ruling confirming that the Authority is a public body performing a function of government in Canada. That ruling was XXXXXXXXXX and was based on the following:
1) The Authority, XXXXXXXXXX, was created in XXXXXXXXXX by a special act of the legislature of the Province of XXXXXXXXXX.
2) The Authority is not an agent of the crown.
3) The purpose of the authority is XXXXXXXXXX.
4) The Authority, amongst its powers, has the ability to:
a) expropriate land;
b) raise revenues by means of taxes, levies, XXXXXXXXXX;
c) make bylaws, and may recommend regulations, permitted under the XXXXXXXXXX;
d) enter into an agreement with the government for the collection of taxes;
e) XXXXXXXXXX.
5) XXXXXXXXXX.
6) For major projects, the Province must enter into negotiations with the Authority respecting the Province’s contribution to the capital costs of the project.
7) The Authority must maintain records as outlined in the XXXXXXXXXX and those records may, without charge, be inspected by any person during normal business hours.
8) The Authority must establish and maintain an accounting system in accordance with generally accepted accounting principles. All records of account and other financial records respecting funds that the government has provided to the Authority or to its subsidiaries must be open at all times for inspection by the Auditor General and the Comptroller General.
9) The Board of Directors consisted of XXXXXXXXXX directors. XXXXXXXXXX of the directors were to be appointed by the Province and XXXXXXXXXX directors were to be appointed by the XXXXXXXXXX, and all of the directors had to be elected municipal officials or elected members of the Province’s Legislative Assembly.
XXXXXXXXXX.
XXXXXXXXXX amendments were made to the XXXXXXXXXX in XXXXXXXXXX. As a result the following now applies:
1) XXXXXXXXXX.
2) The Board of Directors of the Authority consists of XXXXXXXXXX individuals appointed as directors by the XXXXXXXXXX Council (a council composed of representatives from each of the XXXXXXXXXX municipalities XXXXXXXXXX) from a candidate list presented by a screening panel, the chair and vice chair of the XXXXXXXXXX Council on XXXXXXXXXX and no more than XXXXXXXXXX minister-appointed directors.
3) The screening panel consists of one individual appointed by each of the following:
a. The Minister
b. The XXXXXXXXXX Council on XXXXXXXXXX
c. The council of the XXXXXXXXXX
d. The board of directors of the XXXXXXXXXX
e. XXXXXXXXXX
4) The XXXXXXXXXX Council may approve or reject any long term strategy or investment plan of the Authority.
5) Submissions to the XXXXXXXXXX Council must include XXXXXXXXXX, taxes and XXXXXXXXXX for XXXXXXXXXX years.
There is no definition of a “municipal or public body performing a function of government in Canada” in the Act. Therefore, whether any organization is a municipal or public body performing a function of government must be determined on a case-by-case basis.
The term “public body” is also not defined in the Act. A public body is typically a body that acquires both its existence and its authority from a statute enacted by a legislature, and whose functions and transactions are for the benefit of, and affect the whole community of, persons to whom its authority extends. Generally, a public body has a governance purpose and is accountable to those governed, regulated or represented by it.
In our view, if a public body is incorporated, the federal government or a provincial or territorial government or the “public” that the corporation is serving or representing should have some specific control over the actions and operation of the corporation and the corporation should be accountable to that government and that public.
In our view, the Authority continues to be a public body; it was constituted by a statute, the XXXXXXXXXX. The XXXXXXXXXX is also where it derives its authority. The services it provides with respect to XXXXXXXXXX benefits and affects the entire region. Although the manner in which the Board of Directors is appointed has changed, the Authority remains accountable to the residents of the region over which it has jurisdiction. The board of directors is comprised of XXXXXXXXXX as well as up to XXXXXXXXXX directors appointed by the Minister and XXXXXXXXXX other qualified individuals appointed as directors by the XXXXXXXXXX Council from a candidate list presented by a screening panel.
The term “function of government” is also not defined in the Act and reference must be made to the ordinary usage of this term. Historically, we have required that to be performing a function of government an entity must have the ability and powers to govern, tax, pass by-laws and/or provide municipal- or provincial-type services to its members or citizens.
We have accepted that providing a range of municipal-type services or providing a key service traditionally offered by the provinces or territories such as social services, oversight of the environment, health services, and education is generally considered to constitute performing a function of government.
The Authority has demonstrated that it is performing a function of government. The Authority has the ability to tax, expropriate land and pass by-laws. It also has the ability to enforce those by-laws. The Authority XXXXXXXXXX as a strategic whole. It is responsible for the XXXXXXXXXX.
CONCLUSION
Based on the criteria discussed above, it remains our view that the Authority is a municipal or public body performing a function of government in Canada for the purposes of paragraph 149(1)(c) of the Act and the definition of a “qualified donee” in subsection 149.1(1) of the Act.
We trust that these comments will be of assistance.
For your information, unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency’s electronic library. A severed copy will also be distributed to the commercial tax publishers, following a 90-day waiting period (unless advised otherwise to extend this waiting period), for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should the taxpayer request a copy of this memorandum, they may request a severed copy using the Privacy Act criteria, which does not remove taxpayer identity. Requests for this latter version should be e-mailed to: LPRA-PLAR ITR-DDI Access Team-Équipe d'Accès. In such cases, a copy will be sent to you for delivery to the taxpayer.
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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