A non-charitable, non-profit organization is required by
the Income Tax Act of Canada to be
“operated for a purpose other than profit.” In
the past, the CRA has suggested that any accumulation of surplus by
an NPO beyond its immediate need for cash would by itself cause the
organization to fail this requirement. However, the CRA has
just issued a helpful technical interpretation that confirms
accumulation of surplus may not be fatal to tax exemption.
In CRA Document 2019-0825751E5 issued in February of 2021 but
only just released, the CRA commented on a technical interpretation
request made on behalf of an NPO that wished to use its surplus to
establish a business that would generate funds to support its
non-profit purpose. Unsurprisingly, the CRA confirmed that
the establishment and operation of such a business would disqualify
the organization as it would involve a profit purpose, even where
the profits were used for the organization's purposes.
However, the
