Safeguarding a Non-Profit Condo’s Status

Condominium corporations are typically non-profit organizations, making them exempt from income tax. However, according to the Canada Revenue Agency (CRA), a condo corporation could lose its non-profit status if it generates income from activities that are not incidental to the corporation’s overall non-profit objectives.

All of this raises the question: what sort of activities, profits or revenues might jeopardize a condominium corporation’s non-profit status, thereby exposing it to income tax, including tax on interest earned by the corporation’s reserve fund investments?

There are no court decisions on this point; however, the CRA has published a few relevant technical interpretations. It should be noted that the CRA interpretations do not have the force of law, and are only an expression of CRA’s views. A court might rule otherwise.

From a review of the CRA interpretations, it’s not clear when a revenue-generating activity will be considered “incidental” to the corporation’s non-profit status. The most one can say is that it will depend upon the particular circumstances in each case.

In his article, ‘Safeguarding a Non-profit Condo’s Status’, author Jim Davidson summarized the CRA interpretations, including those related to suites, rooftop solar panels, for-profit businesses, telecommunications towers, storage lockers and caretaker suites.

This article originally appeared on the Real Estate Management Industry (REMI) News Network