On 27/03/14 09:06 PM, Michael K wrote:
Is there any legal difference in what we call a “not-for-profit” and a
“non-profit”?
Don't parse the words, no difference has been intended traditionally:
http://en.wikipedia.org/wiki/Nonprofit_organization
There are two different legal senses in which we are a
non-profit/not-for-profit.
* There's our corporate registration under Manitoba's /The Corporations
Act/ . In exchange for the state privilege of incorporation, we have to
operate in accordance with the Act, our articles of incorporation, and
our bylaws which makes us a non-profit.
* There's our (income) tax exempt status under the federal /Income Tax
Act/. Our incorporation status under /The (Manitoba) Corporations Act/
isn't the most relevant thing here, what matters most is our behavior.
The /Income Tax Act/ applies just as much to unincorporated entities --
a group of people who get together for non-profit purpose are an
unicorporated association and are (income) tax exempt -- a group of
people who get together to do business are a partnership and pay tax for
their share of the partnership's income through their personal tax returns.
That being said, our articles of incorporation and bylaws do provide
evidence of our intended behavior in support of our tax exempt status.
But, tax-exempt status doesn't relieve us of our obligation as a
corporation to file a corporate income tax return. Even though no
corporate income tax is owing on any surplus, the income tax return does
provide the feds a good opportunity to assess if our behavior is
consistent with our tax exempt status. Not only can they look for
excessive and unreasonable accumulation of surplus, its also chance to
see if our income and expenses reflect on the kind of behavior that is
consistent with that status. For example, if we had a tax year with
$100,000 in revenue, $15,000 in rent expenses, and $80,000 in salary
expenses (surplus $5,000) it might be kind of suspicious. If it turned
out that the $80,000 in salary was to pay king Ron to be a doorman,
security guard, and couch warmer for 40 hours a week, with such a salary
being completely unreasonable it would be deemed that the primary
purpose of our organization was to enrich Ron and there would be
corporate income tax owing on that $5,000 surplus.
Now, you can find the phrase "not-for-profit" with respect to the
/Canada Not-for-profit Corporations Act/, which you would use if you
wanted to incorporate federally instead of provincially (The Canadian
Hackerspace Association? CHA!)
As they point out in their FAQ:
http://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs04970.html#link6
"""Is an NFP Act corporation automatically considered a non-profit
organization under the Income Tax Act?
No. Incorporation under the NFP Act does not automatically mean that the
corporation will be exempt from tax under the Income Tax Act. More
information on non-profit organization under the Income Tax Act can be
found on the CRA website or by contacting CRA.
"""
This isn't to say that not-for-profit and non-profit mean totally
different things. The feds just happen to use one of these two
interchangeable terms in their incorporation law and another in their
tax law. The same principle applies from above, its not your
incorporation status that makes you (income) tax exempt, its how you
actually behave.
In Manitoba, it seems the preferred term is "non-profit"
http://www.gov.mb.ca/npo/
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