Proposed Changes to the Income Tax Act to Affect RCAAAs

The federal government is in the final stages of reviewing changes to the Income Tax Act that will affect Registered Canadian Amateur Athletic Associations (RCAAAs). The impetus for these changes is the revocation of charitable status from a number of NSOs in recent years (see Football Canada and the Tax Man). It is clear that the Canada Revenue Agency wants to firm up the requirements that need to be met by RCAAAs, which have until now enjoyed special status as registered charities.

Previously, RCAAAs have been governed by various policies of the Canada Revenue Agency dating from 1992. These are published on their web site. To qualify as a Canadian Amateur Athletic Association under the Income Tax Act, the organization had to be a non-profit association that “has as its primary purpose and its primary function the promotion of amateur athletics in Canada on a nation-wide basis”. The CRA website includes two interesting legal cases, AYSA Youth Soccer Association (2007) and Maccabi Canada (1998).

The proposed changes will define Canadian Amateur Athletic Associations as associations “having the promotion of amateur athletics on a nation-wide basis as its exclusive purpose and exclusive function” and “devoting all of its resources to that function”. Furthermore, the definition of “related business” will be the same for RCAAAs as for all charities. NSOs that operate significant commercial ventures will need to consider these changes carefully.

This whole area also gets infinitely more interesting in that NSOs and MSOs will also have to submit new articles of incorporation as part of transitioning to the new Not-For-Profit Corporations Act (NFP Act). These articles will have to align with the proposed new changes to the Income Tax Act, and the need for Canada Revenue Agency approval will introduce another step in the process of compliance with the NFP Act. There is a three year window for compliance, so organization should be working on this now.

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