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Here is an excerpt from an article entitled “Debunking Charity Salary Myths” from the American Institute of Philanthropy. This article is particularly relevant to the discussions in Canada about what is appropriate compensation for non-profit employees and Bill C-470. The American Institute of Philanthropy is a tough US charity watchdog.
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An article appeared in the Edmonton Journal October 4, 2010...
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Even so, charities tend to pay less than private-sector firms for similar competencies. For example, the charities in our study pay a median total compensation of roughly $150,000, compared to median salaries at S&P 500 companies of $1 million, excluding bonus packages and stock options that drive the median compensation up to $6.6 million.”
the requirements of the Income Tax Act. In particular, it must: devote its resources to charitable purposes and activities; not pay, or otherwise make available, its income to any of its members (it can however pay reasonable salaries or reimburse reasonable out-of-pocket expenses); issue official donation receipts in accordance with the
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- Overview
- Table of contents
- Is this guide for you?
- Chapter 1 – General information
- Chapter 2 – How to complete the NPO Information Return
- For more information
T4117(E) Rev. 19
Our publications and personalized correspondence are available in braille, large print, e-text, or MP3 for those who have a visual impairment. Find more information at Order alternate formats for persons with disabilities or call 1-800-959-5525.
Unless otherwise stated, all legislative references are to the Income Tax Act and the Income Tax Regulations.
This guide uses plain language to explain the most common tax situations. It is provided for information only and does not replace the law.
•Is this guide for you?
•Chapter 1 – General information
•What is a non-profit organization?
•What is an agricultural organization?
•What is a board of trade or a chamber of commerce?
•Distinguishing a non-profit organization from a charity
This guide is for you if you represent an organization that is:
•a non-profit organization (NPO) as described in paragraph 149(1)(l) of the Income Tax Act
What is a non-profit organization?
An NPO, as described in paragraph 149(1)(l), is a club, society, or association that is not a charity and that is organized and operated solely for: social welfare civic improvement pleasure or recreation any other purpose except profit To be considered an NPO, no part of the income of such an organization can be payable to or available for the personal benefit of any proprietor, member, or shareholder, unless the proprietor, member, or shareholder is a club, society, or association whose primary purpose and function is to promote amateur athletics in Canada. An NPO is exempt from tax under Part I of the Act on all or part of its taxable income for a fiscal period if it meets all of the above requirements for that period. Note Although a factual determination must be made in each case, most residential condominium corporations qualify as non-profit organizations under paragraph 149(1)(l) because they are usually operated for a purpose other than profit. For more information on whether the organization qualifies as an NPO described in paragraph 149(1)(l), see Interpretation Bulletin IT-496R, Non-Profit Organizations.
What is an agricultural organization?
For the purpose of paragraph 149(1)(e), an agricultural organization is an entity organized and operated for one or more of the following purposes: the advancement or furtherance of agriculture the betterment of the conditions of those engaged in agricultural pursuits the improvement of the grade or quality of their pursuits the development of a higher degree of efficiency in their respective occupations
What is a board of trade or a chamber of commerce?
A board of trade or a chamber of commerce is generally an association to promote local commercial interests. You should use this guide if the organization you represent falls into one of the categories of organizations described at the beginning of this chapter. This guide includes general information about Form T1044, Non-Profit Organization (NPO) Information Return, as well as step-by-step instructions on how to complete it.
The information in this section follows the order of the lines on the return, which is divided into the following seven parts:
Part 1 – Identification
Part 2 – Amounts received during the fiscal period
Part 3 – Statement of assets and liabilities at the end of the fiscal period
Part 4 – Remuneration
Part 5 – The organization's activities
What if you need help?
If you need more information after reading this guide, visit Taxes or call 1-800-959-5525.
Forms and publications
To get our forms and publications, go to Forms and publications or call 1-800-959-5525.
Electronic mailing lists
The CRA can notify you by email when new information on a subject of interest to you is available on the website. To subscribe, go to Canada Revenue Agency electronic mailing lists.
Employees must be paid the legally mandated minimum wage, that can differ state-to-state; there is also a federal minimum wage rate. Employers should pay whichever is higher. If employees (not independent contractors - it's important to know the difference !) work more than 40 hours in a work week, be aware that the nonprofit may owe those employees overtime compensation.
Rules and requirements for non-profit organizations • Few legislative requirements for NPOs in order to receive tax exemption. • Do not have to go through a registration process for income tax purposes (self- assessment system). • Do not have to file an annual return unless they meet certain criteria. • Do not have a spending requirement.
People also ask
Do non-profit organizations pay tax?
Does a non-profit organization need to file a tax return?
Does a non-profit organization pay income to a member?
Are non-profit organizations exempt from tax?
What qualifies a non-profit for tax purposes?
Are non-profit organizations tax deductible?
May 11, 2021 · Instead of filing a tax return under the Income Tax Act, non-profit organizations must file the Form T1044, Non-Profit Organization (NPO) Information Return. The Excise Tax Act , which governs the collection and remittance of GST/HST sales tax, has the same definition of “non-profit organization” as the Income Tax Act but does not provide the same blanket tax exemption.
