Canada Revenue Agency to ease burden on tax exempt corporations

The Canada Revenue Agency (CRA) recently concluded its review and has determined that refunds or rebates will not be withheld from tax-exempt incorporated municipalities, universities, schools, hospitals (MUSH), non-profit organizations (NPOs), federal crown corporations, Indian band councils, and municipal corporations and their subsidiaries when they have outstanding T2 returns. This decision effectively adopts indefinitely the CRA’s 2008 administrative position on this issue.

On April 1, 2007, the CRA implemented the compliance refund hold legislation, which required it to delay paying rebates and refunds until all required returns have been filed. This legislation put an administrative burden on corporate entities in the MUSH, NPO, federal crown corporation, and Indian band sectors because they are exempt from federal income tax and many of these entities had not filed T2 returns in previous years.

The CRA implemented an administrative position in 2008 to ease this burden by not withholding refunds and rebates from these corporations. In 2009, the CRA began an internal review of the effect of the compliance refund hold on tax-exempt corporations.

While refunds and rebates will not be withheld because of outstanding T2 returns, this administrative position does not remove the legislative responsibility of a tax-exempt corporation to file an annual T2 return.

For more information about filing a T2 corporation income tax return, go to www.cra.gc.ca/t2return.