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Tax man stops sending 'education letters'
MAY 18, 2012 CHF Canada has been informed that the Canada Revenue Agency (CRA) is halting its practice of sending “educational letters” to co‑ops and other non-profit housing groups, threatening their tax-exempt status. These letters, which followed selective CRA tax audits, claimed that some common practices, such as rooftop rental, surplus space leasing, investment income and even reducing the housing charges of low-income households, compromised income tax-exempt status.
This change of direction is in response to a letter CHF Canada wrote to the Finance Minister on behalf of a broad coalition of housing stakeholders, including CHF Canada, the Canadian Housing and Renewal Association, the Housing Services Corporation and the Ontario Non-Profit Housing Association. Our letter set out concerns with CRA’s findings, which are based on a new and alarming interpretation of the Income Tax Act. CRA will now discontinue the practice of sending out these opinion letters, and take no action on any of the letters previously issued.
“We are very pleased about the end of these so-called educational letters,” says CHF Canada Executive Director Nicholas Gazzard, “as they were causing unnecessary anxiety among member co‑ops.”
The audits that gave rise to these letters will continue, but only to provide the Department of Finance officials with sufficient data to determine a policy direction. CHF Canada has been assured that housing stakeholders will be fully consulted by Finance in the process of policy development, which could lead to changes to the Income Tax Act to clarify our tax-exempt status.
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