Canadian Tax Adviser
July 2010

Offside Tax-Exempt Loses Status, Open to Indefinite Reassessment

Peter Ranson
Regional Tax, Prince George

In a recent internal technical interpretation (TI), CRA Rulings reminds the Audit division that the CRA can indefinitely assess a taxpayer who makes a misrepresentation on their tax return. This comment was made in response to several questions on whether a particular entity qualifies for the non-profit organization tax exemption and the consequences of ceasing to qualify.

Assessment period
Rulings notes that since the particular entity likely never qualified for the non-profit organization tax exemption, the assessment rules would apply, according to the Administrative Law Section (i.e., the group that deals with assessment and collection issues). Rulings then notes that where a misrepresentation has been made on the return, the normal
3-year reassessment period is suspended, and the CRA can assess indefinitely.

KPMG's observation
Although not specifically stated in the TI, it is implied that the CRA's potential ability to assess the taxpayer indefinitely may apply to an entity that filed as a tax-exempt, but was offside in qualifying for the exemption.

For more information, contact your KPMG adviser.

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