Under the leadership of its Co-Chair, Sid Gould, InsideArt Cooperative has been successful in stating its case to the Canada Revenue Agency (CRA) that this non-profit cooperative is not subject to the payment of corporate tax on its net income.InsideArt was counseled by an accountant specialized in co-op taxation that it must file a T2 (corporate tax return) as a Canadian Controlled Private Corporation (CCPC), and would be taxed at the CCPC rate on their net income. This position was affirmed as one commonly held by many co-op developers in BC.After having reviewed available technical and information bulletins, relevant sections of the federal Income Tax Act, previous Ministerial decisions, and previous court rulings on this issue, Mr. Gould argued to CRA in August that InsideArt Cooperative was exempt under section 149(1)(l), outlining these points:

1. InsideArt Cooperative was incorporated specifically as a non-profit cooperative.
2. Members of the cooperative may not, given the non-profit status, receive any benefit from any funds in excess of those necessary for the operations of the cooperative (profit) and further, are not entitled to any funds or assets should the cooperative cease operations and be required to disburse the same.
3. Although the cooperative engages in commerce, it does so with a specific mandate to improve the conditions of its members, most of whom exist on the margins of society. Similar rules and precedent exist for exempt organizations under section 149 (1) (l) as exist for charities. That is to say the mere existence of commercial operations does not automatically deny an organization the exemption. In this case, it is the very commercial operations which are so necessary to achieve the social benefit for which the cooperative was formed.
4. The cooperative was started as a community economic development project as a method to build capacity of those in the less enabled strata of our society, using business skills to enable the marginalized to exist with less reliance on the social safety net.

'Nil' T2 returns were filed with the letter of argument, along with InsideArt's mission and vision statements (pasted to the end of this email). Last week, Letters of Assessment were issued by CRA agreeing with the 'nil income tax owing' claim.This, we believe, sets a useful precedent for those operating non-profit cooperatives which engage in commerce specifically for the purpose of empowering the marginalized.The Fraser Valley Centre for Social Enterprise continues to work on CRA issues related specifically to social enterprise operations in Canada.