3 August 1994 Internal T.I. 9414206 - ASSOCIATED EMPLOYERS

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Whether particular registered charities designated as associated charities pursuant to subsection 149.1(7) would be considered associated employers for purposes of the UI Tax Credit provided in section 126.1?

Position TAKEN:

NO.

Reasons FOR POSITION TAKEN:

The particular registered charities would not considered associated employers as defined in subsections 126.1(2) & (3).

		August 3, 1994

A. Bissonnette Head Office
Director Rulings Directorate
Source Deductions Division W.P. Guglich
(613) 957-8953
941420

UI Premium Tax Credit ("UI Credit")

This is in reply to your memorandum of May 30, 1994 wherein you requested our views as to whether XXXXXXXXXX charitable organizations would be considered "associated employers" for purposes of the UI Credit provided in section 126.1 of the Income Tax Act (the "Act").

Our understanding of the relevant facts is as follows:

Charities Division advised that there are across Canada XXXXXXXXXX charitable organizations, as defined in paragraph 149.1(1)(b) of the Act. Each one files T3100 returns ("Registered Charities Information Return") and each one has been assigned a separate registered charity number. They are all designated as a charity associated with the XXXXXXXXXX pursuant to subsection 149.1(7) of the Act. This designation is relevant for purposes of paragraph 149.1(6)(c) of the Act. Although all the separate organizations operate independently they must follow the directives, objectives and guidelines established by the XXXXXXXXXX

If all the XXXXXXXXXX organizations are considered one employer or if they are considered associated employers they would not qualify for the UI Credit as the premiums would exceed the limit. However, if they are all separate unassociated employers most would qualify for the UI Credit.

OUR VIEWS

All the XXXXXXXXXX organizations would be considered registered charities as defined in subsection 248(1) of the Act. Since each registered charity qualifies for exemption under subsection 149(1) of the Act each would be considered a person as defined in subsection 248(1).

For purposes of section 126.1 of the Act Employer is defined in subsection 126.1(1) to mean:

"...... any person ...... that has a qualifying employee in 1992 or 1993".

Where the employer is a registered charity exempt from tax under subsection 149(1) of the Act "qualifying employee" of an employer is defined in subsection 126.1(1) to mean:

"any employee of the employer".

Since each separate organization operates independently and would be considered a person as defined in subsection 248(1) of the Act each of the XXXXXXXXXX organizations would be considered a separate employer.

Subsection 248(1) of the Act defines registered charity to include a charitable organization, private and public foundation or a branch, section, parish, congregation or other division of such an organization or foundation.

"Person" is defined in subsection 248(1) of the Act to include any entity exempt from tax under Part I because of subsection 149(1) and "individual" is defined to mean a person other than a corporation.

Since each of the XXXXXXXXXX organizations are registered charities and are exempt under subsection 149(1) each organization would be considered a person and an individual for purposes of the Act.

Paragraph 126.1(3)(a) of the Act provides that:

".... in determining for purposes of this section whether 2 or more employers are associated with each other at any time, ....

where an employer at any time is an individual, the employer shall be deemed at that time to be a corporation all the issued shares of the capital stock of which, having full voting rights under all circumstances, are owned by the individual".

Paragraph 126.1(2)(a) of the Act provides that for purposes of this section any employers that are corporations that are associated with each other at any time shall be deemed to be employers that are associated with each other at that time. As none of the XXXXXXXXXX deemed corporations could be considered to be associated under the provisions of section 256 of the Act respecting "associated corporations", none of these XXXXXXXXXX organizations would be considered associated employers for purposes of section 126.1. Although the designation under subsection 149.1(7) results in the separate organizations being deemed to be associated charities, it does not result in the organizations being deemed to be associated employers.

Therefore, the XXXXXXXXXX organizations would not be considered to be associated employers.

To summarize, it is our view that for purposes of section 126.1 of the Act the XXXXXXXXXX organizations would be considered separate employers who are not considered to be associated employers.

Unless as otherwise stated all references to statute are to the Income Tax Act S.C. 1970-71-72, c.63 as amended consolidated to June 10, 1993.

We trust our comments will be of assistance.

B.W. Dath
Director
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch