CCI wants to know: Does the tax man cometh?
Condo corporations just can't seem to catch a break these days. First there was HST. Then there is proposed federal flag-flying legislation intended to restrict condos' ability to enforce their rules. Now more financial grief.
The latest from Ottawa is that Canada Revenue Agency is suggesting potentially new tax treatment of various income streams that most condos receive and the possible loss of the not-for-profit status of condos receiving such income. If acted on, this proposal would have major repercussions on condominiums and would require greater financial reporting, additional tax returns and collection/remission of taxes when it might not be necessary or worthwhile. This is just one more costly headache that will complicate the lives of condo directors.
Luckily, the Canadian Condominium Institute is on the case. Their national finance committee is looking to gather and compile information to help spread the word and, presumably, to help develop a position on CRA's proposal and advocate on behalf of condos and their owners.
See below for CCI's call for information that was circulated today. Please submit whatever useful information you can and be sure that your condo joins the local CCI chapter nearest you.
CCI National has become aware that some of our condominium corporation members have recently received letters from the Canada Revenue Agency (CRA) stating that certain types of income earned by the corporation (e.g. rental income from roofs, parking spaces, antennas, etc.) may now be considered taxable. This may potentially cause the condo to lose its NFP status. Such loss of status would have a serious financial impact on condo corporations, as they would become liable for income tax and GST/HST.
As a professional member in the legal/accounting field, we would appreciate knowing if you have experienced this, and if so, would you kindly forward to National Office any correspondence you have received from the CRA (with names blacked out for privacy) so that the CCI-N Finance Committee can compile this information.
It is our hope to get a better picture of what is taking place and to ensure that we can keep our members better informed of any new developments.
We thank you for your assistance.
F. Diane Gaunt
National Executive Director
Canadian Condominium Institute
2175 Sheppard Ave. E., Suite 310
Toronto, ON M2J 1W8
Email: cci.national@taylorenterprises.com
Fax: (416) 491-1670
Although I am a condo owner, I agree with the government that condos should be paying income tax on their Interest Earned on Net Income (Profit) (the Common Surplus).
Many condos keep excess Surplus Balance in their Operating Account. Auditors know about this but do not care. The Surplus accumulates over many years. This does not comply with Section 84(2). It is supposed to be spent on commo expenses. Instead, Boards take more contributions fron owners to pay common expenses. Condos have an advantage. I have children who have to save Reserve money to pay for aging properties. They earn Interest Income and have to pay Income Tax on it. There is a lack of equality here.
I think that condos should be given more opportunities to make money, because they do not have a basement to rent out in order to pay the bills.
This money should be tax free, provided that the money is used to offset the maintenance fee increases and special assessments.