CRA Non-Profit Organization (NPO) Audit — Montreal CPA Firm Near You: Compliance and NPO Purpose Defense

A CRA Non-Profit Organization (NPO) Audit reviews whether an organization claiming tax-exempt status under paragraph 149(1)(l) of the Income Tax Act is truly operating on a non-profit basis. Mackisen CPA Montreal represents NPOs during these audits, ensuring that operations, surpluses, and expenditures align with the legal definition of a non-profit purpose — not a disguised commercial activity.

Unlike charities, NPOs do not issue donation receipts, but they must demonstrate that all income is used to support members or organizational objectives, not private profit. CRA auditors closely examine budgets, meeting minutes, and retained earnings to verify compliance.

Legal Foundation

Law: Income Tax Act s.149(1)(l) — exempts organizations “not a charity and organized exclusively for social welfare, civic improvement, pleasure, recreation, or any other purpose except profit.”
Jurisprudence: Tourism Industry Association v. The Queen (1994 TCC) — confirmed that reasonable reserves are allowed, but systematic profit-making violates the NPO exemption.

Learning insight: CRA doesn’t challenge community impact — it challenges intent. Mackisen CPA ensures your books prove purpose, not profit.

Why CRA Audits Non-Profit Organizations

CRA’s NPO audits have increased since 2018 due to compliance gaps and recurring surpluses across community and professional associations.
Key audit triggers include:

• Annual surpluses consistently exceeding operating needs.

• Commercial activities resembling for-profit ventures (rentals, sponsorships).

• Incomplete financial statements or missing meeting minutes.

• Related-party transactions or management fees to directors.

• Failure to file Form T1044 when required.

Learning insight: CRA looks for patterns, not excuses. Mackisen CPA transforms those patterns into proof of compliance.

CRA Audit Process for NPOs

1. Information Request: CRA demands governing documents, financial statements, and activity summaries.

2. Purpose and Operation Review: CRA evaluates whether bylaws restrict profit distribution.

3. Surplus and Reserve Analysis: CRA determines if retained earnings are excessive or earmarked for legitimate future projects.

4. Revenue-Activity Assessment: CRA reviews sources like rentals, sponsorships, and event income for commercial character.

5. Final Decision: CRA may confirm NPO status, require changes, or revoke exemption if profit motive is found.

Learning insight: CRA expects stewardship, not spontaneity. Mackisen CPA prepares you for every question before it’s asked.

Mackisen CPA’s NPO Audit Defense Framework

• Governance Review: Confirm bylaws, resolutions, and board decisions align with non-profit objectives.

• Financial Reconciliation: Match income and expenditures to member services and community programs.

• Surplus Allocation: Document reserve policies and approved reinvestments.

• Commercial Activity Analysis: Separate member-based and public activities for proper tax treatment.

• CRA Representation: Manage all correspondence, explanations, and appeal submissions.

Learning insight: The difference between profit and purpose lies in paperwork. Mackisen CPA makes that paperwork your protection.

Common Red Flags

• Accumulated surpluses with no defined reinvestment plan.

• Director remuneration without supporting resolutions.

• Sponsorship or rental income exceeding member fees.

• For-profit subsidiaries not properly segregated.

• Missing Form T1044 for large organizations.

Mackisen CPA identifies each of these risks and creates a compliance narrative that demonstrates lawful, member-focused operations.

Real-World Success

• A Montréal arts organization retained its NPO exemption after CRA questioned its annual surpluses; Mackisen CPA documented planned infrastructure reinvestments.

• A regional sports association avoided $120,000 in reassessed tax when we reclassified its sponsorship program as member-support income.

• A professional federation cleared its audit by showing all retained earnings were allocated to educational development programs.

Learning insight: CRA respects clarity. Mackisen CPA turns compliance into communication.

SEO Optimization and Educational Value

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Secondary Keywords: CRA Form T1044, NPO surplus rules, Mackisen CPA non-profit assistance, CRA profit purpose test, CRA NPO deregistration.

Learning insight: The clearer your financial story, the stronger your online credibility. Education and compliance build both trust and visibility.

Why Mackisen CPA Montreal

Mackisen CPA Montreal combines deep expertise in CRA audits, tax law, and not-for-profit governance. Our bilingual CPA team ensures your financials, records, and resolutions comply with federal and provincial regulations. We help NPOs and associations defend their purpose, preserve their tax-exempt status, and strengthen accountability to members and donors.

Learning insight: Non-profit is not “non-scrutiny.” Mackisen CPA makes your transparency your best audit defense.

Call to Action

If your organization has received a CRA inquiry or NPO audit letter, respond strategically — not reactively.
Contact Mackisen CPA Montreal for full CRA defense, surplus analysis, and organizational compliance.
Phone: 514-276-0808 | Email: info@mackisen.com | Website: mackisen.com

Learning conclusion: CRA Non-Profit Audits don’t question generosity — they question governance. Mackisen CPA Montreal ensures your community impact remains compliant, credible, and confidently defended.