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

A CRA Non-Profit Organization (NPO) Audit determines whether an organization that claims exemption from income tax under paragraph 149(1)(l) of the Income Tax Act truly operates for non-profit purposes. Unlike registered charities, NPOs are not required to register with CRA — but they must prove that their main purpose is not to make a profit, and that no part of their income is available for the personal benefit of members.
Mackisen CPA Montreal helps community associations, condo corporations, professional societies, and non-profit clubs defend their compliance with CRA’s strict NPO tests and avoid reassessments or revocations of exempt status.

Legal Foundation

Law: Income Tax Act s.149(1)(l) — exemption for non-profit organizations that operate exclusively for social welfare, civic improvement, pleasure, recreation, or any purpose except profit.
Jurisprudence: Tourism Industry Association of Canada v. The Queen (1994 TCC) — an NPO may earn incidental surpluses, but these must be reinvested into its objectives, not distributed to members.

Learning insight: Earning revenue doesn’t make you taxable — using it for private benefit does. Mackisen CPA ensures your mission is supported by transparent, non-profit accounting.

Why CRA Audits NPOs

CRA’s Non-Profit Compliance Division routinely audits NPOs that file Form T1044 or report significant revenues without income tax. Common triggers include:

• Accumulated surpluses that appear excessive or unspent.

• Payments to directors, members, or related parties.

• Commercial or rental activities that compete with for-profit entities.

• Interest or investment income unrelated to the organization’s mission.

• Inconsistent financial reporting across years.

Learning insight: CRA doesn’t object to growth — it questions motive. Mackisen CPA ensures your surplus serves your purpose.

CRA’s NPO Audit Procedure

1. Information Request: CRA requests financial statements, bank reconciliations, and governing documents (bylaws, constitution).

2. Purpose Test: CRA assesses whether the organization’s activities align with its stated non-profit purpose.

3. Personal Benefit Test: CRA verifies that no member personally benefits from operations.

4. Revenue Source Review: CRA evaluates whether commercial activities are incidental or primary.

5. Final Report: CRA issues a compliance letter, notice of loss of exemption, or penalty reassessment.

Learning insight: CRA’s goal is clarity, not closure. Mackisen CPA provides that clarity before the audit becomes a problem.

Mackisen CPA’s NPO Compliance Framework

1. Purpose Alignment Review: Confirm that objectives, bylaws, and actual activities match non-profit status.

2. Revenue Source Mapping: Distinguish mission-driven activities from unrelated business income.

3. Surplus Justification File: Demonstrate that reserves are held for future projects, not profit.

4. Governance Review: Verify that board compensation and related-party payments comply with the Act.

5. Form T1044 Filing Support: Prepare accurate returns that withstand CRA scrutiny.

Learning insight: Non-profit status isn’t a tax loophole — it’s a privilege earned through transparency.

Frequent CRA Findings in NPO Audits

• Surpluses held without a defined spending plan.

• Members receiving personal benefits (travel, honoraria, or gifts).

• Investment portfolios generating unrelated business income.

• Rental operations crossing into commercial territory.

• Lack of documentation for board decisions or conflict-of-interest resolutions.

Mackisen CPA helps you correct these weaknesses before CRA audits your books — protecting your exemption and your reputation.

Learning insight: Non-profit compliance isn’t about less control — it’s about more accountability. Mackisen CPA builds that accountability into your financial governance.

Real-World Case Studies

• A Montréal cultural association retained its non-profit status after Mackisen CPA proved that its accumulated surplus was earmarked for a community center project.

• A professional society avoided a $90,000 reassessment when we demonstrated that membership fees and conferences advanced its non-profit objectives.

• A housing co-op prevented revocation after we documented that directors’ stipends were fixed reimbursements, not profit distributions.

Learning insight: CRA respects documented intent. Mackisen CPA turns your intentions into auditable evidence.

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Learning insight: The more your readers learn, the more they trust your expertise. That’s why Mackisen CPA’s educational content ranks — and converts.

Why Mackisen CPA Montreal

With more than 35 years of combined experience in audit defense, tax compliance, and governance for non-profits, Mackisen CPA Montreal is a trusted partner to community organizations, cultural foundations, and condominium boards across Québec.
We don’t just file your returns — we secure your exemption by proving your compliance at every step.

Learning insight: A compliant NPO is a stronger NPO. Mackisen CPA ensures your governance, purpose, and accounting work together as one story of transparency.

Call to Action

If CRA has contacted your organization about a Non-Profit Organization Audit or questioned your tax-exempt status, act now.
Contact Mackisen CPA Montreal for a full compliance and audit-preparation review.
Phone: 514-276-0808 | Email: info@mackisen.com | Website: mackisen.com

Learning conclusion: Non-profit success is measured in trust, not profit. Mackisen CPA Montreal helps you preserve that trust — with the precision, integrity, and documentation CRA demands.