In our June, 1999 newsletter we relayed Canada Customs and Revenue Agency's ("CCRA") recent policy changes on classification of municipal childcare subsidies. Until the beginning of 1999 these subsidy payments were treated as government funding for the purpose of determining GST refund eligibility. In 1999 CCRA began excluding them from the definition of government funding.

Canada Customs and Revenue Agency Regulation R91-37 contains an outline of what qualifies as government funding for the purpose of determining GST refund eligibility. Per diem funding appears to be excluded from the definition of government funding in the regulation. As the purchase of childcare spaces by a municipality is based on a per diem calculation, this payment does not appear to be regarded as government funding by the CCRA.

As a result, not-for-profit organizations that are not registered charities should not include municipal per diem childcare subsidies as part of government funding for the purpose of determining GST refund eligibility. Registered charities, on the hand, will continue to be eligible for the 50% rebate of GST as the government funding rule does not apply to them.

Not-for-profit organizations no longer eligible for the GST rebate might want to consider applying for charitable status with CCRA with a view to becoming eligible for future rebates of 50% of GST paid.