BC’s Business Corporations Act (the “Act”) recently introduced Community Contribution Companies, or CCCs. When seeking to incorporate for a purpose that is not purely for-profit or non-profit, it may be worth considering a CCC.
For-profit companies can operate for the purpose of earning a profit, can distribute profits among shareholders and are taxable entities.
Non-profit entities operate for non-profit purposes, are prohibited from distributing profits among members and are not subject to income tax. Non-profits may or may not become registered charities, which can issue tax receipts to donors.
CCCs fall somewhere in between these two types of entities. They are incorporated for purposes that are beneficial to society or to a segment of society that is broader than the group related to the CCC. They may distribute profits, subject to limits set out in the Regulations to the Act (currently set at 40% of the company’s profit plus any unused dividends from the previous financial year). They are also restricted in how assets can be distributed on dissolution or otherwise.
CCCs must produce an annual Community Contribution Report that is made publicly available and discloses certain information about activities and assets of the CCC. The contents of these reports are governed by the applicable legislation.
It is important to note that CCCs currently are not entitled to issue tax receipts and are not exempt from income tax. From a tax perspective, they are treated similar to for-profit companies.
Some reasons why incorporation as a CCC would be beneficial, despite the lack of favourable tax treatment may include the following. When seeking public support, approaching possible supporters may be more successful by a CCC rather than a for-profit entity. This is because as CCCs become more common, they may develop a reputation for benefitting the community at large, being worthy of support. It may satisfy a supporter who seeks more than simply fiscal efficiency, but also seeks social responsibility. Further, a charity, which is generally prohibited from entering into for-profit activities, may consider incorporating a CCC as a subsidiary to run a profitable enterprise that in turn benefits the charity.
It remains to be seen if CCCs will have additional financial incentives available to them, such as having access to gaming grants or provincial tax credits.