By Terrance S. Carter

Department of Finance Seeks Public Comment on Draft Legislative Proposals to Income Tax Act

The Department of Finance released a set of draft legislative proposals and accompanying explanatory notes on February 4, 2022, to implement certain tax measures previously announced in the Budget 2021, as well as certain additional measures. Of interest to charities and non-profit organizations, are proposed changes regarding the reporting requirements for trusts, including amendments to subsection 104(1) of the ITA, as well as the introduction of new subsections 150(1.2) and (1.3) of the ITA.

The proposed changes are very technical, but generally will require more trusts to file a return of income (“T3”) than what is currently the case. For example, bare trusts will be subject to reporting requirements, as will express trusts (if certain conditions are met). All trusts that are required to file a T3 (except express trusts when certain conditions are met) will have to provide additional personal information (e.g. names, addresses, dates of birth) about trustees, beneficiaries, or settlors of the trust. Failure to comply with the new reporting requirements is addressed in newly added penalty provisions, and could result in a monetary penalty of $2500 or greater.

Other amendments of interest include proposed amendments to subsection 188(1.2) of the ITA concerning revocation rules applicable to charities. Specifically, pursuant to Budget 2021, the ITA has already been amended to “streamline the revocation process of charitable status” to prevent the abuse of charitable registration for terrorist financing purposes by allowing for the immediate revocation of charitable status of an organization listed as a terrorist entity, as set out in greater detail in Charity & NFP Law Bulletin No 492. The new proposed amendments would include coordinating amendments to subsection 188(1.2). This subsection concerns a charity’s winding-up period and applies for the purpose of calculating revocation tax under subsection 188(1.1) with regard to certificates issued under the Charities Registration (Security Information) Act and notices of intention to revoke a charity’s registration. The proposed amendments to subsection 188(1.2) would make these provisions applicable with respect to entities that become a “listed terrorist entity”.

The Department of Finance is seeking public comment on the draft legislative proposals, and has indicated that any responses to its consultation should be submitted no later than March 7, 2022.

Federal Government Declares Public Order Emergency under Emergencies Act

In response to the recent “Freedom Convoy” protests in Canada, the Government of Canada declared a “public order emergency” under Part II of the Emergencies Act (the “Act”) on February 14, 2022. This was followed by the filing of Emergency Measures Regulations (the “Regulations”), and an Emergency Economic Measures Order (the “Order”) under the Act on February 15, 2022. However, on February 23, 2022, the government revoked the Emergencies Act.

Of note, the declaration of a public order emergency allowed the federal government to strengthen anti–money-laundering controls, which may affect fundraising platforms used by charities. For further details, see the ATF/AML Update, below.

​Read the February 2022 Charity & NFP Law Update