By Terrance S. Carter and Theresa L.M. Man

The federal budget released on April 7, 2022 (“Budget 2022”) promised changes to the legislative framework governing charities in the “spirit of Bill S-216,” a bill which proposes to replace the “own activities” requirement in the Income Tax Act (“ITA”) with a legislative regime of resource accountability. This new regime would effectively equip charities to work with organizations that are not Canadian registered charities or other type of qualified donees (“QDs”). When Bill C-19, Budget Implementation Act, 2022, No. 1 (“Bill C-19”) was introduced in the House of Commons on April 28, 2022, there was and continues to be considerable interest in the charitable sector concerning how proposed changes to the ITA will impact the ability of registered charities to work with such organizations. As of the date of writing, Bill C-19 is going through second reading in the House of Commons. As mentioned in Charity & NFP Law Bulletin No. 510, and the April 2022 Charity & NFP Law Update, Bill C-19 sets the stage for significant changes concerning how charities may disburse funds to organizations that are not QDs. Bill C-19 also pre-emptively repeals Bill S-216, An Act to amend the Income Tax Act (use of resources of a registered charity) (“Bill S-216”) if Bill S-216 was to receive royal assent prior to Bill C-19.

This Bulletin reviews the background of Canada’s current legislative framework for charities, with regard to the ITA’s own activities test and the corresponding “direction and control” regime administered by the Canada Revenue Agency (“CRA”). It also reviews the development and proposed solutions of Bill S-216 as a response to the current legal framework. Lastly, this Bulletin outlines the new provisions introduced by Bill C-19, the response by the charitable sector to date, and the authors’ thoughts about possible amendments to Bill C-19.

For the balance of this Bulletin, please see Charity & NFP Law Bulletin No 511.

​Read the May 2022 Charity & NFP Law Update