A. INTRODUCTION
On January 5, 2013, a revised set of the proposed
Electronic Commerce Protection Regulations (the “Proposed IC Regulations”) were
pre-published by Industry Canada in Part I of the Canada Gazette Vol.
147, No. 1 for a consultation period of 30 days. The Proposed IC Regulations
are Industry Canada’s regulations under Bill C-28 (“Anti-spam Legislation”),
which has been reported on in previous Charity Law Bulletins and Charity Law
Updates. For information concerning the first draft of the regulations
released by Industry Canada, as well as more information on the Anti-spam
Legislation, see Charity Law Bulletin No. 257, dated August 18, 2011
available at http://www.carters.ca/pub/bulletin/charity/2011/chylb257.htm.
This Charity Law Bulletin will briefly review the
portions of the Proposed IC Regulations that, although not new under the
Proposed IC Regulations, remain of concern to not-for-profits and provides
further commentary on the Anti-spam Legislation.
B. REVIEW OF ANTI-SPAM LEGISLATION
Generally, the Anti-spam Legislation prohibits a person
from sending a “commercial electronic message,” which includes any electronic
message that encourages participation in a commercial activity, regardless of
whether there is an expectation of profit, without the person who receives it
having provided consent. As such, although emails from charities or not-for-profits
seeking donations are not generally “commercial electronic messages,” those
that encourage participation in a commercial activity likely would by subject
to the requirements of the Anti-spam Legislation. Consent under the Anti-spam
Legislation can be either express or implied. In this regard, implied consent can
arise where there is an “existing non-business relationship” between the sender
and receiver of a “commercial electronic message.” As a reminder, an “existing
non-business relationship” can arise were a donation or gift was made by the
person to whom the “commercial electronic message” was sent within the two-year
period “immediately before the day on which the message was sent...” and the
person who sent the message was a registered charity. The same exemption and
time period also applies where a person has done volunteer work with the
charity within the past two year period. Of concern to not-for-profits, an
“existing non-business relationship” also includes membership, as defined by
regulation, in a club, association or voluntary organization, as defined
by regulations.
C. DEFINITIONS FOR “MEMBERSHIP” AND “CLUB, ASSOCIATION OR VOLUNTARY ORGANIZATION UNDER THE IC REGULATIONS
In this regard, the Proposed IC Regulations at subsection
7(1) define membership as being “the status of having been accepted as a member
of a club, association or voluntary organization in accordance with its
membership requirements.” Furthermore, the Proposed IC Regulations define a
club, association or voluntary association as “a non-profit organization that
is organized and operated exclusively for social welfare, civic improvement,
pleasure or recreation or for any purpose other than profit, if no part of its
income is payable to, or otherwise available for the personal benefit of any
proprietor, member or shareholder of that organization unless the proprietor,
member or shareholder is an organization whose primary purpose is the promotion
of amateur athletics in Canada.”
It should be noted that the definition of a non-profit
under the Proposed IC Regulations mirrors the definition of a non-profit
organization under the Income Tax Act (Canada) (“ITA”) under paragraph 149(1)(l).As
a result, both the definition of membership and of a “club, association or
voluntary organization” remain unchanged from the previous draft of the Proposed
IC Regulations.
One concerning aspect of the adoption of the definition of
a non-profit organization is that there are other tax-exempt entities under the
ITA which are not non-profit organizations which would legitimately expect to
be exempt under the definition of a “club, association, or voluntary
organization.” For example, a fraternal benefit society, which may or may not
meet the definition of non-profit organization, would have an equal expectation
that there would be an “existing non-business relations” with its members. On the
face of the Proposed IC Regulations, though, Industry Canada has adopted a
narrow interpretation of “club, association, or voluntary organization” which
would not include a fraternal benefit society. In addition, it is also worth
nothing that membership in a registered Canadian amateur athletic association
would not be included in the definition of a “club, association or voluntary
organization” adopted by the Proposed IC Regulations.
In this regard, by cross-referencing the definition of
non-profit organization under the ITA, the Regulations might be interpreted to
exclude other tax-exempt entities defined therein, including those at
paragraphs 149(1)(e),(g),(i), and (k). While the Anti-spam Legislation makes
specific reference to registered charities and political parties in relation to
“existing non-business relationships,” it is unfortunate that the Proposed IC
Regulations provide a very narrow definition of “club, association, or
voluntary organization” with no reasonable justification for the exclusion of
other not-for-profit entities which may not necessarily be non-profit
organizations as defined in paragraph 149(1)(l) of the ITA.
D. CONCLUSION
It will be important for all not-for-profits to continue
to monitor the Proposed IC Regulations once they are finalized to begin
planning in advance for the proclamation of the Anti-spam Legislation in late
2013. Comments on the Proposed IC Regulations are being received by Industry
Canada until February 4, 2013.
The Proposed IC Regulations and further background
material can be found online at: http://www.gazette.gc.ca/rp-pr/p1/2013/2013-01-05/html/reg1-eng.html
