by Dev User | Aug 27, 2020 | Uncategorized
August 2020 Charity & NFP Law Update
At its Annual General Meeting, on August 12, 2020, the Uniform Law Conference of Canada (“ULCC”) adopted the Uniform Benevolent and Community Crowdfunding Act, 2020 (the “Uniform Crowdfunding Act, 2020”) to replace the Uniform Informal Public Appeals Act previously adopted by the ULCC in 2011. For background information, including a review of the 2019 Consultation Paper from the ULCC, which included a number of new provisions adopted in the Uniform Crowdfunding Act, 2020, see Charity & NFP Law Bulletin No. 455.
The introduction to the Uniform Crowdfunding Act, 2020 reiterates the distinction highlighted in the 2019 Consultation Paper between the fundraising efforts carried out by organized charities and similar bodies on a continuing basis from the kind of informal fundraising through public appeals covered by the Uniform Crowdfunding Act, 2020. As such, the Uniform Crowdfunding Act, 2020 provides for the application of trust law to all public appeals, with special guidance in relation to surpluses, and contains a list of powers available to the fundraisers to properly administer the funds raised through the informal public appeal. The Uniform Crowdfunding Act, 2020 also allows for judicial oversight where appropriate, and recognizes the important role of Internet-based crowdfunding platforms.
The Uniform Crowdfunding Act, 2020 addresses a number of issues raised in response to the 2019 Consultation Paper, including certain issues raised in a submission from the Charities and Not-For-Profit Law Section of the Canadian Bar Association. Of interest to registered charities, the Uniform Crowdfunding Act, 2020 provides for a “right to halt the appeal” where if an appeal has been initiated without the consent of a qualified donee for whose benefit the appeal was initiated, the qualified donee, through an authorized representative, would be able to demand that the appeal be halted and the appeal organizer or intermediary would have to comply with the demand. Where the appeal organizer or the intermediary fail to comply with an objection by a qualified donee, the Uniform Crowdfunding Act, 2020 would provide the right to apply to court for injunctive relief.
As well, the Uniform Crowdfunding Act, 2020 would not apply to a public appeal conducted by a qualified donee or a public appeal through an intermediary, provided that the intermediary stipulates and effectively pays the funds directly to a qualified donee, and the qualified donee did not object to the appeal. Further, the qualified donee for whose benefit a public appeal was initiated, as well as, amongst others, the Public Guardian and Trustee or comparable official of the provincial enacting jurisdiction, would be permitted to commence court proceedings to enforce the terms of trust of the public appeal.
At this time, only Saskatchewan has adopted comparable public appeals legislation, which was applied to the administration and distribution of funds raised in response to the Humboldt Broncos incident in 2018, discussed in the January 2019 Charity & NFP Law Update. However, other provinces may (and should) consider adopting legislation to address the increasing prevalence of online crowdfunding.
Read the August 2020 Charity & NFP Law Update
by Dev User | Aug 27, 2020 | Uncategorized
August 2020 Charity & NFP Law Update
The Tax Court of Canada released its decision in Canadian Legal Information Institute v The Queen on July 17, 2020, concerning an appeal by the Canadian Legal Information Institute (“CanLII”) from tax assessments made by the Minister of National Revenue (the “Minister”) under the Excise Tax Act (“ETA”). CanLII, a not-for-profit corporation, operates an online law library with free public access, and claimed input tax credits (“ITCs”) under subsection 169(3) of the ETA.
The Minister denied the ITCs on the basis that CanLII’s service was an exempt supply pursuant to section 10 of Part VI of Schedule V of the ETA because it was provided for no consideration. CanLII, however, argued that it had made a taxable supply, as it received consideration for its services from the Federation of Law Societies of Canada (“FLSC”). The FLSC paid an annual levy to CanLII pursuant a governance agreement. That agreement required CanLII to provide the FLSC with an annual report recommending a
dollar amount needed for the following year’s operations. The FLSC then had the option to pay this amount, or to pay a different amount to CanLII.
With respect to the ITCs, CanLII incurred operating expenses from various third-party services providers in relation to operating the virtual library including, for example, website operation and maintenance fees, case law access fees, and computer code storage fees. CanLII, as an HST registrant, collected GST on these expenses and then claimed ITCs on them. The court therefore considered whether CanLII could claim these ITCs under subsection 169(3) of the ETA.
The court first determined whether CanLII made a taxable supply in operating its virtual library. Pursuant to subsection 169(3), the court found that CanLII would be entitled to ITCs if it “acquired property or a service for consumption, use or supply in the course of its commercial activities.” The Minister argued that CanLII’s business involved making exempt supplies because all or substantially all of its services were made for no consideration, and that FLSC’s discretionary payments did not constitute consideration, as they were not made pursuant to a legal obligation.
The court stated that “all that would be required in order for a fee to constitute consideration for the taxable supply of the services would be a contractual obligation.” It found that, pursuant to the governance agreement, once the FLSC had determined the annual amount to be paid to CanLII, it was then obligated by operation of law to pay that amount to CanLII for the supply of the virtual library, and that such payment was not discretionary. It also found that a direct link existed between the levy paid by the FLSC and CanLII’s supply of the virtual library. FLSC’s funding was therefore not intended for multiple uses, but rather “to enable CanLII to achieve its sole goal of operating a virtual library in a business like manner”, which included contracting with third-party suppliers. The court found that CanLII’s services had been made in consideration of its commercial activities, and that its supply of services were therefore taxable supplies. It therefore held that CanLII was entitled to claim its ITCs, amounting to $745,690.89 for the assessment periods between April 1, 2013 and June 30, 2015.
This decision demonstrates that courts may apply a broad interpretation to how “consideration” is defined in excise tax matters. Charities and not-for-profits that are HST registrants and receive funding should therefore, with the assistance of professional advice, carefully determine whether that property or service was acquired for consumption, use or supply in the course of commercial activities, as this may constitute consideration for a taxable service and may enable those charities or not-for-profits to claim ITCs.
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by Dev User | Aug 27, 2020 | Uncategorized
August 2020 Charity & NFP Law Update
The decision in Farrish v Delta Hospice Society was an oral ruling regarding a petition brought pursuant to the Society Act in B.C. seeking relief with respect to a proposed meeting of the Delta Hospice Society (“Society”), a not-for-profit operating under the Societies Act (B.C.) (the “Act”). The Society operated a hospice and carried out related charitable programs involving the provision of care and support for individuals in the last stages of life. The petitioners had brought the hearing of the petition forward on an urgent basis, as they were seeking relief with respect to a proposed meeting of the members of the Society scheduled for three (3) days after the hearing. The court recognized that differing views on euthanasia and medical assistance in dying (“MAiD”), legalized in Canada in 2016, were at the core of the disagreement at the Society, although the court stated “it is not [the court’s] role on this application to resolve that debate.”
The Board of Directors of the Society (“Board”) had sent out notice of a membership meeting to be held on June 15, 2020 (“2020 AGM”) and directed that a membership vote on amendments to the Society’s constitution and bylaw would take place by mail-in ballot. The Society’s then-current governing documents did not reflect a position for or against MAiD. As such, the Board (of whom a majority did not support MAiD) called the 2020 AGM to obtain membership approval over significant changes to the constitution and bylaw prohibiting MAiD. The proposed changes also allowed the Board, in its sole discretion, to refuse new membership applications (“Proposed Amendments”).
In anticipation of the 2020 AGM, both factions (for and against MAiD) encouraged membership applications at the Society to increase the number of members to vote in favour of their respective positions on the Proposed Amendments. The petitioners sought to challenge the Board’s actions leading up to the scheduling of the 2020 AGM on two grounds. Firstly, the petitioners sought a declaration that the mail-in ballot voting process set out in the Notice of the 2020 AGM was not allowed. Secondly, the petitioners argued that the Board had wrongly refused membership to many applicants (who did not support the Board’s position), while granting membership to other applicants (who supported the Board’s position) in breach of the Society’s bylaw and the Act.
On the first issue, the court noted that while section 84(5) of the Act provides that the bylaw of a society “may” authorize “voting by mail”, the Society chose not to authorize this in its bylaw. As such, the optional method of voting by mail was not authorized under the Society’s bylaw.
With reference to B.C.’s Ministerial Order No. MO116 that was issued due to the COVID-19 pandemic (“MO116”), the Society’s counsel argued that since MO116 provided membership meetings to be held by telephone and electronic means, but was silent on the method of voting, “mail‑in ballot” should be allowed under MO116. The court held that since MO116 does not explicitly authorize the use of mail-in ballots, the Society’s bylaw (which does not permit mail-in ballots either) would apply.
On the second issue, the Society’s bylaw merely contained generic wording stating that “…on acceptance by the directors [a person] is a member.” As such, on the issue of the Board’s rejection of membership applications that were not in support of its position, the court found that, “unless the criteria for membership are set out in the bylaw, the directors do not have the discretion to deny membership on some other basis that they themselves determine.”
The court found that membership had historically been dealt with on an open basis, such that anyone who applied and paid the application fee was granted membership, and that it was only after the 2020 AGM, that “this practice changed to address the various applications that arose from the competing membership campaigns.” Interestingly, the court held that the Board’s open basis approach to membership was binding on the Board’s admission and rejection of members in the period of time leading up to the 2020 AGM. The court therefore ordered the Society to cancel the 2020 AGM; to provide the petitioners with a list of all persons whose membership applications had been rejected since the 2019 AGM; and to include all of those rejected persons in the register of members within 14 days. It also ordered that the Society seek the court’s direction before giving notice to the Society’s members of any future meeting.
The Society appealed to the Court of Appeal for British Columbia and on June 25, 2020 the Society’s appeal was allowed, with a stay granted on the lower court’s order to include rejected applicants as members of the Society. The appeal court also ordered that, as a condition of the stay, the Society was prohibited from accepting any new members until the hearing of the appeal. The appeal was set for August 17, 2020, but was not available as of the date of publication. While the appeal court’s comments will be binding in B.C. and of great interest, the comments made by the lower court in this case to date underscore the importance of including membership qualification requirements within the bylaw for a not-for-profit. While it is often the case for not-for-profits to adopt generic boilerplate by-laws that may often not reflect their governance needs (as the Society did) it is important that by-laws reflect the legal requirements, as well as the unique operational needs and practices of each not-for-profit.
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by Dev User | Aug 27, 2020 | Uncategorized
August 2020 Charity & NFP Law Update
On August 13, 2020, the Ontario Ministry of Government and Consumer Services (“MGCS”) announced a public consultation to “create a legislative framework for privacy in the province’s private sector” (the “Consultation”). According to the MGCS press release, the increased reliance on digital platforms that has resulted from the COVID-19 outbreak has led to the Consultation and there is “a strong need to build public and consumer confidence and trust in the digital economy”.
The Consultation, which is framed as a collaboration between the provincial government and the people of Ontario, is seeking feedback on the following eight privacy issues:
- Increased transparency about how personal information is being used by businesses and organizations;
- Allowing individuals to revoke consent at any time, and adopting an “opt-in” model for secondary uses of their information;
- Introduce a “right to erasure” or “the right to be forgotten”;
- Introduce individual data portability rights;
- Increased enforcement powers for the Information and Privacy Commissioner, including the authority to impose penalties;
- New requirements for data that has been de-identified and derived from personal information;
- Enable the establishment of data trusts for privacy protective data sharing; and
- Expanding the scope and application of the law to include non-commercial organizations, including not-for-profits, charities, trade unions and political parties.
Anyone can participate in the Consultation through the online survey or the yet to be confirmed virtual Town hall sessions. Technical experts and industry organizations may also participate through written submissions on Ontario’s Regulatory Registry.
This Consultation may signal that legislative change is ahead in Ontario. The province does not currently have privacy legislation that governs the Ontario private sector and, as has been discussed previously in this publication, the federal private sector privacy legislation – the Personal Information Protection and Electronic Documents Act – only applies to private sector organizations to the extent that they are engaged in “commercial activities”. This means that there is currently no privacy legislation that applies to Ontario’s charities and not-for-profits or to other organizations that are not engaged in “commercial activities”. In addition, PIPEDA only applies to the personal information of employees of federal works, undertaking or businesses, which are enterprises that fall within the legislative authority of the federal government, such as telecommunications, banking, airlines and broadcasting. New Ontario private sector privacy legislation would likely address those gaps.
In light of the Consultation and the prospect of up to date private sector privacy legislation in Ontario, it will be interesting to see whether the federal government moves ahead with its plans to modernize PIPEDA that were signalled in the proposed Digital Charter, discussed in Charity & NFP Law Bulletin No. 449. Charities and not-for-profits with operations in Ontario should consider participating in the Consultation and monitor any subsequent reports and developments from the MGCS about the province’s legislative framework for privacy.
The Consultation is open until October 1, 2020.
Read the August 2020 Charity & NFP Law Update
by Dev User | Aug 27, 2020 | Uncategorized
August 2020 Charity & NFP Law Update
Advisory Committee on the Charitable Sector Holds June Meeting
As reported by the Canada Revenue Agency (“CRA”) on July 17, 2020, the Advisory Committee on the Charitable Sector (“ACCS”) held a virtual meeting on June 22, 2020 to identify priority areas for the ACCS to focus on. As a committee comprised of members from the charitable sector, the CRA, and the Department of Finance, the ACCS was formed to “engage in meaningful dialogue with the charitable sector, to advance emerging issues relating to charities, and to ensure the regulatory environment supports the important work that charities do.”
At the virtual meeting, ACCS members took part in exercises to identify priorities, and confirmed the charity-related regulatory and legislative issues to focus on going forward. They identified five working groups to examine priorities, including:
- Modernizing the regulatory framework in Government as it relates to the charitable sector;
- Supporting the work of charities serving vulnerable populations;
- Exploring charity-related regulatory and legislative issues faced by Indigenous Peoples and organizations;
- Examining the regulatory approach to charitable purposes and activities, including its impact on charities working with non-qualified donees, and charities engaging in revenue-earning activities; and
- Improving data collection and analysis related to the charitable sector.
In addition to identifying these priorities, the ACCS also expressed support for efforts in the charitable sector to meet needs with emergency funding and infrastructure, and discussed backing these efforts.
Read the August 2020 Charity & NFP Law Update
