by Dev User | Aug 29, 2019 | Uncategorized
Aug 2019 Charity & NFP Law Update
On June 28, 2019, the Tax Court of Canada released its decision in Promised Land Ministries v R, upholding the Minister of National Revenue’s (the “Minister”) decision to suspend the receipting privileges and qualified donee status of Promised Land Ministries (“PLM”) for one year. After an office audit for the fiscal years ending December 31, 2011 and 2012, the Minister found that PLM failed to maintain proper books and records, including invoices, receipts, and vouchers, for expenditures made on activities outside of Canada contrary to the ITA. Further, PLM had failed to comply with a compliance agreement (“Agreement”) arising out of a previous audit wherein it had agreed to take corrective measures with respect to maintaining proper books and records for its activities outside of Canada.
In Canada, PLM provided church services twice a week and offered spiritual help to individuals during the week. In addition, the Pastor went on mission trips outside of Canada to poor and remote areas to preach to other pastors about spiritual welfare. The costs of the mission trips included coordinators, accommodation, airline tickets, set up costs, lunches for the participants, and bus transportation. The Pastor was the founder, manager, and sole employee of PLM, responsible for making deposits and the custodian of PLM’s records.
Contrary to PLM’s submission that “it acted in good faith in providing what it believed the Minister was requesting” as a result of the office audit, the court noted that PLM did not appreciate the breadth of the definition of “records” under subsection 248(1) of the ITA, stating “[n]ot only does the definition of record include a “return”, it also includes invoice, voucher and “any other thing containing information, whether in writing or in any other form” which would include an expense receipt.”
The court also found that the Minister had followed the requirements set out in Prescient Foundation v MNR (“Prescient”), discussed in Charity Law Bulletin No. 313, which stated:
the Minister must ‘clearly identify the information which the registered charity has failed to keep’ and ‘explain why this breach justifies the revocation. It is not sufficient to simply state that the charity has failed to keep proper records.’ Natural justice requires that a charity be properly and adequately informed of the particulars of the alleged breach so that it may respond to the allegations.
In so finding, the court reasoned that the CRA had “clearly particularized the alleged breach” in its correspondence with PLM on multiple occasions. Despite being given the opportunity to respond over an extended amount of time, PLM had failed to provide the CRA with the invoices, vouchers and a breakdown of expenses made outside of Canada during the Pastor’s mission trips.
Although PLM argued that its poor recordkeeping was due to problems with its former accountants, and that obtaining receipts for expenses abroad was difficult as they were “cash economies,” the court found these arguments to be “self-serving,” particularly as PLM was well aware of the recordkeeping requirements set out in the Agreement. Having been put on notice, and aware that the CRA would follow up on compliance with the Agreement, it was up to PLM to find ways to substantiate its expenses for the mission trips. The Minister suggested a voucher book where details of the expenses could have been recorded and signed by the individual receiving the funds. The court also found that PLM could not blame the accountants for the inadequate recordkeeping because PLM had the ultimate responsibility for maintaining proper books and records. The court concluded that PLM’s repeated non-compliance in providing receipts for activities outside of Canada in a timely manner, and being unable to sufficiently account for half of the expenses, justified the suspension and upheld the Minister’s decision.
This case serves as a reminder to charities of the importance of complying with the obligations imposed on them, both under the ITA and in compliance agreements with the CRA. Registered charities must comply with their recordkeeping obligations, including maintaining records of expenses of activities outside of Canada, even in “cash economies” where receipts may be difficult to obtain. As demonstrated in this case, non-compliance can expose charities to the risk of suspension of their qualified donee status and receipting privileges, and even revocation of charitable status.
Read the August 2019 Charity & NFP Law Update
by Dev User | Aug 29, 2019 | Uncategorized
Aug 2019 Charity & NFP Law Update
Recent legislative changes to the Income Tax Act (Canada) (“ITA”) have opened the door for registered charities and registered Canadian amateur athletic associations (“RCAAAs”) to engage in “public policy dialogue and development activities” (“PPDDAs”). These changes, which were introduced through Bill C-86, Budget Implementation Act, 2018, No. 2 and received Royal Assent on December 13, 2018, removed all reference to “political activities,” and now permit charities (and RCAAAs) to engage in PPDDAs to the extent that PPDDAs further their charitable purpose. To this end, charities and RCAAAs may devote 100% of their resources to PPDDAs, which may include lobbying, as opposed to the previous 10% limit on permitted political activities.
With the upcoming Federal election, and recent amendments to the Canada Elections Act, which are meant “to increase transparency regarding the participation of third parties in the electoral process,” it is important that charities, RCAAAs, as well as other not-for-profits (“NFPs”) intending to carry out lobbying activities understand the legislation for which these activities are subject. In this regard, the lobbying activities carried out by charities and RCAAAs are subject to restrictions under the ITA. In addition, charities, RCAAAs, and other NFPs are subject to federal, provincial, and municipal elections and lobbying legislation. This Bulletin provides a very brief introduction to the federal and provincial lobbying legislation (collectively, “Lobbying Legislation”) and its impact on charities, RCAAAs and NFPs. This Bulletin also provides a very brief introduction to the recent legislative changes to the Canada Elections Act. As Lobbying Legislation is complicated in nature, it is beyond the scope of this Bulletin to discuss lobbying legislation as it applies to municipalities (including municipal by-laws), or to provide an in-depth analysis of Lobbying Legislation. As such, this Bulletin does not provide a detailed explanation of the law in this regard and the reader will therefore want to refer to the resources cited herein for further details.
For the balance of this Bulletin, please see Charity & NFP Law Bulletin No. 453.
Read the August 2019 Charity & NFP Law Update
by Dev User | Aug 29, 2019 | Uncategorized
Aug 2019 Charity & NFP Law Update
Corporations Canada Updates Policies under CNCA
Corporations Canada announced on August 15, 2019 that it updated its Policy on corrections of articles or a certificate – Canada Not-for-profit Corporations Act, to streamline and improve the process of requesting corrections of articles or a certificate for corporations under the Canada Not-for-profit Corporations Act (“CNCA”). A correction is a request to fix an error in a corporation’s articles or a certificate that occurred during the preparation of the articles or issuance of the certificate. This policy explains how a corporation may request a correction be made. These amendments include new, simplified templates for correction requests, with added model statements; removal of the requirement to explain the error and to provide a statutory declaration; allowing a corporation’s professional representative to sign the declaration where an error is obvious; and simplified policy language, with examples to further clarify what an “obvious error”, “non-obvious error” and “error attributable to Corporations Canada” are. It should be noted that the requirements permitting a correction have not been amended, and that this is merely an update to the policy.
BC Consultation on Proposed Societies Act Amendments
Since British Columbia’s Societies Act came into force on November 28, 2016, the BC government has been monitoring its roll-out to ensure its effectiveness for societies and their members. Based on the feedback received from societies, the legal community, and the public, the BC Ministry of Finance announced a consultation in July 2019, and provided a list of 36 proposed amendments to the Act to address various issues that have arisen. The purpose of these proposed amendments is to ensure the Act remains and becomes even more user-friendly by addressing ambiguities, omissions and inconsistencies within the Act and other legislation; streamlining, updating and refining processes; as well as removing unnecessarily burdensome Corporate Registry filing requirements. In this regard, the proposed amendments include clarifying certain provisions (such as directors’ terms of office, what meetings are referred to in specific provisions, what is meant by “register of directors” and “register of members”); providing new due diligence defence for senior managers; prohibiting anyone to act for absentee directors at board meetings; not requiring directors to disclose material interest in a contract or transaction, if the director reasonably had no knowledge of the contract or transaction until director becomes aware of the conflict; expanding reporting obligations concerning remuneration; and excluding bequests made by affiliated individuals from “public donations” and thereby would not affect a society’s ability to be a member-funded society. Of particular note, it has also been proposed that applications for transition from the previous Society Act to the current Societies Act that were filed late (after the November 28, 2018 deadline) would not be invalid. As well, the Registrar is proposed to have the power to dissolve those societies that failed to file a transition application or for failing to return a record the registrar has requested. While the consultation ended on August 23, 2019, it remains to be seen which amendments the government will proceed with.
BC Civil Resolution Tribunal Has Jurisdiction over Certain Society and Cooperative Disputes
British Columbia societies should be aware of a mechanism that may allow for a quick and efficient resolution to certain disputes between members and directors through the province’s Civil Resolution Tribunal. The Civil Resolution Tribunal is an independent, neutral online tribunal that has jurisdiction to make enforceable decisions and function as a fast and affordable alternative to the court action. British Columbia’s Bill 22, Civil Resolution Tribunal Amendment Act, 2018, which received Royal Assent and came into force on May 17, 2018, introduced Division 6 to Part 10 of the provincial Civil Resolution Tribunal Act, giving the tribunal jurisdiction to hear “society claims” respecting British Columbia societies on the following matters: (a) the interpretation or application of the Societies Act or a regulation, constitution or bylaw, including a request to inspect, or to receive a copy of, a record of a society; (b) an action or threatened action by the society or its directors in relation to a member; and (c) a decision of the society or its directors in relation to a member.
It can therefore resolve disputes, for example, where a society has not followed the Societies Act or its regulations, where a society has not complied with its constitution by-laws, where proper notice was not provided for meetings, where voting was carried out improperly or incorrectly, or where the society has not provided access to records. The tribunal is to be considered to have specialized expertise in respect of claims within its jurisdiction. Claims may be brought by societies, by society members, or by anyone who believes they have a right to view or obtain copies of a society’s records or financial statements.
However, there are many issues that are outside the jurisdiction of the tribunal, such as termination of membership in the society; liquidation, dissolution or restoration of a society; corporate reorganizations; certain claims that may be dealt with by the Supreme Court (such as powers of court respecting general meetings and remedies under Part 8 of the Societies Act); or claims to which all parties have agreed that the British Columbia Arbitration Act will apply.
Read the August 2019 Charity & NFP Law Update
