CRA Responds to 2017 Consultation Panel Report on Political Activities of Charities

by | Apr 25, 2019 | Uncategorized

Apr 2019 Charity & NFP Law Update

On March 7, 2019, the Minister of National Revenue issued its response (the “Response”) to the Report of the Consultation Panel on the Political Activities of Charities published in May 2017 (the “Report”). The Report provided various recommendations on the administrative and legislative framework governing political activities at the time, discussed in Charity & NFP Law Bulletin No. 403. While the Federal Government had committed to providing a formal response in 2017, that timeline was not kept. However, although an official written response was not provided, the government did take various steps in response to the recommendations in the Report. The Response now marks the government’s final response to each of the four recommendations outlined in the Report.

Recommendation 1 is to “revise the CRA’s administrative position and policy.” The Response points to the draft guidance on public policy dialogue and development activities (“PPDDAs”), discussed in Charity & NFP Law Bulletin No. 438, for which the CRA is currently accepting feedback.

Recommendation 2 is to “implement changes to the CRA’s administration of the Income Tax Act (ITA).” The Response indicates that funding of up to $5.3 million is being provided over the next five years to the CRA for enhanced sector outreach and education. The CRA has also implemented the Charities Education Program. Further, the Response states that the additional administrative changes and initiatives will be made, such as new communication and engagement methods, and updating its webpages that discuss the audit process and other topics of interest to Indigenous communities.

Recommendation 3 is to “amend the [ITA] by deleting any reference to non-partisan political activities to explicitly allow charities to fully engage without limitation in [PPDDAs].” The Response points to the legislation introduced through Bill C-86, Budget Implementation Act, 2018, which implemented the PPDDA regime, also discussed in Charity & NFP Law Bulletin No. 438. It further indicates that the suspension on the Political Activities Audit Program has been lifted and that affected charities will be contacted by the CRA. Finally, the Response also states that, as a result of the Bill C-86 amendments, the government has discontinued its appeal in the Canada Without Poverty v AG Canada decision, discussed in Charity & NFP Law Bulletin No. 425.

Recommendation 4 is to “modernize the legislative framework governing the charitable sector.” The Response states that the government is establishing a permanent Advisory Committee on the Charitable Sector, as discussed in the March 2019 Charity & NFP Law Update. $3.2 million in new funding will be provided to the CRA over the next five years to support this initiative.

While the Response has been long-awaited, it is clear that the government has taken the recommendations of the Report into consideration through various government initiatives. The Response therefore brings a certain degree of finality to the debate over political activities and the evolution of PPDDAs over the last two years, and provides a helpful overview of the work that the government has undertaken in response to the Report.

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Legislation Update

by | Apr 25, 2019 | Uncategorized

Apr 2019 Charity & NFP Law Update

Bill C-97, Budget Implementation Act, 2019, No. 1

On April 8, 2019, Bill C-97, Budget Implementation Act, 2019, No. 1 (“Bill C-97”) was introduced in the House of Commons and received first reading. Bill C-97 proposes to implement certain provisions that impact charities and not-for-profits that were introduced in the 2019 Federal Budget (“Budget 2019”). In this regard, Bill C-97 implements legislative amendments to the Income Tax Act and Excise Tax Act that were included in the Notice of Ways and Means Motions in Budget 2019 that include: (1) support for Canadian journalism through qualified donee status, a refundable labour credit, and personal income tax credit for digital subscriptions; (2) legislative amendments to remove the requirement that property be of “national importance” in order to qualify for the enhanced tax incentives for donations of cultural property; and (3) health-related proposals, such as the medical expense tax credit for medical cannabis and tax exemptions for certain biologicals, medical devices and health care services.

Additionally, and as proposed in Budget 2019, Bill C-97 includes draft legislative amendments to strengthen Canada’s anti-money laundering and anti-terrorist financing regime. In this regard, and of interest to charities and not-for-profits, the Criminal Code of Canada will be amended to criminalize concealment of the origin of funds in the case of recklessness. Additionally, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act will be amended to allow the Governor in Council to make regulations defining “virtual currency” and “dealing in virtual currencies”, and to amend disclosure obligations relating to designated information.

Further details on the above proposed changes, as introduced in Budget 2019, are available in Charity & NFP Law Bulletin No. 443.

Proposed Regulatory Amendments under the Child Care and Early Years Act, 2014 and Education Act

On April 4, 2019, the Ontario Regulatory Registry announced a consultation to seek feedback on proposed regulatory amendments under the Child Care and Early Years Act, 2014 (“CCEYA”) and Education Act. The proposed amendments are based on feedback from previous consultations with the child care sector, and are intended to ease compliance for licensees and providers, which may include charities and not-for-profits.

The amendments would reduce administrative burdens by removing duplicative requirements under O Reg 137/15 (General) and O Reg 138/15 (Funding, Cost Sharing and Financial Assistance) under the CCEYA. Further, the amendments would increase the choice and availability of child care services by giving licensees and providers the flexibility to offer programming options that meet their community’s needs through amendments to O Reg 137/15 and O Reg 138/15 under the CCEYA, and O Reg 221/11 (Extended Day Programs) under the Education Act. Finally, the amendments would clarify and align requirements in order to create a consistent standard of care across Ontario for all child care settings through amendments to O Reg 137/15 under the CCEYA and O Reg 221/11 under the Education Act. 

Ontario Bill 66, Restoring Ontario’s Competitiveness Act, 2019

On April 3, 2019, Ontario Bill 66, Restoring Ontario’s Competitiveness Act, 2019 was brought into force after receiving Royal Assent. Bill 66 amends the Employment Standards Act, 2000, among other acts, to reduce the regulatory burden on businesses, including charities and not-for-profits, when entering into work hour agreements and averaging agreements with employees, as well as with regard to employment standards educational posters required under the Employment Standards Act, 2000. Further details on the changes introduced through Bill 66 are available in the January 2019 Charity & NFP Law Update.

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Changes to Trademarks Definition and Registrability Coming

by | Apr 25, 2019 | Expertise, Intellectual Property Law

Apr 2019 Charity & NFP Law Update

As previously reported in the November 2018 Charity & NFP Law Update, significant changes to Canada’s trademark law will take effect on June 17, 2019.

One notable change is that the definition of “trademark” will be amended from “a mark that is used by a person…” to “a sign or combination of signs that is used or proposed to be used by a person…” The word “sign” is also defined as “includ[ing] a word, a personal name, a design, a letter, a numeral, a colour, a figurative element, a three-dimensional shape, a hologram, a moving image, a mode of packaging goods, a sound, a scent, a taste, a texture and the positioning of a sign”. The Trademarks Act has therefore been significantly broadened to include protection for these non-traditional trademarks. However, these non-traditional trademarks may be more difficult to secure and may require the applicant to furnish evidence of extensive use and promotion prior to obtaining a registration certificate.

The new law also includes utilitarian function as a universal bar to registrability, codifying Canadian case law. In particular, the amendments to the Act state that “a trademark is not registrable if, in relation to the goods or services in association with which it is used or proposed to be used, its features are dictated primarily by a utilitarian function.” This prohibition against utilitarian function will apply to all marks under the amended Act, not only to distinguishing guises, as is currently the case. Further, it appears that the amendments to the Act do not make it possible to overcome functionality objections by filing evidence of acquired distinctiveness, as is the case in the USA.

An example of this doctrine is the USA case involving Hershey Chocolate & Confectionary Corporation (“Hershey”). Hershey filed a trademark application for the design of their candy bar that was described by Hersey as “a configuration of a candy bar that consists of twelve equally-sized recessed rectangular panels arranged in a four panel by three panel format with each panel having its own raised border within a large rectangle”. The United States Patent and Trademark Office examiner denied the application on the basis that even if the individual features of the candy bar design were not considered functional, the combination of all of the features together were considered functional, since the configuration was to help break the chocolate bar into bite sized pieces. However, ultimately, Hersey provided extensive evidence that established the design as a whole had acquired distinctiveness and the configuration was granted trademark protection in the USA. It will be interesting to see how a similar case will be decided in Canada with the new prohibition.

Charities and not-for-profits should continue to monitor these amendments and strategies should be devised to maximize the scope of protection of trademark portfolios.

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Special Senate Committee Update

by | Apr 25, 2019 | Uncategorized

Apr 2019 Charity & NFP Law Update

In April, the Special Senate Committee on the Charitable Sector (the “Committee”) continued to hear from witnesses on the impact of laws and policies on the charitable and not-for-profit sector and the impact of the voluntary sector in Canada. Videos of the hearings are available on the Committee website and transcripts are normally made available a couple weeks after the meeting.

On April 1, 2019, the Committee heard from various departments of the government, including the CRA, Public Services and Procurement Canada, Department of Finance, as well as Innovation, Science, and Economic Development Canada, amongst others. Other witnesses included the chief economist of Imagine Canada, the senior community planning consultant from the Social Planning Network of Ontario, and a professor in the department of politics and public administration at Ryerson University. A selection of topics discussed included government initiatives, such as the CRA’s IT Modernization Project (“CHAMP”), and attracting individuals to the non-profit sector. Employment and human resources in the non-profit sector were identified as being of particular significance and recommendations were made, for example, to implement a federal student loan forgiveness program for those working in the non-profit sector.

On April 8, 2019 the Committee heard witnesses from the volunteer sector, including representatives from United Way Canada, Association of Fundraising Professionals, Imagine Canada, and the Muttart Foundation. Topics discussed focused on adapting the understanding of volunteerism to include the contribution of the younger generation, issues of funding, and strategies to improve employment in the sector such as improving job stability.

 The Committee also held a round table discussion with legal experts to discuss various matters relating to the regulation of charities. Amongst the topics discussed were: the types of registered charities; the “destination of funds” test; the 3.5% disbursement quota; and an “expenditure responsibility test” compared to the test for direction and control and donations of private shares and real estate.

The April 1 and April 8, 2019 meetings were the last series of meetings held by the Committee, which will now begin to prepare its report, which is expected to be released in September 2019.

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Consultation on Social Finance Fund Announced

by | Apr 25, 2019 | Uncategorized

Apr 2019 Charity & NFP Law Update

Employment and Social Development Canada (“ESDC”) is seeking public input through an online engagement process (“Consultation”) concerning support for social purpose organizations (“SPOs”) through a Social Finance Fund. The Social Finance Fund was initially proposed through the 2018 Fall Economic Statement, as discussed in Charity & NFP Law Bulletin No. 435. Through the Consultation, which was announced on March 18, 2019, ESDC indicated that it is exploring avenues for supporting SPOs “in building their capacity to innovate and move towards participation in social finance opportunities.” To carry this out, ESDC aims to offer support for SPOs over a two-year period, with the aim of helping them scale their practices and improve their participation in the social finance market.

The Consultation follows after the September 2018 release of the Social Innovation and Social Finance Strategy Co-Creation Steering Group’s report on social innovation and social finance (“Report”), discussed in the September 2018 Charity & NFP Law Update. The Report proposed twelve recommendations, including recommendations that would improve participation in social finance opportunities and specifically to “improve social purpose organizations’ access to federal innovation supports.”

A Discussion Guide has been published that provides a background on social innovation and social finance in Canada and discusses how ESDC’s Investment and Readiness Stream will support SPOs. In this regard, it indicates that the Investment and Readiness Stream will fund projects that support investment readiness, with a focus on four areas, including: (1) building SPOs’ technical capacity to access investments, funds and revenue sources; (2) impact measurement and knowledge mobilization; (3) emergence and growth of social finance intermediaries; and (4) early-stage innovations.

ESDC is seeking feedback, particularly from SPOs and associated groups; national and regional service delivery organizations, social finance intermediaries and associated groups; and entrepreneurs, social innovators, academics, experts and associated groups. The Consultation is open until May 31, 2019, and interested groups may respond by completing an online questionnaire, or by email to [email protected].

​Read the April 2019 Charity & NFP Law Update