by Dev User | Apr 25, 2019 | Uncategorized
Apr 2019 Charity & NFP Law Update
On April 18, 2018, a labour arbitration board in Saskatchewan (the “Board”) released its decision in The Town of Kindersley v Canadian Union of Public Employees Local 2740 in which the Board upheld an employer’s decision to dismiss a unionized employee for improper use of his medically prescribed cannabis. This decision is a reminder to charities and not-for-profits that the accommodation of an employee’s needs with respect to medical cannabis does not give an employee licence to use the substance in whichever way the employee sees fit. Rather, employees are expected to abide by company policies, rules, and workplace accommodation agreements and also conduct themselves responsibly in their use of the substance. While this decision was released in 2018, the principles relating to workplace accommodation and the use of medically prescribed cannabis are important, especially in light of the recent legalization of recreational cannabis in Canada in October 2018, and the potential of the increased use of both medical and recreational use of cannabis across Canada as discussed in Charity & NFP Law Bulletin No. 431.
For the balance of this Bulletin, please see Charity & NFP Law Bulletin No. 447.
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by Dev User | Apr 25, 2019 | Uncategorized
Apr 2019 Charity & NFP Law Update
On March 19, 2019, the Ontario Superior Court of Justice denied leave to a non-profit corporation, the Humane Society of Canada for the Protection of Animals and the Environment (the “Society”), to be represented by a person who is not a lawyer. This motion, which was decided in Canada Trust v Public Guardian and Trustee, 2019 ONSC 1768, was in the context of an estate matter where the deceased had willed the residue of her estate to be divided equally among four charities, including the Society. The executor sought court direction on the question of whether it would be in the public interest to execute the gift, worth approximately $90,000, to the Society due to the Society’s “serious deficiencies in its management” that resulted in its charitable revocation, as reported in the July/August 2015 Charity & NFP Law Update. The Society moved for leave to be represented by Mr. Michael O’Sullivan, a non-lawyer who is the chairman and CEO of the Society, the Humane Society of Canada Foundation, and also a director of a the Ark Angel Foundation, whose charitable revocation was reported in the February 2019 Charity & NFP Law Update. Mr. O’Sullivan further deposed that it was his view that “a charity’s money should not be spent on lawyers.”
In finding that Mr. O’Sullivan was not reasonably capable of advocating on behalf of the Society, the court looked to his past conduct representing the other corporations as well as his conduct so far in the present application. The court commented that Mr. O’Sullivan’s advocacy in one proceeding “doubled the Society’s liability to the plaintiff” because of unfounded allegations and frivolous requests, while another proceeding resulted in the award of substantial costs against the corporation “taking into account its vexatious conduct and unfounded allegations of impropriety against others.” In the present application, the court noted that Mr. O’Sullivan’s written materials demonstrated that he did not understand the issues nor how to present them to the benefit of the Society, which would result in frivolous positions and cost more money to the Society and parties impacted by the proceeding. Further, because he was also the sole witness to proceeding, the court found that taking on an additional role as an advocate would cause confusion.
As such, the court denied leave to the Society to be represented by Mr. O’Sullivan and ordered it to file a notice of appointment of solicitor within 15 days, exceeding which it would not be entitled to participate in the application. Further, the court awarded costs to the executor, fixed at $22,000, to be deducted from the gift at issue, and the remaining $68,000 to be paid into court until further order. The court also added the Public Guardian and Trustee (“PGT”) to the application as a party to have conduct over the application, despite the Society’s objection. The court commented that the PGT had a “long-established role in the exercise of the parens patriae function of the Crown”, had the expertise in the matter, and also conducted the investigation. As a result, the court stated that the “Public Guardian is the only logical candidate” to have carriage over the application.
It is not uncommon for charities to receive gifts from the estate of donors. When executing gifts from the estate to charities, the executor may raise concerns regarding the public benefit of such a gift if the organization has been shown to have issues in the way it is operated. As such, charities need to ensure that their assets and operations are properly managed. Further, the case serves as a reminder that it is best to consult with legal professionals when dealing with court proceedings. While being self-represented may appear to save money at the outset, a representative who is unfamiliar with court procedure or unable to advocate effectively for the organization may end up costing it more money and more reputational damage. Since the finance of charities come primarily from donors, the use of its assets, especially in court proceedings, should be spent responsibly and carefully.
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by Dev User | Apr 25, 2019 | Uncategorized
Apr 2019 Charity & NFP Law Update
On April 18, 2018, Bill 74, The People’s Health Care Act, 2019 (“Bill 74”) received Royal Assent. Schedule 1 of Bill 74 enacts the Connecting Care Act, 2019 (the “Act”), which will come into force on a date to be set by proclamation. While the Act is expansive, the following is a brief overview of select portions that may affect charities and not-for-profits.
The Act will establish a new province-wide health “super agency”, known as Ontario Health, which will ultimately take over the province’s Local Health Integration Networks (“LHINs”) – which themselves recently took over the former Community Care Access Centres – as well as a number of independent provincial health agencies, including Cancer Care Ontario. The Act also provides Ontario Health and the Minister of Health and Long Term Care (“Minister”) with broad powers to integrate the province’s health system. Ontario Health can integrate the health system through funding changes (subsection 31(a)), through facilitating and integrating the integration of persons, entities or services (subsection 31(b)) or by issuance of a facilitation decision pursuant to which parties or services are integrated by agreement of the parties (section 32).
Under section 33, the Minister may also make integration orders pursuant to which the Minister will require health service providers or integrated care delivery systems (“ICDs”, a group of persons or entities designated by the Minister that meets the conditions prescribed in the Act) to integrate, including:
- provide all or part of or cease to provide all or part of a service;
- cease operating, dissolve or wind up its operations;
- amalgamate with one or more persons or entities;
- co-ordinate services or partner with another person or entity; and/or
- transfer all or substantially all of its operations to one or more persons or entities.
While the Act is part of a larger health care reform plan through which ICDs, other groups of providers and other organizations will provide a coordinated continuum of care to a defined geographic population, the Act does not provide for any particular governance structure for ICDs, and notably does not require them to be not-for-profit.
There are some constraints currently in place for LHINs that will also be placed on the Minister’s integration powers regarding religious-based, not-for-profit and charitable providers, as follows:
- Paragraph 33(2)(a) of the Act provides that the Minister shall not unjustifiably, as determined under section 1 of the Canadian Charter of Rights and Freedoms, require a religious organization to provide a service that is contrary to the religion related to the organization.
- Paragraph 33(2)(b) of the Act provides that the Minister shall not require the transfer of property held for a charitable purpose to a person or entity that is not a charity.
- Paragraph 33(2)(c) of the Act provides that the Minister shall not require a person or entity that is not a charity to receive property from a person or entity that is a charity and to hold the property for a charitable purpose.
- Paragraph 33(2)(g) of the Act provides that the Minister shall not require a not-for-profit health service provider or ICD to amalgamate with for-profit health service providers or ICDs.
- Paragraph 33(2)(h) of the Act provides that the Minister shall not require a not-for-profit health service provider or ICD to transfer all or substantially all of its operations to a for-profit health service provider or ICD.
There are no similar constraints on the powers of Ontario Health under sections 31 and 32.
However, subsection 37(1) of the Act provides that if an integration decision requires a health service provider or ICD to transfer property that it holds for a charitable purpose, all gifts, trusts, bequests, devises and grants shall be deemed to be gifts, trusts, bequests, devises and grants to the transferee. Subsection 37(2) provides that, if such property being transferred was originally gifted for a specific purpose pursuant to a will, deed or other document, the transferee must use it for the specified purpose. From a charities law perspective, if the specified purpose can no longer be fulfilled, such as in a case in which the charitable property was originally gifted to support the operations of a charity that has been ordered to cease operations, the charity’s stakeholders may want to consider seeking legal advice in order to ensure that its charitable assets are dealt with appropriately and, as much as possible, in accordance with the donors’ intentions.
The sweeping changes introduced by the Act will likely result in several years of uncertainty in Ontario’s health care system, affecting thousands of organizations, entities and individuals. There may be risks to smaller providers, including charitable and not-for-profit providers, particularly if they have charitable assets that they wish to deploy in accordance with donors’ intentions. Charities and not-for-profits involved in the provision of health care in Ontario may need to obtain independent legal advice in order to develop appropriate strategies for managing or addressing these risks under the new legislation.
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by Dev User | Apr 25, 2019 | Uncategorized
by Dev User | Apr 25, 2019 | Uncategorized
Apr 2019 Charity & NFP Law Update
On March 8, 2019, the Canada Revenue Agency (“CRA”) published an information website on Digital Currency, which defines “digital currency” by way of reference to Bitcoin stating that “Bitcoins are not controlled by central banks or any country, […] can be traded anonymously, […] can be bought and sold in return for traditional currency, and can also be transferred from one person to another.” The information website further states that transactions involving digital currency are governed, for tax purposes, by the rules for barter, which are described in the CRA’s Interpretation Bulletin IT-490, Barter Transactions. The information website also states that gains or losses resulting from buying and selling digital currency like a commodity may constitute taxable income or capital, as determined in accordance with Interpretation Bulletin IT-479R, Transactions in Securities. Finally, the information website states that the CRA is very active in pursuing cases of non-compliance.
On the same date, the CRA also released its Guide for cryptocurrency users and tax professionals (the “Cryptocurrency Guide”) which defines “cryptocurrency” as a type of “alternative currency” such as Bitcoin, and as a “digital asset” (also referred to as a “crypto asset” or “altcoin”), that works as a medium of exchange but that is not legal tender. This suggests that the CRA considers the terms “digital currency”, “digital asset” “cryptocurrency”, “crypto asset”, “alternative currency”, and “altcoin”, at least to some extent, interchangeable.
The Cryptocurrency Guide states that the CRA “generally” treats cryptocurrency like a commodity for purposes of the ITA and that transactions involving cryptocurrencies are “generally” treated as either business income or capital gain, depending on the circumstances. In this regard, the Cryptocurrency Guide describes when earnings or losses from a disposition of cryptocurrency may be considered either business income/losses or capital gains/losses, including a number of examples involving cryptocurrency trading and cryptocurrency mining, and when cryptocurrency should be considered capital property or inventory.
The Cryptocurrency Guide further states that “in general” possessing or holding a cryptocurrency is not taxable and that only a disposition “could” have tax consequences, such as with regard to: i) the sale or gift of cryptocurrency; ii) a trade or exchange of cryptocurrency, including the exchange of one type of cryptocurrency for another; iii) the conversion of cryptocurrency into government-issued currency, such as Canadian dollars; and iv) the use of cryptocurrency to buy goods or services.
Regarding gifts of cryptocurrency, and of interest to charities and not-for-profits, CRA document 2013-0514701I7 provides that the fair market value of Bitcoin at the time of the transfer to a qualified donee must be used to determine the eligible amount of the gift for tax purposes and, subject to the deeming rule applicable to gifts in kind, the eligible amount of the gift may be less than its fair market value. The CRA website Determining fair market value of non-cash gifts provides additional information on gifts in kind.
As such, the Cryptocurrency Guide recommends that reasonable methods be used in order to value all transactions for each type of cryptocurrency or separate digital asset, for example, by consistently choosing an exchange rate taken from the same exchange broker or an average of midday values across a number of high-volume exchange brokers. The Cryptocurrency Guide also requires that adequate books and records be kept for all cryptocurrency transactions for at least 6 years, including the date of the transactions, the receipts of purchase or transfer of cryptocurrency, the value of the cryptocurrency in Canadian dollars at the time of the transaction, the digital wallet records and cryptocurrency addresses, a description of the transaction and the other party (even if it is just their cryptocurrency address), the exchange records, accounting and legal costs, and the software costs related to managing tax affairs.
Neither the Cryptocurrency Guide nor the webpage on Digital Currency address issues related to cryptocurrency and registered charities. However, reference to these documents will be important in the context of registered charities receiving gifts of and receipting cryptocurrency. In this regard, the reaffirmation that cryptocurrency is considered by the CRA to generally be a commodity and subject to the deeming rules applicable for gifts in kind will be significant in issuing receipts, as well as the books and records that should be kept related to transactions in order to support any valuation given.
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