New Ontario Government Makes Major Changes to ESA
Nov 2018 Charity & NFP Law Update
After being introduced by the Ontario Government only one month ago on October 23, 2018, Bill 47, Making Ontario Open for Business Act, 2018 (“Bill 47”), received Royal Assent on November 21, 2018, making amendments to the Employment Standards Act, 2000 (“ESA”) and other legislation. The passing of Bill 47 represents a significant roll-back of certain amendments to the ESA passed by the former Ontario Liberal government in 2017 pursuant to Bill 148, Fair Workplaces, Better Jobs Act, 2017, which increased employee entitlements with respect to minimum wage, leaves of absences, scheduling, and more. Since almost all the latest ESA amendments introduced in Bill 47 will come into effect January 1, 2019, charities and not-for-profits have only a month to modify their policies and practices so as to bring them into compliance. As such, the focus of this Charity & NFP Bulletin is to provide a summary of the ESA changes made by Bill 47.
For the balance of this Bulletin, please see Charity & NFP Law Bulletin No. 436.
Ontario Court Permits Charity to Keep “No Strings Attached” Donation
Nov 2018 Charity & NFP Law Update
On October 30, 2018, the Ontario Superior Court of Justice released its decision in The McKay Cross Foundation v ICSS, concerning a motion for summary judgment dismissing an action by The McKay Cross Foundation (the “Foundation”), CAM 88 Inc., and Ann Cross (collectively the “Plaintiffs”) claiming the return of a $100,000 donation to a registered charity, Innovative Community Support Services (“ICSS”). In this case, the court considered the agreement between both parties in order to determine whether the donated funds were specific purpose charitable funds.
In late 2011, Ms. Cross sought to purchase or build a residence where her developmentally disabled grandson and two other disabled men could receive quality care. After approaching ICSS about this, a draft agreement was proposed in June 2012, whereby Ms. Cross would provide $300,000 to purchase a house to be held by ICSS on the condition that ICSS would obtain certain government funding. While not explicitly stated in the decision, it does not appear that the agreement was signed by the parties. In a subsequent email, ICSS suggested that Ms. Cross donate $100,000 “no strings attached,” and that she donate $50,000 each year for the following three years. Ms. Cross responded that she could give $100,000 before Christmas 2012 and $100,000 after Christmas 2012 but before June 30, 2013. On September 19, 2012, ICSS received a $100,000 cheque from Ms. Cross marked “Donation”.
By November 2012, ICSS temporarily placed the three men in a separate residence that it managed until another house could be found. Although ICSS continued to make efforts to find funding, it informed Ms. Cross by September 2013 that government funding would not be available for some time. Ms. Cross subsequently informed ICSS that she would purchase a house, and did so under The McKay Cross Foundation’s name. This was then rented to ICSS to manage. The three men moved into this house in 2014 and have lived there under ICSS’ care since then. However, on December 1, 2014, The McKay Cross Foundation wrote to ICSS demanding the return of Ms. Cross’ $100,000 donation.
At court, the Plaintiffs argued that there was an agreement for Ms. Cross to donate funds in exchange for a tax receipt, but that the donated funds were restricted to the specific purpose of purchasing a home for the men. They further claimed that ICSS had breached its fiduciary obligations when it did not ensure that the donation was applied in accordance with the alleged restricted purpose. ICSS, on the other hand, claimed there was no genuine issue requiring a trial, as the Plaintiffs had no evidence to support their arguments. Further, it argued that Ms. Cross’ donation was made with no strings attached.
In examining the evidence, the court found that the donation was made with no strings attached. Throughout email exchanges between Ms. Cross and ICSS concerning Ms. Cross’ purchase of the house, it found that Ms. Cross never asked or mentioned that the $100,000 donation should be applied to the purchase. Rather, it stated that “she communicated quite cooperatively with [ICSS] seeking their assistance to help fund required renovations.” The court also noted that the contract alleged by the Plaintiffs would have been “too vague to be enforceable,” as it did not address the parties, the terms, legal title to the house, how the parties were to be bound by it, or the required circumstances for a return of the donation or a portion thereof. Therefore, any potential breach of contract claim would have failed. Given the communication between both parties, the court therefore held that there was no evidence that the donation was restricted to being used for a down payment for a house for the three men, and found that there was no genuine issue requiring trial. Accordingly, the court dismissed the Plaintiffs’ action, assessed costs of $24,280 against the Plaintiffs and allowed ICSS to keep the $100,000 donation.
This case provides a good illustration of the importance for charities and donors of drafting and entering into proper gifting agreements before donations are made. This is particularly important where the donor wishes to restrict their donation to a specific purpose. Without such an agreement, the intention of either or both parties may be misunderstood. In such circumstances, as was the case here, unnecessary money and time in court may need to be spent in order to determine the true intention of the parties.
Corporate Registers of Real Property Interests Mandatory as of December 10, 2018
Nov 2018 Charity & NFP Law Update
Charities and other not-for-profit corporations incorporated under the Ontario Corporations Act (the “Act”) are reminded that as of December 10, 2018 they are required to keep at their head office a register of their ownership interests in real property in Ontario. According to subsection 300.1(2) of the Act, the register must identify each property and show the date it was acquired and, if applicable, the date it was disposed of. Subsection 300.1(3) of the Act requires the following supporting documents to be kept with the register: a copy of any deeds, transfers or similar documents that contain certain information with respect to each property listed in the register, including the municipal address, if any; the registry or land titles division and the property identifier number (PIN); the legal description; and the assessment roll number, if any.
The register must be available for inspection during normal business hours by the members of the corporation and by creditors or their agents or legal representatives and any of them may make extracts therefrom.
These new provisions in the Act were made pursuant to the Forfeited Corporate Property Act, which came into effect on December 10, 2016. They were made to assist the Crown in locating land that reverts to the Crown if a corporation is dissolved while owning land. Corporations are expected to be compliant with these new provisions by December 10, 2018, failing which they and their directors and officers could face fines.
CRA News
Nov 2018 Charity & NFP Law Update
Peel and Stick Bar Code Labels No Longer Provided with T3010 Package
The Canada Revenue Agency (“CRA”) has announced that, as of November 14, 2018, it has stopped providing charities with peel and stick bar code labels with their T3010 annual information return packages. The CRA will, however, continue to provide charities with Form TF725, Registered Charity Basic Information Sheet. Charities will continue to be able to make changes to their information through Form TF725. This form should be submitted along with the T3010, even where charities have not made any changes.
Changing Your Fiscal Year-End Infographic
On November 15, the CRA released a graphic educational tool (“infographic”), Changing Your Fiscal Year-End: What a registered charity needs to do. The infographic indicates that the T3010 must be filed no more than 12 months apart, even when a charity changes its fiscal year-end. When a charity changes its fiscal year-end, it will therefore need to file a transitional return for the brief period between its old and new fiscal year-ends before filing full-year returns thereafter. To change a fiscal year-end, the infographic states that charities must first determine their new fiscal year-end and then send a letter to the CRA (separate from the T3010), asking for permission to make the fiscal year change. The letter must contain the following information: the proposed new fiscal year-end, the proposed effective year of the change, and must be signed by an authorized representative currently on file. Upon receipt of confirmation of permission to change the fiscal year-end from the CRA, the charity must then file its transition return before filing its regular return with the new fiscal year-end.