Privacy Regulations Recognize CRA’s RAD as Investigative Body

by | Mar 29, 2018 | Uncategorized

Mar 2018 Charity & NFP Law Update

Amendments to the Privacy Regulations, SOR/83-508 (the “Privacy Regulations”) under the Privacy Act and amendments to the Access to Information Regulations, SOR/83-507 under the Access to Information Act came into force on March 7, 2018 upon the registration of the Regulations Amending the Privacy Regulations: SOR/2018-39 and Regulations Amending the Access to Information Regulations: SOR/2018-38 (the “Amending Regulations”). Among the changes introduced, the Amending Regulations amended Schedule II of the Privacy Regulations to designate the Review and Analysis Division, Charities Directorate, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency (“RAD”) as an investigative body for the purposes of s. 8(2)(e) of the Privacy Act. This designation means that government institutions will be able to disclose personal information to RAD for law enforcement purposes without having to obtain consent from the affected individuals. RAD will also be entitled to rely on the law enforcement exemption to deny requests for access to personal information made under either the Privacy Act or the Access to Information Act.

According to the CRA Privacy Impact Assessment (PIA) Summary – Review and Analysis Division, “RAD is responsible for delivering the Agency’s mandate under the Anti-Terrorism Act to prevent the abuse of registered charities for the financing of terrorism.” The CRA’s Report on the Charities Program 2015-2016 explains that it does this by reviewing applications for charitable registration, monitoring and auditing registered charities, and providing education on terrorism and terrorist financing-related issues.

It is interesting to note that, although RAD is a division of the CRA’s Charities Directorate, the Amending Regulations designate only RAD itself as an investigative body rather than the CRA Charities Directorate as a whole. As a result, it would appear that RAD has access to information gathering powers not available to the Charities Directorate itself.

The increased information-gathering powers given to RAD as an investigative body remove a certain expectation of privacy concerning the personal information of identifiable individuals associated with a charity, such as their “directors, trustees, officers or other officials.” This is in line with a trend towards decreased privacy that has seen the CRA include a new privacy warning statement in the most recent T3010 Registered Charity Information Return, which states that the CRA collects personal information, including that of “directors trustees, officers and/or like officials” from the T3010 under the authority of the Income Tax Act and uses this information as a basis for the indirect collection of additional personal information from other internal and external sources to assess the overall risk of registration. Charities and their directors, officers and other officials should be aware of RAD’s increased personal information-gathering power and ability to rely on the law enforcement exemption to deny requests for access to personal information under its control.

​Read the March 2018 Charity & NFP Law Update

Legislation Update

by | Mar 29, 2018 | Uncategorized

Mar 2018 Charity & NFP Law Update

Federal Bill C-74, Budget Implementation Act, 2018, No. 1

On March 27, 2018, Bill C-74, Budget Implementation Act, 2018 (“Bill C-74”) was introduced and received first reading at the House of Commons. If passed, Bill C-74 will implement certain measures proposed in the 2018 Federal Budget (“Budget 2018”), some of which will impact the charitable and not-for-profit sector, as discussed in Charity & NFP Law Bulletin No. 417. In this regard, Bill C-74 proposes to amend the s. 188(1.3) definition of “eligible donee” under the Income Tax Act (“ITA”) to include municipalities for purposes of revocation tax, and to amend the s. 149.1(1) definition of “qualified donee” to simplify the qualified donee status of universities outside of Canada. For further information regarding universities outside Canada, see “Ministry of Finance Clarifies Changes Concerning Prescribed Universities” below.

Ontario Bill 193, Rowan’s Law (Concussion Safety), 2018 and Rowans Law Consultations

On March 7, 2018, Bill 193, Rowan’s Law (Concussion Safety), 2018, received Royal Assent. With the exception of the provision establishing Rowan’s Law Day on the last Wednesday in September each year, which came into force on Royal Assent, this legislation, including the corresponding amendments to the Education Act, will come into force on a date to be set by proclamation. Rowan’s Law (Concussion Safety), 2018 follows recommendations set out in the September 2017 report of the Rowan’s Law Advisory Committee that was discussed in the June 2016 Charity & NFP Law Update, as well the September 2017 Charity & NFP Law Update. The Ministry of Tourism, Culture and Sport has started a consultation process for the development of regulations, policies and guidelines that will govern amateur competitive sport organizations and school boards. The consultation process, which will be open until May 7, 2018, also provides a consultation paper for discussion purposes.

Ontario Bill 3, Pay Transparency Act, 2018

On March 20, 2018, the Ontario government introduced Bill 3, Pay Transparency Act, 2018 (“Bill 3”) in the Legislature, where it has since been debated twice at second reading on March 26 and 28, 2018. Bill 3 replaces Bill 203, Pay Transparency Act, 2018 introduced on March 6, 2018 and which died on the order paper upon the prorogation of the Legislature on March 15, 2018. If passed, Bill 3 will establish a number of provisions regarding compensation-related information of employees and prospective employees. For example, Bill 3 would prohibit employers from seeking compensation history about a job applicant, and will require employers to include compensation information in publicly advertised job postings, along with a number of other related provisions. Prescribed employers would also be required to prepare “pay transparency reports” including information about the employer, their workforce composition, and differences in compensation in their workforce regarding gender and other prescribed characteristics. It is expected that these reporting requirements would first apply to the Ontario Public Service, and then employers with over 500 employees, to be followed then by employers with over 250 employees. If passed, Bill 3 would be scheduled to be in force as of January 1, 2019.

Ontario Bill 14, Personal Information Protection Act, 2018

On March 21, 2018, Ontario Bill 14, Personal Information Protection Act, 2018 (“Bill 14”), a private member’s bill, was introduced in the Legislature. Bill 14 passed second reading on March 22, 2018 and was referred to the Standing Committee on Justice Policy the same day. If passed, Bill 14 will apply to every organization, including unincorporated associations and not-for-profit organizations, but not to personal information subject to the federal Personal Information Protection and Electronic Documents Act (“PIPEDA”), to Ontario’s Freedom of Information and Protection of Privacy Act, or to other similar provincial Acts. Bill 14 governs the collection, use and disclosure of personal information and, if passed, could potentially be deemed substantially similar to Part 1 of the PIPEDA. Pursuant to subsection 26(2) of PIPEDA, the Governor in Council may order that organizations and activities subject to provincial legislation that it deems substantially similar to be exempt from PIPEDA with respect to the collection, use or disclosure of personal information occurring in that province.

Amendments to Regulations under the Ontario Charities Accounting Act

As of April 1, 2018, new amendments to Ontario Regulation 4/01 under the Charities Accounting Act (“CAA”) will authorize charitable corporations to pay directors and related persons for goods, services, or facilities under certain limited circumstances. For more information, see “Regulations Concerning Directors’ Remuneration Coming into Force” below.

Proposed changes to Regulation 166/11 under Retirement Homes Act

On March 9, 2018, the Ministry of Seniors Affairs opened a consultation process looking for submissions from the public on Proposal 18-OSS001, related to the disclosure of cannabis-related offences by retirement home licence applicants, as well as by staff and volunteers in retirement homes, in anticipation of changes to the federal Controlled Drugs and Substances Act. Submissions are due March 30, 2018. As per the Consultation Report published in January 2017, it is worth noting that only a small number of retirement homes are not-for-profit, as opposed to long-term care homes licensed or approved under the Long-Term Care Homes Act, 2007.

Proposed changes to Regulation 79/10 under Long-Term Care Homes Act, 2007

On February 28, 2018, the Ministry of Health and Long-Term Care introduced Proposal 18-HLTC018, which contains a number of technical amendments dealing with penalties, fees and information required from licensees, as well as the disclosure of cannabis-related offences by staff and volunteers in anticipation of changes to the federal Controlled Drugs and Substances Act. Input from the public was due March 29, 2018.

Proposed Regulation on exemptions to Ticket Sales Act, 2017

On March 1, 2018, the Ministry of the Attorney General introduced Proposal 18-MAG001 on exemptions to the Ticket Sales Act, 2017, which is set to come into force on July 1, 2018. The Ticket Sales Act, 2017 already includes an exemption for registered charities, but this proposed regulation would generally exempt small venues, such as schools, including colleges and universities, churches or other places of worship, and buildings that are owned or operated by municipalities, school boards or community organizations. Comments were due March 21, 2018.

​Read the March 2018 Charity & NFP Law Update

The 2018 Ontario Budget: Impact on Charities and Not-for-Profits

by | Mar 29, 2018 | Uncategorized

Mar 2018 Charity & NFP Law Update

On March 28, 2018, Ontario’s Minister of Finance Charles Sousa tabled the Liberal Ontario Government’s 2018 Budget (“2018 Ontario Budget”). The 2018 Ontario Budget includes various provisions that will be of interest to the charitable and not-for-profit sector, including tax measures to enhance support for charitable giving, to ensure the Employer Health Tax remains available to charities and not-for-profits, and to create a tax exemption for certain non-profit child care facilities.

In order to maintain and enhance support for charitable giving in Ontario, the 2018 Ontario Budget proposes to enhance the Ontario Charitable Donations Tax Credit (“OCDTC”), a tax credit that provides relief to taxpayers that make eligible donations. The current OCDTC rate is 5.05% for the first $200 of eligible donations and 11.16% for eligible donations exceeding $200. In this regard, the 2018 Ontario Budget proposes to increase the rate for eligible donations exceeding $200 from 11.16% to 17.5% in order to correspond with proposed changes to provincial personal income tax.

The 2017 Ontario Budget proposed measures to eliminate an exemption available to certain employers for Employer Health Tax (“EHT”), a payroll tax that partially funds the Ontario Health Insurance Plan, and to ensure that the EHT exemption would be available for other, smaller employers. The EHT exemption is currently available to employers that are not eligible for the Small Business Deduction under the Income Tax Act. The 2018 Ontario Budget proposes to base the EHT exemption on the Small Business Deduction eligibility criteria. The effect of this would be that the EHT exemption would remain available to charities, not‐for‐profit organizations, and private trusts, among other small employers.

The 2018 Ontario Budget also recognizes that many child care facilities are located in spaces that are property tax-exempt, such as public schools, places of worship, municipal town halls, and other community centres. In order to maintain the tax-exempt status of these facilities where a portion of their facility is rented to a non-profit child care centre, the 2018 Ontario Budget proposes to amend the Assessment Act in order to provide a tax exemption to non-profit child care centres within the meaning of the Child Care and Early Years Act, 2014 that lease property in these tax-exempt spaces. Proposed amendments to the Assessment Act have already been introduced through Bill 31, Plan for Care and Opportunity Act (Budget Measures), 2018 (“Bill 31”), which received first reading on March 28, 2018, the same day that the 2018 Ontario Budget was released.

The proposed provisions of the 2018 Ontario Budget are welcome measures that, if passed, may provide relief to specific charities and not-for-profits, as well as to the sector as a whole. Charities and not-for-profits operating in Ontario should monitor the status of Bill 31, as well as any upcoming budget implementation bills to be introduced in the Ontario Parliament.

​Read the March 2018 Charity & NFP Law Update

CRA News

by | Mar 29, 2018 | Uncategorized

Mar 2018 Charity & NFP Law Update

New Business Numbers No Longer Required for Internal Divisions

In the September 2017 Charity & NFP Law Update, it was reported that the Canada Revenue Agency (“CRA”) would be assigning unique nine-digit business numbers to charities’ internal divisions that were sharing the business numbers of their head bodies in order to access the CRA’s online services through the Charities IT Modernization Project. However, on March 1, 2018, the CRA announced through an e-mail sent to certain stakeholders, as well as through an update to its Guidance CG-028, “Head bodies and their internal divisions”, that the new initiative announced in September 2017 will no longer be required in order to allow internal divisions to access the CRA’s online services. This means that the CRA is reverting back to its long-standing practice of assigning internal divisions with the same business numbers as their head bodies followed by a program identifier “RR”, as well as a unique four-digit reference number following RR to help distinguish between different head bodies and internal divisions.

CRA Releases Video on Gift Certificates and Gift Cards

On February 28, 2018, the CRA published a video outlining when and how registered charities can issue official receipts for gift card or gift certificate (“Gift Card”) donations. Gift Cards are akin to promises to issue a gift which are fulfilled upon a transfer of property through redemption of the Gift Card. In this regard, if a charity that received a Gift Card directly from an issuer (i.e. the individual or business that issues the Gift Card and from whom the Gift Card can be redeemed for services or property), the charity can only issue a donation receipt to the issuer once the charity has used the Gift Card to purchase a product or service, and only for the amount that the charity redeemed from the Gift Card. On the other hand, a charity that received a Gift Card from a Gift Card holder (i.e. a third party non-issuer who purchased the Gift Card from an issuer) can issue a donation receipt to the donor for the amount of the Gift Card because the holder purchased the Gift Card, giving it a monetary value. As such, it is important for charities to know whether the donor of a Gift Card is an issuer or a holder of a Gift Card.

​Read the March 2018 Charity & NFP Law Update

CRA Releases Interpretation on Gifts of Securities Made by Executors

by | Mar 29, 2018 | Uncategorized

Mar 2018 Charity & NFP Law Update

On March 7, 2018, the CRA released Interpretation 2017-0698191E5, “Gift of securities by executors of a will” that addresses the income tax implications of three hypothetical scenarios involving gifts made by executors of the estate of a deceased individual. More specifically, the facts presented to the CRA described a will in which there was no designation of the amounts to be given to charities, although the three co-executors were given flexibility to make donations in their discretion. It was also indicated that the deceased’s assets included a mutual fund investment account with a $4 million total fair market value with an inherent capital gain of $1 million. In response, the CRA addressed the resulting tax implications of this situation by way of three different scenarios.

The first scenario addressed whether a charitable donation of $500,000 cash from a graduated rate estate’s (“GRE”) sale of mutual fund units could be used to offset personal taxes owed on the deceased’s final return. In this regard, the CRA stated that, subject to subsection 118.1(13) of the Income Tax Act, a gift made by an estate is deemed to be made by the estate, as opposed to by the deceased, under subsections 118.1(4.1) and (5). It further stated that the cash would constitute property substituted for the property that the estate acquired on and as a consequence of the death of the deceased for the purposes of paragraph 118.1(5.1)(b), concerning gifts by GREs. Therefore, the donation credit could be claimed on the deceased’s final return pursuant to clause 118.1(1)(c)(i)(C) on the definition of “total charitable gifts.”

The second scenario considered the same facts as the first scenario with the exception that the donation is in-kind rather than cash. In this regard, the CRA stated that where subsection 118.1(5) applies to a gift, the gift is not considered to be made until the gifted property is transferred. While the capital gain on mutual fund units would be calculated at the time of death, subparagraph 38(a.1)(ii) provides for a nil taxable capital gain where the property disposed of is a unit of a mutual fund corporation or trust and the gift is subject to subsection 118.1(5.1) and is made by a GRE to a qualified donee.

The third scenario was also a donation in-kind as in the second scenario. However, the question was whether the capital gain from an increase in the fair market value of the mutual fund units between the time of deemed disposition immediately before death and the time of the units’ transfer to a qualified donee would also be eligible for a nil taxable capital gains. The CRA answered that the difference between these two values will result in a gain or a loss to the estate, as applicable. However, where the gift is given to a qualified donee and the taxable capital gain of that gift is nil pursuant to paragraph 38(a.1), as discussed above, any subsequent increase in value from the date of death to the date of disposition by the GRE will also be nil pursuant to subparagraph 38(a.1)(i).

​Read the March 2018 Charity & NFP Law Update