by admin | Jun 25, 2015 | Charity & Not-for-Profit Law
Request for Proposals for the Social Finance Accelerator Initiative
The Employment and Social Development Canada announced on June 8, 2015, that it has issued a Request for Proposals (“RFP”) to award up to three contracts to establish a social finance accelerator to tackle persistent social problems in each of three regions: the Western provinces, Ontario, and Quebec and the Atlantic provinces. The Social Finance Accelerator Initiative was originally announced as part of the 2015 Federal Budget. Although this initiative is not directly related to Canada Revenue Agency (“CRA”), it will affect how CRA works with charities. The announcement indicates that successful bidders will work with organizations, such as charities and not-for-profit organizations to deliver enhanced assistance to more people in need, by addressing issues including unemployment, poverty and homelessness. Proposals may also address social isolation of seniors, and services targeting vulnerable youth to support their transition from education to work. The RFP will be open until July 17, 2015, and the awarded contracts are expected to be announced in August 2015, with the work starting by January 2016.
CRA Updated Income Tax Folio Chapter on Related Persons and Dealing at Arm’s Length
On June 9, 2015, CRA released an updated version of Chapter 1 of Income Tax Folio 5: Transfer of income, property or rights to third parties. Chapter 1 can be referenced as S1-F5-C1: Related persons and dealing at arm’s length. When it was first published on May 2, 2014, this Chapter replaced and cancelled Interpretation Bulletin IT-419R2, Meaning of Arm’s Length. The Chapter discusses the criteria used to determine whether or not persons deal with each other at arm’s length for the purposes of the Income Tax Act. This document will continue to have an impact on the operation of charities, since the arm’s length concept affects issues such as designation of charities and inter-charity transfers.
CRA Removes Guide on Keeping Records
As of May 12, 2015, CRA’s Guide RC4409, Keeping Records is no longer being made available. Currently, CRA provides limited information on keeping records on its website at: http://www.cra-arc.gc.ca/records/. It is unclear whether a new Guide will be released to replace RC4409.
Prime Minister Announces $10 Million for CRA to Detect and Suppress Terrorist Financing Prime Minister Stephen Harper announced on June 4, 2015, that CRA will invest approximately $10 million over five years to build on current efforts to detect and suppress terrorist financing activities in the charitable sector. This funding is made under Economic Action Plan 2015 for CRA to “better crack down on the financing of terrorist groups through registered charities in Canada.” This announcement was made alongside other provisions also mentioned in the 2015 Federal Budget (“Budget 2015”) , including $136.81 million being added to the budget of CSIS over five years, with $40.97 million per year being provided on an ongoing basis afterwards, to address the issue of terrorism.
by Dev User | Jun 25, 2015 | Charity & Not-for-Profit Law, Counter Terrorism Law, Expertise
Anti-Terrorism and Charity Law Bulletin No. 40,
The House of Commons Standing Committee on Finance (the “Committee”) released its report entitled Terrorist Financing in Canada and Abroad: Needed Federal Actions (the “Report”) on June 18, 2015. The Report contains 15 recommendations that are designed to increase the effectiveness of Canada’s anti–money laundering and anti–terrorist financing regime, as well as contribute to global efforts to combat terrorist financing. In its discussion of the issues, the Committee noted the low level of terrorist financing that has been detected in Canada compared to other countries, but the Committee was careful to note that limited detection and prosecution of terrorist financing in Canada does not mean that there is a low risk of terrorist financing in Canada or that Canadian entities are not being used to raise or transfer terrorism-related funds abroad. As such, the Committee indicated that more could be done to detect terrorist financing and increase investigative capacity, which could lead to more prosecutions with these expanded capabilities. The following Anti-terrorism and Charity Law Alert discusses the consultation process the Committee conducted in preparation for the Report, for which Carters Professional Corporation was invited to take part, and includes a discussion of which recommendations affecting charities and not-for-profits were adopted by the Committee and those recommendations made by Carters that have yet to be adopted by the Committee.
by admin | Jun 25, 2015 | Charity & Not-for-Profit Law
Economic Action Plan 2015, No. 1
On June 24, 2015, Bill C-59, Economic Action Plan 2015 Act, No. 1 (“Economic Action Plan”) received
Royal Assent. The Economic Action Plan implements some of the income tax and related measures proposed in Budget 2015 on April 21, 2015, which contained a number of important measures of benefit
to the charitable and not-for-profit sector.
For more discussion of the impact of Bill C-59 and Budget 2015 on charities and not-for-profits, see
Federal Budget 2015: Impact on Charities, Charity Law Bulletin No. 363.
Anti-terrorism Act, 2015
Bill C-51, Anti-terrorism Act, 2015 received Royal Assent on June 18, 2015, after passing Third
Reading in the Senate without any significant amendments. Several of the provisions in the Act are now
in force, including the creation of a new Criminal Code offence that criminalizes the advocacy or
promotion of the commission of terrorism offences. The remainder of the provisions in the Act come
into force either 30 days after the Act received Royal Assent or on a day to be fixed by order of the
Governor in Council. In addition to introducing two new pieces of legislation, the Security of Canada
Information Sharing Act and the Secure Air Travel Act, Bill C-51 increases the powers given to the
Canadian Security Intelligence Service “to address threats to the security of Canada,” provides law
enforcement agencies with enhanced ability to disrupt terrorism offences and terrorist activity, makes it
easier for law enforcement agencies to detain suspected terrorists “before they can harm Canadians,”
creates new terrorism-related offences, and expands the sharing of information between government
institutions.
For a discussion of the impact of Bill C-51 on charities and not for profits, see The Impact of Bill C-51
on Charities and Not for Profits, Anti-Terrorism and Charity Law Bulletin No. 39.
Digital Privacy Act
On June 18, 2015, Bill S-4, the Digital Privacy Act, which amends the Personal Information Protection
and Electronic Documents Act (“PIPEDA”), was mostly proclaimed into force by Royal Assent. The
Act creates greater opportunity for organizations to disclose personal information to certain
organizations and individuals without the subject’s knowledge or consent. The Act also restricts
organizations from informing individuals that their personal information was shared with enforcement
and security agencies under certain circumstances. Consequences for not complying with the Act
include fines for failure to record and report breaches of security safeguards.
For more information on how Bill S-4 amends current legislation, see Charity Law Bulletin No. 341, by
Terrance S. Carter and Colin J. Thurston.
2015 Pre-Budget Consultations
On May 25, 2015, the federal government issued a news release announcing that the House of Commons
Standing Committee on Finance (the “Committee”) will hold its 2015 pre-budget consultations from
June 5 to August 7, 2015.
The themes for the 2015 pre-budget consultations are:
- Productivity: What federal actions regarding health, education, tools, technology, the federal public
service and supports for the involvement of all Canadians would improve Canada’s rate of
productivity?
- Infrastructure and communities: What federal actions would ensure that Canada’s communities have
the infrastructure they need to support people and businesses, including in work, leisure and getting
goods to market?
- Jobs: What federal actions would support Canadian residents as they secure employment, adapt their
skills to meet the evolving needs of employers, and move to locations where jobs exist?
- Taxation: What federal actions in relation to personal and business taxation would result in the
desired incentives for work, saving, spending, investment, job creation and other positive outcomes?
Prior to the announcement, the Committee had adopted a motion inviting the Standing Committee on
Finance of the next Parliament to consider submissions received during these pre-budget consultations
in the event that the upcoming federal election prevents the current Committee from tabling its prebudget consultation report. The pre-budget consultation report is traditionally compiled by the
Committee based on submissions it receives and is considered by the Minister of Finance in the
development of the new federal budget. As the federal budget normally impacts charities in some way,
any charities with proposals in mind are encouraged to participate in the pre-budget consultation
process.
Submissions must be no more than 2,000 words in length. They must be sent in electronic format to
[email protected] and received by the Committee no later than August 7, 2015, at 11:59 p.m.
EST.
by admin | Jun 25, 2015 | Charity & Not-for-Profit Law
Canada Not-for-profit Corporations Act
As reported in the January 2015 Charity Law Update, Corporations Canada had provided an update on
the number of federal not-for-profit corporations that had continued from Part II of the Canada
Corporations Act (“CCA”) to the Canada Not-for-profit Corporations Act (“CNCA”). At that time, of
approximately 25,000 federal not-for-profits, including an estimated 17,000 active not-for-profits,
originally incorporated under the CCA, 11,400 had continued under the CNCA. As of June 20, 2015,
12,282 federal not-for-profit corporations had completed the continuance process under the CNCA.
While this is up somewhat, there would appear to be a significant number of federal not-for-profit
corporations that still need to complete the continuance process.
CCA not-for-profit corporations that did not complete the continuance process by October 17, 2014 may
be administratively dissolved by Corporations Canada. In this regard, as reported in previous Charity
Law Bulletins, Corporations Canada has been sending notices of pending dissolution to those
corporations that have not yet completed the continuance process. Federal not-for-profit corporations
that have not continued within 120 days of the notice will be dissolved by Corporations Canada. Since
notices of pending dissolution were being sent out by Corporations Canada as of December, 2014, it has
now been more than 120 days for such not-for-profit corporations to have responded to Corporations
Canada. As such, approximately 8,009 not-for-profit corporations have been administratively dissolved
for failing to continue to date.
If a corporation has been dissolved for failing to continue, it will need to be revived. In this regard,
Corporations Canada has a brief summary of the revival process and the steps that are required to be
revived. Of course, the prudent approach would be for corporations that have not yet completed the
continuance process to do so, regardless of whether a notice of pending dissolution has been received, in
order to avoid needing to be revived.
Ontario Not-for-profit Corporations Act, 2010
As noted in earlier updates, there is no new information in relation to the coming into force of the
Ontario Not-for-profit Corporations Act, 2010 (“ONCA”), which remains as being no earlier than 2016.
The website for the Ministry of Government and Consumer Services continues to note that the ONCA
will not come into force until the Legislative Assembly passes a number of technical amendments to the
ONCA and other statutes impacted by the ONCA, and the government is able to implement certain technology updates to support these changes. Since the Legislative Assembly has adjourned until
September 14, 2015, no updates in this regard will be anticipated until after summer.
by admin | Jun 25, 2015 | Charity & Not-for-Profit Law
On June 23, 2015, Imagine Canada released a discussion paper entitled Charities in Canada as an
Economic Sector (the “Paper”) by Brian Emmett, Imagine Canada’s Chief Economist for Canada’s
Charitable and Nonprofit Sector, and Geoffrey Emmett, Research Assistant. It was written to “take a
balanced look at the Canadian charitable sector from an economic point of view.” In doing so, the Paper
emphasizes the important role and scope of the charitable sector in Canada’s economy, discusses
revenue sources for charities, and briefly highlights policy implications stemming from the sector’s role
in the economy. Overall, the authors stress that while charities are not analogous to for-profit businesses,
the impact that they have on the economy is equally strong and is a necessary part of the broader
economic picture.
The Paper begins by highlighting the significant role and scope of the Canadian charitable sector. The
authors define the charitable sector as part of the service sector and emphasize that its growth “reflects
growth in the service sector in general.” For example, the charitable sector’s contribution to Canada’s
GDP and employment is growing faster than many “traditional” sectors, such as construction, and the
charitable sector employs nearly as many people as the manufacturing sector. This section of the Paper
concludes by highlighting the commonalities between charities and small businesses, such as their
relatively small size and the “significant risks to success and continuity” that exist for both sectors.
The Paper then discusses revenue sources for charities. It draws a key distinction between the private
sector, in which customers determine financial success, and the charitable sector, in which “clients are
somewhat passive beneficiaries of funding decisions by governments and donors.” The charitable sector
relies on government transfers, member and donor funds, and the sale of goods and services. It is
interesting to note that the Paper highlights some of the same challenges regarding donations that were
also included in this year’s edition of Statistic Canada’s Spotlight on Canadians: Results from the
General Survey, such as the fact that donors are aging. For more information on the Statistics Canada
report see Charity Law Bulletin No. 362.
The final section of the Paper is a relatively brief overview of associated policy implications. These
include the fact that policy makers should consider the needs of the charitable sector in the same way that they currently consider sectors more traditionally thought of as “economic”. Also, the authors state
that “the full suite of support programs available to small private businesses” should be made available
to the charitable sector. They also emphasize that regulatory and income tax barriers to expanding
earned income and investment opportunities should be addressed and social finance should be expanded.
Finally, the authors argue that the importance of the charitable sector should warrant better data
collection and analysis such as that which supports the small business sector.
Overall, this Paper provides an interesting and needed discussion, which situates the charitable sector as
a key part of the wider Canadian economy. As the Paper highlights, given the fact that the charitable
sector is facing increasing financial challenges, understanding its economic role is an important part of
understanding how the sector can respond and move forward with innovative solutions.
by admin | Jun 25, 2015 | Charity & Not-for-Profit Law
Exploring the Potential of Social Finance in Canada, a Report of the Standing Committee on Human
Resources, Skills and Social Development and the Status of Persons with Disabilities (“Committee”),
was released on June 17, 2015 (the “Report”). The Report is the culmination of the Committee’s study
of “Social Finance’s potential for unlocking new sources of capital to improve social and economic
outcomes for Canadians.” During the consultations for the study, witnesses before the Committee
included representatives from not-for-profits, charities and government departments.
The Report begins by characterizing the phenomenon of social finance or impact investing as “an
approach to mobilizing repayable capital in ways that seek to create positive social impacts” and
proceeds to examine the Canadian social finance market, regulatory framework, potential ways to
measure social impact, different ways to improve knowledge and capacity; and develop the social
finance market.
The Report concludes with a total of nine recommendations being made by the Committee. Of those
recommendations, four make specific reference to the perceived inadequacies of the current regulatory
framework for charities and non-profit organizations (“NPOs”). In particular, the Committee
recommends:
- “[T]he federal government consider legislative and policy measures […] to allow charities greater
flexibility to conduct business activities for the purpose of reinvesting profits back into their
charitable missions.”
- CRA and the Department of Finance (“Finance”) “review current regulations with respect to the
profit-generating activities of non-profit organizations, and consider options to allow some nonprofits with a clear social purpose to generate surplus revenues in some circumstances.”
- CRA and Finance “conduct a review of current policies with respect to program-related investments,
with a view to improving the communication and/or clarity of these measures, as necessary.”
- “Employment and Social Development Canada continue to encourage cross-sector collaboration on
social finance by convening regular meetings of stakeholders from the for-profit and the non-profit
and charitable sectors, in order to encourage partnership development and to share information and
best practices.”
- It will be interesting to see if any of the Committee’s recommendations have an immediate impact on
CRA’s current policy positions with regard to the profit-generating activities of NPOs and charities, as
the Committee’s recommendations seem to focus on policy rather than legislative measures to address
social finance issues.
