NPO Tax Exempt Status – Affordable Housing Providers

by admin | Jun 25, 2015 | Charity & Not-for-Profit Law

On May 27, 2015, Canada Revenue Agency (“CRA”) released a CRA View (#2014-054279) that addressed the potential tax implications for a non-profit organization, as described in paragraph 149(1)(l) of the Income Tax Act (“ITA”), that derives income from the long-term lease of parking spots to a business owned by one of its board members. In this case, the non-profit organization is an affordable housing provider. The comments provided by CRA considered whether the profit earned was incidental and whether it arose from activities that were connected to the organization’s non-profit objectives.
CRA stated that both of these considerations were questions of fact. In this context, CRA concluded that income from the long-term rental of parking spots to a third-party by an affordable housing provider “will generally not be considered to be directly connected to the objective of providing affordable housing.” That said, CRA also stated that a review of all circumstances could lead to the conclusion that the housing provider “does not have a profit purpose, notwithstanding the lease.” CRA then briefly considered whether the income would be made available for the personal benefit of any member. CRA emphasized that, in general, income cannot be made available, either directly or indirectly, for the personal benefit of any member. However, in this particular circumstance, it could not determine whether the board member in question was also a member of the housing provider.
As an alternative to proceeding under the requirements of paragraph 149(1)(l), this interpretation also highlighting that affordable housing providers can potentially be exempt from tax under a number of less restrictive sections of the ITA including: municipal corporations (paragraph 149(1)(d.5)), limited divided housing companies (paragraph 149(1)(n)), and corporations “constituted exclusively for the purpose of providing low-cost housing accommodation for the aged” (paragraph 149(1)(i)). Many not-for-profits may file their annual corporate returns (T2) with CRA on the basis that they are a non-profit organization under paragraph 149(1)(l), when in fact there may be a tax-exempt category under the ITA that better describes their organization and purpose. Recent CRA Views over the last several years have had the effect of further tightening the types of revenue generating activities non-profit organizations can undertake while being reasonably confident that they are complying with the definition in paragraph 149(1)(l). As such, many not-for-profits that currently file as non-profit organizations under paragraph 149(1)(l) may want to review whether they are better suited as a tax-exempt entity under another paragraph in the ITA.

Court Upholds Members’ Right to Requisition a Meeting

by admin | Jun 25, 2015 | Charity & Not-for-Profit Law

On May 5, 2015, a decision was released from the Ontario Superior Court of Justice in the matter of
Saskatchewan WTF Taekwondo et al v Taekwondo Canada. The applicants, being the various provincial
bodies of Taekwondo Canada making up its membership, sought a court order calling a meeting of
members under section 168 of the Canada Not-for-profit Corporations Act (“CNCA”).
The members had requisitioned a meeting on February 15, 2015, to be called for the reinstatement of
suspended members and the removal of several of the board of directors. The directors did not call a
meeting on the basis of paragraph 167(3)(c) of the CNCA, which provides that directors need not call a
meeting where it, “clearly appears that the primary purpose of the proposal is to enforce a personal claim
or redress a personal grievance…” As a result, the members attempted to call a meeting on their own
when the directors refused to do so, but required the membership list, which the board did not provide.
The Court was satisfied upon a review of the facts that there was “no basis for characterizing the
motives of the members who requisitioned the meeting as being in the nature of a personal grievance.”
The Court emphasized that use of the word “clearly” in paragraph 166(6)(b) of the CNCA meant that
“only requisitions which are clearly personal grievances are to be rejected.” In addition, the Court also
noted that “the right to call a special meeting is a substantive one and is not lightly to be interfered
with.” In this regard, the board had also sought an exemption from the Director under the CNCA from
the requirement to provide the membership list. However, the Court stated that such requests cannot act
as an injunction to prevent calling a meeting or complying with the CNCA. Moreover, the court did not find the fact that an annual meeting would be forthcoming was a reason for not calling the requisitioned
meeting, particularly when the annual meeting was a year away and no notice had been provided.
As the CNCA remains relatively new legislation, it can be assumed that membership rights will continue
to be enforced through the courts, and specifically the courts will be asked how the various provisions of
the CNCA are to be interpreted in the not-for-profit context. It is important to note that the court looked
to case law concerning similar provisions of the Canada Business Corporations Act, on which a
substantive portion of the CNCA is based. This trend is likely to continue as the CNCA continues to be
interpreted through litigation.

Bill 113 to Update Criminal Record Check Process in Ontario

by admin | Jun 25, 2015 | Charity & Not-for-Profit Law

On June 3, 2015, the Ontario government introduced Bill 113, the Police Record Checks Reform Act, 2015. If passed, the Act would implement a new statutory regime in Ontario governing police checks, which generally describe searches of the Canadian Police Information Centre (“CPIC”) and other applicable police databases to screen an individual for employment, volunteer or other purposes. Changes arising from Bill 113 would include the following:

• Standardization of the police checks that can be requested by individuals, as well as standardization of the information authorized for disclosure for each type of police check. The three types of police checks described in Bill 113 are: criminal record checks, criminal record and judicial matters checks, and vulnerable sector checks. At the present time, police checks are not standardized across Ontario and are instead governed by different procedures established by each respective regional police service.
• Restrictions placed on the release of non-conviction records and mental health information. Non-conviction information would only be disclosed in the context of vulnerable sector checks where individuals are applying to work or volunteer with vulnerable individuals as described in Bill 113. An individual would also be able to request reconsideration of the release of non-criminal/non-conviction records as outlined in Bill 113.
• Police record checks will always be sent to the individual for review before any disclosure of the check to an employer or other organization that requested the police check. After receiving the results of the police check on himself/herself an individual may provide written consent allowing the disclosure of the police check results to another person or individual.
•  Authorization to third-party background screening companies to conduct certain types of police checks.
• Bill 113 is modeled on the Ontario Association of the Chiefs of Police’s LEARN Guideline for Police Record Checks, an initiative to standardize the procedures that apply to obtain police checks. The LEARN Guidelines were first introduced in March 2011 and updated in June 2014.

Judicial Renderings – Interesting Cases to Consider

by admin | Jun 25, 2015 | Charity & Not-for-Profit Law

The following paper, entitled Judicial Renderings – Interesting Cases to Consider was presented at the Canadian Bar Association’s National Charity Law Symposium on May 29, 2015. The paper provides an overview and commentary on some of the more important Canadian and international court decisions impacting charities and not-for-profits from the past year. It considers case law in a range of areas including the relationship between political purposes and charitable purposes, advancement and freedom of religion, directors’ liability, estate gifts, and charitable receipting issues. It is clear from the depth and breadth of the issues raised in the cases summarized that the judicial renderings over the past twelve months have been particularly fruitful. It is important for those working in the charitable and not-for-profit sectors to be aware of recent case law in the international context as it may very well serve as bellwethers of trends in charity law that may be coming to Canada at some point in the future.