by admin | Jan 26, 2017 | Charity & Not-for-Profit Law, Expertise
CRA has recently released a number of new and revised publications over the last few months. The most anticipated publication is the Charities Directorate’s (“Directorate”) Report on the Charities Program 2015-2016 (“Report”), first promised by the Minister of National Revenue (“Minister”) on January 20, 2016 and posted on CRA’s webpage on December 29, 2016. The Report contains messages from the Minister, the Commissioner of CRA, and the Directorate’s Director General, a description of the charitable sector, and key operational information about the Directorate.
In particular, the Report includes:
- a range of statistics on the charitable sector, applications for charitable registration, audit outcomes, revocations of charitable registration, and the objections process;
- a review of the Directorate’s outreach and engagement activities, such as improving its webpages, expanding its use of social media, and developing and reviewing its guidance products; and
- updates on the political activities audit program, compliance initiatives, and the Charities Modernization Project to improve online filing options for applicants for charitable status and registered charities.
Additional new and recently revised CRA guides, forms, and webpages relevant to registered charities and not-for-profits include:
- T4013, T3 Trust Guide 2016, which incorporates changes to reflect the new rules for testamentary trusts, estate donations, and Graduated Rate Estates that were previously discussed in our October 2016’s Charity & NFP Law Update in “Budget Implementation Act, 2016, No. 2 is Released”.
- RC4034, GST/HST Public Service Bodies’ Rebate now contains updates on harmonized sales tax rate changes in New Brunswick, Newfoundland and Labrador, and PEI, as well as the end of the point-of-sale rebate on books in Newfoundland and Labrador, and other GST/HST news.
- Registered charities can now advise the Directorate of changes to their directors, trustees, or like officials’ information by faxing, emailing, or mailing the changes to the Directorate using this new form.
- The Sponsorship webpage was updated on October 28, 2016. The webpage contains a definition of sponsorship, information on acknowledgement and receipting, factors to consider in sponsorship situations, and some scenarios as examples.
- RC191, Qualified Donee: Becoming a Prescribed University Outside Canada was revised to reflect the fact that applications for qualified donee status are now being processed by the Directorate’s Assessment, Determinations, and Monitoring Division.
by admin | Jan 26, 2017 | Charity & Not-for-Profit Law, Expertise
Budget Implementation Act, 2016, No. 2 Receives Royal Assent
Bill C-29, A second Act to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measures, received Royal Assent on December 15, 2016. For more information on the Act see “Budget Implementation Act, 2016, No. 2 is Released” from the October 2016 Charity & NFP Law Update.
Ontario Budget Receives Royal Assent
On December 8, 2016, Bill 70 – Building Ontario Up for Everyone Act (Budget Measures), 2016 received Royal Assent. Of interest to charities are the amendments to the Municipal Act, 2001 and the City of Toronto Act, 2006. These amendments provide for, among other things, charity rebates of at least 40 per cent of municipal tax for property in the commercial and industrial classes, as well as creating the ability for “the Minister of Finance to make regulations providing that the sections may apply to additional property classes not already prescribed under the Act”.
Amendment to the Ontario Employer Health Tax will Impact Registered Charities
As a matter of background concerning amendments that recently came into force, as of January 1, 2014, the amount of annual remuneration that may be exempt from Ontario’s Employer Health Tax (“EHT”) is $450,000, up from the previous $400,000. EHT is a payroll tax that all employers in Ontario are required to pay on the total remuneration paid to employees in a given year. The basic rule is that eligible employers are exempt from EHT on the first $450,000 of their total annual remuneration paid out. The amount of tax that employers are required to pay varies depending on the amount of remuneration paid. Currently the tax rates vary between 0.98% – 1.95%. Employers cannot claim the EHT exemption, though, if their annual payroll (including payroll of associated employers) is above $5 million. Eligible employers who are registered charities, however, can claim the EHT exemption even if their annual payroll is above $5 million.
As of January 1, 2017, amendments to the Employer Health Tax Act Regulations came into force whereby registered charities with two or more qualifying “charity campuses” are now permitted to claim an EHT exemption for each qualifying “charity campus”. What qualifies as a “charity campus” is summarized on the Ministry of Finance’s website and is stated as including, “all of a registered charity’s locations that are in one building, or on one parcel of land (property), or on contiguous properties (properties that touch along a boundary or at a point). If a registered charity has branches, sections, parishes, congregations or other divisions (internal divisions), a “charity campus includes all of the locations of the registered charity and all of the locations of any of its internal divisions that are in one building, or on one property or on contiguous properties.”
An “associated employer” is any employer “who is connected by ownership by a combination of ownership and relationships between individuals” (e.g. relatives, blood, marriage, adoption). Because there is only one available EHT exemption for an employer in any given year, associated employers, whether they are associated for the entire year, or only for a specific period of time throughout the year, must consider their combined total remuneration paid to determine whether they qualify for the EHT exemption. Employers that are associated with a registered charity, however, are not required to include the registered charity’s total annual remuneration to determine whether they qualify for the EHT exemption, and are not required to share its EHT exemption with the registered charity.
For more detailed information visit the Ministry of Finance website by clicking here.
by admin | Jan 26, 2017 | Charity & Not-for-Profit Law, Expertise
Budget Implementation Act, 2016, No. 2 Receives Royal Assent
Bill C-29, A second Act to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measures, received Royal Assent on December 15, 2016. For more information on the Act see “Budget Implementation Act, 2016, No. 2 is Released” from the October 2016 Charity & NFP Law Update.
Ontario Budget Receives Royal Assent
On December 8, 2016, Bill 70 – Building Ontario Up for Everyone Act (Budget Measures), 2016 received Royal Assent. Of interest to charities are the amendments to the Municipal Act, 2001 and the City of Toronto Act, 2006. These amendments provide for, among other things, charity rebates of at least 40 per cent of municipal tax for property in the commercial and industrial classes, as well as creating the ability for “the Minister of Finance to make regulations providing that the sections may apply to additional property classes not already prescribed under the Act”.
Amendment to the Ontario Employer Health Tax will Impact Registered Charities
As a matter of background concerning amendments that recently came into force, as of January 1, 2014, the amount of annual remuneration that may be exempt from Ontario’s Employer Health Tax (“EHT”) is $450,000, up from the previous $400,000. EHT is a payroll tax that all employers in Ontario are required to pay on the total remuneration paid to employees in a given year. The basic rule is that eligible employers are exempt from EHT on the first $450,000 of their total annual remuneration paid out. The amount of tax that employers are required to pay varies depending on the amount of remuneration paid. Currently the tax rates vary between 0.98% – 1.95%. Employers cannot claim the EHT exemption, though, if their annual payroll (including payroll of associated employers) is above $5 million. Eligible employers who are registered charities, however, can claim the EHT exemption even if their annual payroll is above $5 million.
As of January 1, 2017, amendments to the Employer Health Tax Act Regulations came into force whereby registered charities with two or more qualifying “charity campuses” are now permitted to claim an EHT exemption for each qualifying “charity campus”. What qualifies as a “charity campus” is summarized on the Ministry of Finance’s website and is stated as including, “all of a registered charity’s locations that are in one building, or on one parcel of land (property), or on contiguous properties (properties that touch along a boundary or at a point). If a registered charity has branches, sections, parishes, congregations or other divisions (internal divisions), a “charity campus includes all of the locations of the registered charity and all of the locations of any of its internal divisions that are in one building, or on one property or on contiguous properties.”
An “associated employer” is any employer “who is connected by ownership by a combination of ownership and relationships between individuals” (e.g. relatives, blood, marriage, adoption). Because there is only one available EHT exemption for an employer in any given year, associated employers, whether they are associated for the entire year, or only for a specific period of time throughout the year, must consider their combined total remuneration paid to determine whether they qualify for the EHT exemption. Employers that are associated with a registered charity, however, are not required to include the registered charity’s total annual remuneration to determine whether they qualify for the EHT exemption, and are not required to share its EHT exemption with the registered charity.
For more detailed information visit the Ministry of Finance website by clicking here.
by admin | Jan 26, 2017 | Charity & Not-for-Profit Law, Expertise
On December 10, 2016, certain provisions of Bill 144, the Budget Measures Act, 2015 (“Bill 144”), which enacted the Forfeited Corporate Property Act, 2015 (“FCPA”) and the Escheats Act, 2015 (“EA”), came into force creating new record keeping obligations for Ontario corporations.
In this regard, while Bill 144 not only addressed situations where corporations, including charities and not-for-profits, dissolve without having properly disposed of all of their assets, but new recordkeeping obligations for both new and existing Ontario corporations were also introduced by way of amendments to the Ontario Business Corporations Act (“OBCA”), the Ontario Corporations Act (“OCA”), and the Ontario Not-for-profit Corporations Act (when it comes into force). These amendments provide that Ontario corporations are now required to maintain a register of ownership interests in land in Ontario at its registered office. This includes:
- The identity of each property in Ontario in which the corporation possesses an “ownership interest”;
- The date on which the corporation acquired the property and, if applicable, the date on which it disposed of it; and
- A copy of any deed, transfers or similar documents that contain the municipal address, the registry or land titles division and the property identifier number, the legal description, and the assessment roll number of each property listed on the register, if any.
“Ownership interest” is an undefined term thereby implying that these measures could extend to both legal and beneficial ownership in real property. These may also include where the corporation has an interest in property by way of lease or other arrangement. These requirements are unique to Ontario, as currently other jurisdictions in Canada in which charities and not-for-profits might incorporate are not required to maintain such registers. While for some corporations the creation and maintenance of such registers will likely be straightforward, it is anticipated that corporations with a history in the province will need time and effort in order to review all prior documentation dealing with its ownership interests in land.
Corporations incorporated after December 10, 2016 must comply with the new recordkeeping requirements immediately. For corporations that were incorporated prior to December 10, 2016, they will have two years, i.e., until December 10, 2018, to comply with the new requirements.
As both the FCPA the EA and the corresponding amendments to other acts may have application to incorporated charities and not-for-profit corporations in Ontario, it will be important for these corporations to consult with their legal counsel to determine the impact of these new acts and recordkeeping requirements.
For more information on the changes under the FCPA and the EA see the January 2016 edition of our Charity & NFP Law Update.
by admin | Jan 26, 2017 | Charity & Not-for-Profit Law, Expertise
CRA recently released three rulings clarifying whether certain supplies by charities are exempt from Good and Services Tax (“GST”) and Harmonized Sales Tax (“HST”). The three rulings relate to specific fact scenarios and offer some clarity to charities who make similar supplies. In particular, the documents deal with fees charged by a charity to employers/sponsors for apprentice training, tournament registration fees, supplies of educational and consultancy services, annual conference registrations, and product sales.
Ruling #1
Document #158637 addresses whether GST/HST applies “to a commitment fee and cancellation fee charged by a charity to the employer/sponsor of an apprentice in relation to training services.” After reviewing the specific facts of the arrangement, CRA ruled that the organization, which is a charity and registrant under the Excise Tax Act (“ETA”), should not charge GST/HST on fees paid by the employer/sponsor or apprentice in relation to training services nor should it charge GST/HST on the cancellation fee when there is withdrawal from training. CRA also noted that if a charity has erroneously collected GST/HST on such exempt supplies, that 100% of the GST/HST amount collected is still required to be remitted to CRA. The charity can choose to “adjust, refund or credit the excess tax within two years after the day the amount was so charged or collected” by issuing a credit note in accordance with the ETA. Other options include accounting for the error in its net tax calculation or having the person who paid the GST/HST in error apply for a rebate using Form GST 189, General Application for Rebate of GST/HST.
Ruling #2
Document #152989r was issued by CRA to correct a previously issued ruling. In this scenario, the organization was also a charity for the purposes of the ETA and charged registration fees for its fundraising tournaments. CRA ruled “that the supply of a right to participate in” the charity’s tournament was an exempt supply. In its explanation of the ruling, CRA stated that the registration fees were distinguishable from fees charged “on admissions to a place of amusement” and that the previous ruling had mischaracterized the fact scenario. In contrast to the supply of a right to participate in a tournament, most fees charged on admissions to a place of amusement are likely not exempt under the ETA even if made by a charity.
Ruling #3
Document #127947r is another revised ruling, which was issued by CRA to reflect changes to its interpretation of a previously issued ruling involving an organization that is a charity and registrant for the purposes of the ETA. The charity requested a ruling on whether its supplies of educational services, educational consultancy services, registrations to its annual conference, and sales of certain products were exempt from GST/HST. The revised ruling only made changes to CRA’s previous comments on the sales of certain products, as its interpretations of the taxability of the supplies of the educational services, educational consultancy services, and registrations remained unchanged. In this regard, the latter three supplies continued to be exempt supplies, but the sales of certain products were a mix of zero-rated, i.e. taxable at the rate of zero, and taxable at the GST/HST rate applicable “depending on the province in which the supply is made.” Unfortunately, because the rulings are redacted by CRA prior to issuance, the detail on the types of products sold and zero-rated are limited to the fact that they were found by Health Canada to be drugs under the federal Food and Drugs Act. The types of products sold that were taxable, but not at a rate of zero, were not found to be drugs under the federal Food and Drugs Act and did not further qualify as exempt under other provisions of the ETA. However, CRA did note that supplies of these products could potentially be exempt if the charity “were to charge less than direct cost” on future sales.
Although these CRA documents certainly help clarify how the GST/HST might apply in certain situations, if your organization makes supplies similar to those referenced above, it is always a good idea to seek further guidance from your accounting or legal professionals.
by admin | Jan 26, 2017 | Charity & Not-for-Profit Law, Expertise
At the 2016 conference for the association de planification fiscale et financière held on October 7, 2016, the CRA answered several questions on graduated rate estates (“GREs”) during a round table session, which it has now made available in writing through commercial databases (CRA documents #2016-0651731 and 2016-0652821). The questions asked at the conference concerning GREs include:
1) For the application of clause (c)(ii)(B) of the definition “total charitable gifts” in subsection 118.1(1), does an estate need to qualify as a GRE in the taxation year in which the gift is made or in the taxation year in which the eligible amount of the gift is deducted in computing the individual’s tax payable?
2) Based on proposed legislation released by the Department of Finance on January 15, 2016, can a former GRE that makes a gift more than 36 months after the death of an individual, but within 60 months after the individual’s death, claim the gift in the first three taxation years of the estate?
Referring to the wording of clause (c)(ii)(B) of the definition of “total charitable gifts” in subsection 118.1(1), CRA stated that the answer to question 1 is “[i]n the taxation year in which the gift is made.” With regard to question 2, CRA answered in the negative, stating a “gift made by an estate that is not a GRE is only available to the estate in the taxation year in which the gift is made or in any of the next five taxation years from the year in which the gift is made (clause 118.1(1)(ii)(A)).”
In a separate document, CRA responded to the question of whether “… clause (c)(ii)(A) of the definition of ‘total charitable gifts’ in subsection 118.1(1)” applies to a GRE? The answer in this regard is yes, because “[a] GRE or a former GRE is a trust.”
