by admin | Oct 27, 2016 | Charity & Not-for-Profit Law
CRA Updates Guidance on GST/HST Information for Charities
On October 4, 2016 Canada Revenue Agency (“CRA”) updated RC4082 GST/HST Information for Charities. The guide contains new information based on amendments to the Excise Tax Act and Regulations, some of which amendments are proposed and not law. Information updated includes harmonized sales tax (“HST”) rate changes for New Brunswick, Newfoundland and Labrador, and Prince Edward Island, a change in the public service bodies rebate for municipalities resident in Newfoundland and Labrador, changes to include purely cosmetic supplies in taxable supplies, and increased online services for businesses and representatives. Most significantly, CRA says that “the GST/HST treatment of charitable donations has changed where a charity makes a taxable supply of property or a service in exchange for a donation and when an income tax receipt may be issued for a portion of the donation.” Charities should ensure that they reference the new version for any changes that apply to them.
CRA also updated RC4058 Quick Method of Accounting for GST/HST the same day to reflect the HST rate changes and the increased online services noted above.
Reminder of the Political Activities Consultations
As reported in the September Charity Law Update, on September 27, 2016, Canada Revenue Agency (“CRA”) together with the Minister of National Revenue announced public consultations to “clarify the rules regarding the involvement of registered charities in political activities.”
In this regard, CRA is currently receiving comments online until November 25, 2016 in relation to the development of new guidance or educational resources for charities on the rules governing political activities. While the consultation is open to everyone, it provides an important opportunity for registered charities the comment on CRA’s existing policy guidance and address issues faced by registered charities in carrying out political activities.
by admin | Oct 27, 2016 | Charity & Not-for-Profit Law
Budget Implementation Act, 2016, No. 2 is Released
On October 19, 2016, the Department of Finance released the Notice of Ways and Means Motion to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measures
(the “Budget Implementation Act, 2016, No. 2”) and the accompanying Explanatory Notes Relating to the Income Tax Act, Excise Tax Act, Excise Act, 2001 and Related Texts (the “Explanatory Note”). Of primary interest to charities is clause 42, which implements amendments to the definition of total charitable gifts, total cultural gifts, and total ecological gifts in subparagraph 118.1(1) of the Income Tax Act (“ITA”), specifically with regard to gifts made by an individual’s graduated rate estate. Clause 42 also implements the changes to ITA subparagraphs 118.1(5.1) and 118.1(19)(c), which deal with gifts by an individual’s graduated rate estate and excepted gifts in respect of the gift of non-qualifying securities. These changes will apply to the 2016 and subsequent taxation years.
Also potentially of interest to charities and not-for-profits is clause 71 of the Budget Implementation Act, 2016, No. 2, which adds Part XIX Common Reporting Standards to the ITA, and will come into force on July 1, 2017. Part XIX “implements the reporting and due diligence standards of the Common Reporting Standard … developed by the Organisation for Economic Co-operation and Development that underpins the automatic exchange of financial account information.” It will require financial institutions to report certain information to CRA on reportable accounts.
Bill C-2 Amending the ITA on Donation Tax Credits Receives Second Reading in the Senate
On September 20, 2016, An Act to amend the Income Tax Act (“Bill C-2”) was passed by the House of Commons. Bill C-2 was originally introduced on December 9, 2015 to change the federal personal income tax rates for individual taxpayers as of January 1, 2016. On October 6, 2016, Bill C-2 received its second reading in the Senate and was then referred to committee. Bill C-2 will amend the formula used to calculate the donation tax credit in subsection 118.1(3) of the ITA by reducing the second personal income tax rate to 20.5% from 22% and the introduction of a new 33% personal income tax rate on individual taxable income in excess of $200,000 effective for the 2016 and subsequent taxation years. One of the consequential proposals contained in Budget 2016 was to provide a 33% charitable donation tax credit on donations above $200 to trusts that are subject to the 33% rate on all of their taxable income. This measure was also intended to extend the 33% charitable donation tax credit contained in Bill C-2 to donations made by a graduated rate estate during a taxation year of the estate that straddles 2015 and 2016.
2017 Public Budget Consultations
On September 26, 2016 the Minister of Finance launched pre-budget consultations for 2017. The general public, including charities and not-for-profits, are invited to submit their opinions online at the #Budget2017Consultations website and via Twitter with the hashtag #Budget2017. The website has a survey, a discussion forum, and email contact for submissions. Submitted briefs, witnesses and the meeting schedule are available to the public on the parliamentary website.
by admin | Oct 27, 2016 | Charity & Not-for-Profit Law
On September 28, 2016, the Minister of Innovation, Science and Economic Development tabled Bill C-25, An Act to amend the Canada Business Corporations Act, the Canada Cooperatives Act, the Canada Not-for-profits Corporations Act and the Competition Act (“Bill C-25”). In particular, Bill C-25 proposes to, amongst other amendments:
- reform some aspects of the process for electing directors of public Canada Business Corporations Act (“CBCA”) corporations;
- replace paper-based communication between corporations and their shareholders with electronic communication to provide notice of meetings to shareholders and online access to relevant documents;
- require public CBCA corporations to place before the shareholders, at every annual meeting, information respecting diversity among directors and the members of senior management;
- amend the Competition Act to expand the concept of affiliation to a broader range of business organizations; and
- to allow a corporation dissolved under the Canada Not-for-profits Corporations Act (“CNCA”) to now be able to apply to be revived under the CBCA, in addition to under the CNCA, which currently is the case.
Notwithstanding the breadth of the changes being introduced for public CBCA corporations, Bill C-25 includes only minor technical amendments for CNCA corporations other than the last bullet above. These amendments, amongst others, include a definition of a person who has become “incapable” in subsection 2(1) of the CNCA, and the addition of section 277.1 of the CNCA requiring the Director to publish a notice of any decision made by the Director in respect of applications made under various sections of the CNCA. Such decisions include amongst others when a corporation is deemed non-soliciting (ss. 2(6), when a corporation is permitted to delay calling of annual meetings (ss. 160(2), and when the Director relieves the corporation from certain parts of the CNCA (s.173)).
by admin | Oct 27, 2016 | Charity & Not-for-Profit Law
On July 20, 2016, Canada Revenue Agency (“CRA”) released document 2016-063262, which clarifies comments made by CRA with regard to two scenarios presented at the Conference for Advanced Life Underwriting (“CALU”) roundtable on May 3, 2016. Both scenarios dealt with the situation where “[a] contract holder designates a registered charity as beneficiary of a segregated fund policy” and whether the Income Tax Act’s (“ITA”) capital gains provisions “apply in respect of the property transferred to the qualified donee upon the death of the annuitant.” More specifically, in looking at these scenarios, it was reviewed whether the capital gains provisions consider a donor’s taxable capital gain for a transfer of certain types of property to a qualified donee to be zero.
In each scenario, CRA was asked whether the proceeds of a disposition by gift to a registered charity of an interest in a segregated fund policy results in a zero taxable capital gain for the contract holder when the annuitant dies in 2016. In the first scenario, the contract holder, who is also the annuitant, passed away and the insurer forwarded the proceeds to the charity as per the beneficiary designation in the policy. In the second scenario, the person insured under the contract, i.e. the annuitant, is a family member of the contract holder. In this scenario, the annuitant dies and the proceeds are also paid out to the charity as beneficiary.
In both scenarios, CRA concluded that the ITA’s capital gains provision which deems a capital gain to be zero upon the disposition of certain property did not apply. This was because the cheque to the charity of the proceeds of the policy in question did not constitute the type of property for which the ITA’s capital gains provision would apply. While it was recognized that an interest in a segregated fund policy is one of the types of property eligible for this capital gains provision, CRA took the position that, in these scenarios, the interest in the fund was not, in fact, the property being transferred, but rather the charity was being given the proceeds of the policy. In the second scenario, CRA further pointed out that the proceeds of the policy were not disposed of due to the contract holder’s death.
Based on CRA’s comments in this document, if a charity is aware that one of the goals of the donor in naming the charity as a beneficiary of a segregated fund policy is to realise a nil capital gain, then the charity should caution them that the nil capital gains provisions will not apply for the proceeds of such policy and that they, as always, should obtain independent tax advice.
by admin | Oct 27, 2016 | Charity & Not-for-Profit Law
On October 12, 2016, Canada Revenue Agency (“CRA”) released document number 2013-0503671, a response to an email from September 23, 2013 relating to the issue of “[w]hether improvement districts, particularly in British Columbia, would be considered municipal or public bodies performing a function of government for the purpose of paragraph 149(1)(c) [of the Income Tax Act (“ITA”)] and therefore able to issue donation receipts as a qualified donee.” CRA’s position on this matter is that they are municipal bodies and are therefore able to issue donation receipts as a qualified donee under the ITA in accordance with subparagraph 149.1(1)(a)(iii).
CRA begins by noting that “[t]here is no definition of a “municipal or public body performing a function of government in Canada” in the [ITA]” and therefore whether an organisation qualifies must be determined on a case by case basis. Further “municipal body” is also not defined in the ITA. CRA adds that “a municipal body is typically considered to be a body established or exercising a power under a municipal act or a similar statute of a province or territory with respect to governing the affairs or purposes of a geographic area and is accountable to those governed by it.” CRA says that an improvement district is better described by this label than by the public body label. Improvement districts “are local authorities responsible for providing local services for the benefit of the residents in a community.”
In CRA’s opinion improvement districts, “whether providing one or several services to the public in their respective districts, exercise the powers similar to those of municipalities and in our view are ‘governmental’ or performing a ‘governance function’.” They therefore qualify as municipal bodies performing a government function. Although not described in the CRA View, as a consequence of meeting the definition of “municipal or public body performing a function of government” under paragraph 149(1)(c), an entity under this paragraph would still need to apply to CRA in order to be listed as a qualified donee for the purposes of subparagraph 149.1(1)(a)(iii).
by admin | Oct 27, 2016 | Charity & Not-for-Profit Law, Intellectual Property Law
Non-profit organizations that produce copies of works for persons with print disabilities should take note that on September 30, 2016, the Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired, or Otherwise Print Disabled (the “Treaty”) came into force. The Treaty is an international treaty administered by the World Intellectual Property Organization (WIPO) that sets out minimum standards to which Treaty member-countries must adhere, and aims to facilitate access to copyright works for persons with print disabilities by providing the material in accessible formats. The Treaty establishes international norms that require countries to provide exceptions in their domestic copyright laws to facilitate the availability of works in accessible formats, including Braille, audiobooks, and large-print.
Prior to acceding to the Treaty, the Canadian Copyright Act (“Act”) was amended to include exceptions for people with print disabilities in line with the obligations of the Treaty. The amendments to the Act include a carve out exception to copyright infringement for “non-profit organizations” acting on behalf of persons with print disabilities, allowing them to make a copy of protected printed works accessible for persons with print disabilities, if the work is not commercially available in a similar format. Non-profit organizations are also permitted to share accessible works across borders with foreign non-profit organizations in member-countries that are acting for the benefit of persons with a print disability, provided that the work is not available in a similar format within a reasonable time, for a reasonable price, and with reasonable effort.
The Act defines “print disability” broadly as a disability that prevents or inhibits a person from reading a literary, musical, artistic or dramatic work in its original format and includes such a disability resulting from (a) severe or total impairment of sight or the inability to focus or move one’s eyes; (b) the inability to hold or manipulate a book; or (c) an impairment relating to comprehension.” The definitions are intentionally wide-ranging to allow for a variety of different types of copying, including making sound recordings, sign language, and Braille reproductions, to meet the needs of individuals with print disabilities.
Non-profit organizations in Canada that are looking to utilize these exemptions will still need to be cautious of the other provisions of the Act that continue to apply, such as the possibility of royalties to the original author of the work, and submitting reports on its activities. As such, prior to relying on these copyright infringement exceptions, non-profit organizations should seek advice from their legal counsel.
