by admin | May 28, 2015 | Charity & Not-for-Profit Law
CRA Updates T4063, Registering a Charity for Income Tax Purposes
On May 8, 2015, CRA released an updated T4063, Registering a Charity for Income Tax Purposes. This
guide is intended to help applicants for charitable registration complete Form 2050, Application to Register a Charity under the Income Tax Act, which was last updated in 2011.
CRA Releases Updated GST/HST Guidelines and Information for Charities
In May 2015, CRA released an updated GST/HST Info Sheet (GI-067) Basic GST/HST Guidelines for Charities and an additional GST/HST Info Sheet (GI-066) How a Charity Completes its GST/HST Return. These versions replace the previous versions from June 2011. The new Info Sheets reflect the changes regarding GST/HST that have occurred in some provinces since 2011. GI-067 explains when charities must comply with specific GST/HST rules, such as when a charity is required to register for GST/HST purposes, including when a charity qualifies as a small supplier. GI-066 outlines the specific steps a charity must take to complete its GST/HST return. GST10 Application or Revocation of the Authorization to File Separate GST/HST Returns and Rebate Applications for Branches or Divisions was also updated. This form can be used by public service bodies, charity, and qualifying non-profit organizations who want to file separate GST/HST returns and rebate applications as separate branches or divisions.
National Volunteer Week Speech Highlights First-Time Donor’s Super Credit
On May 6, 2015, CRA posted an April 15, 2015 speech given by the Honourable Kerry-Lynne D. Findlay,
the Minister of National Revenue (“Minister”), at an event hosted by the Vancouver Fire Fighters’
Charitable Society, a registered charity in honour of National Volunteer Week. The Minister drew
attention to three charities-related non-refundable tax credits, the First-Time Donor’s Super Credit, the
Volunteer Firefighters’ Tax Credit and the Search and Rescue Volunteers Tax Credit.
CRA Commencing Legal Action Against CBC for Disclosure of Donor Names
On May 15, 2015, CRA issued a statement that it has sent final notice to the CBC and will commence
legal action to recover confidential taxpayer information that CRA inadvertently sent to CBC on
November 24, 2014. CBC published the information, which, according to the CBC report, contained
details about donations of cultural property, including donors’ identities and donation values, on
November 25, 2014. On the day of publication, CRA released a statement characterizing the breach as an
accidental disclosure and reported it to the Privacy Commissioner of Canada. Both CRA statements
indicate CBC was aware the information was protected, but CBC continues to refuse to return it to CRA.
Under section 241 of the Income Tax Act, CRA has an obligation to keep taxpayer information, including
certain information from registered charities and donors, confidential. As a public broadcaster, it will be
interesting to see whether CBC’s officials and representatives fall under the jurisdiction of section 241, as
it also applies to government entities other than CRA.
by admin | May 28, 2015 | Charity & Not-for-Profit Law
On May 26, 2015, the Federal Court of Appeal heard the appeal in Public Television Association of
Québec v Minister of National Revenue. The primary issue in this case is whether the Public Television
Association of Québec (the “Appellant”) retained a sufficient degree of direction and control over its
resources when it transferred funds to Vermont Public Television (“VPT”), an American television station
that broadcasts in southern Québec, or acted as a conduit for Canadian donations to VPT. The decision in
this case has been reserved, but the written arguments (factums) of the parties and the Intervener, Imagine
Canada, are publically available by contacting the court.
The Appellant is a not-for-profit corporation formed for the purpose of advancing education through the
production, distribution, and promotion of non-commercial, educational television programming. It has
been a registered charity since September 21, 1990. On August 23, 2011, the Appellant received a Notice of Intention to Revoke, following an audit for the fiscal period of June 30, 2005 to June 30, 2006. However,
the question of adequate direction and control was not raised until April 4, 2013, in the response to the
Appellant’s Notice of Objection, which had been filed on November 11, 2011.
In its factum, the Appellant submits that it has produced to Canada Revenue Agency (“CRA”) convincing
evidence, including agreements, minutes of directors meetings and bank statements to demonstrate that it has direction and control over the funds it raises, choice of programs broadcast by VPT and that it pays a fair price for the programming it purchases through VPT. The Appellant also presents arguments based on the Canada-US Tax Convention that the transfers to VPT should also be treated as gifts to a registered charity. CRA in its responding factum sets out facts to support its position that the Appellant is simply acting as a conduit for receipting purposes for VPT in Canada.
Charity lawyers will be particularly interested in the factum of the Intervener, Imagine Canada. It reflects a carefully crafted argument that CRA’s Guidance CG-002, Canadian Registered Charities Carrying out Activities Outside Canada and its predecessors misinterpret the law on which they are based. Imagine Canada argues that the Federal Court of Appeal decisions upon which CRA relies do not require written agreements between the Canadian charity and foreign intermediary but only that the charity be able to provide a sufficient account of how its resources are used by the intermediary in light of the particular context and operational realities and that the charity have a “reasonable expectation” that the resources be used only for charitable purposes. Imagine Canada concluded that the CRA Guidance “is so narrowly and erroneously drafted that charities should not reasonably be expected […] to rely on [it].”
Given the arguments presented in the factums, the decision by the Federal Court of Appeal in Public
Television Association will invariably be an interesting decision to read and one that lawyers and charities
that operate outside of Canada will want to carefully study.
by admin | May 28, 2015 | Charity & Not-for-Profit Law
Canada (National Revenue) v Revcon Oilfield Constructors Incorporated, a judgment of the Federal Court
released on April 23, 2015, discusses solicitor-client privilege during tax planning. The decision is the
result of a summary application made by Canada Revenue Agency (“CRA”) through the Minister of
National Revenue, after Revcon Oilfield Constructors Incorporated (“Revcon”) failed to produce material
to the CRA in connection with a reorganization that it undertook in 2011. CRA requested the material pursuant to section 231.7 of the Income Tax Act (ITA), though Revcon asserted solicitor-client privilege
over the material and refused to provide it.
The ITA, at s. 231.7, defines “solicitor-client privilege” as “the right, if any, that a person has in a superior
court in the province where the matter arises to refuse to disclose an oral or documentary communication
on the ground that the communication is one passing between the person and the person’s lawyer in
professional confidence, except that for the purposes of this section an accounting record of a lawyer,
including any supporting voucher or cheque, shall be deemed not to be such a communication.”
The materials in dispute fell into four categories:
- Items that would identify Law Firm X, an undisclosed law firm which was retained by the
Respondent’s counsel for the purposes of the restructuring transactions being audited [the Law
Firm X claim].
- Items which include “shorthand tax law language used by Law Firm X that describes the
Transactions in a manner that could potentially be prejudicial to the Respondent’s interests” [the
Nomenclature claim].
- Items which include Law Firm X’s opinion respecting the transactions or the work product of Law
Firm X’s legal retainer [the Structuring claim].
- Items which were communications for the purpose of obtaining legal advice or assistance [the
Legal Advice claim].
The Court rejected the Law Firm X claim and the Nomenclature claim. The judge concluded, in line with
well-established principles of solicitor-client privilege, that only documents containing legal advice were
privileged. Charities and not-for-profits should be reminded that although CRA cannot view documents
subject to legal privilege, legal privilege can be waived if the charity or not-for-profit is not careful when
sharing communications, such as sharing legal opinions with third-parties. If an auditor requests a
document that a charity or not-for-profit suspects is privileged, the organisation should place the document
in a sealed package and retain the package until a judge provides an order about its status.
by admin | May 28, 2015 | Charity & Not-for-Profit Law, Counter Terrorism Law
The Federal government in May 2015 introduced several new pieces of legislation relating to antiterrorism in Canada. One of the Acts is the Removal of Serious Foreign Criminals Act, which proposes to amend several federal Acts in an effort to streamline the removal of foreign nationals who commit serious crimes in Canada, allow for the mandatory transfer of foreign criminals back to their country of origin and render foreign criminals ineligible for a record of suspension. Among its contents is a provision for making all foreign nationals, and some permanent residents sentenced to more than six months for a serious crime in Canada, ineligible for a criminal record suspension, as well as a provision allowing Canada to transfer a criminal without their consent where provided for under the terms of a future treaty. This Act is currently in First Reading in the House of Commons.
Also in May 2015, the Prevention of Terrorist Travel Act was introduced alongside amendments to the
Canadian Passport Order (“CPO”). These amendments are part of Economic Action Plan 2015 Act, No.
1, the legislation implementing Budget 2015, and are thus currently in Second Reading at the House of
Commons. The amendments to the CPO will grant Federal Court judges the ability to cancel, refuse or
revoke passports as a preventative measure to stop an individual from committing a terrorism offence, as
defined by the Criminal Code, or for the national security of Canada or a foreign country or state. The
revocation of a passport could last for up to 10 years. The Prevention of Terrorist Travel Act pertains to
judicial proceedings involving a CPO decision. Among other provisions, the Act stipulates that during a
proceeding, on the Minister’s request, a judge must hear submissions on evidence in the absence of the
public and the applicant and their counsel, and the judge must ensure that the applicant is provided with
only a summary of the evidence if in the judge’s opinion it would be injurious to national security or endanger the safety of any person if disclosed.
Economic Action Plan 2015 Act, No. 1 also implements changes to section 55(3) of the Proceeds of Crime
(Money Laundering) and Terrorist Financing Act, as alluded to in Budget 2015. These changes will require that the Financial Transactions and Reports Analysis Centre of Canada, if it has reasonable grounds to suspect that designated information would be relevant to investigating or prosecuting a money laundering offence or a terrorist activity financing offence, disclose the information to an agency or body that administers the securities legislation of a province.
The legislation described above reflects the Federal government’s increased focus on addressing terrorist
activity. These measures are generally reflective of the approach towards terrorist activity as found in
legislation such as Bill C-51, as discussed in Anti-Terrorism and Charity Law Bulletin No. 39, The Impact
of Bill C-51 on Charities and Not for Profits. Also like Bill C-51, the legislation described above may raise concerns for Canadian charities and not for profits, specifically those operating in conflict zones or otherwise becoming the subject of investigation by law enforcement and other agencies. Close attention to the development of this legislation will be important so that every organization may conduct a close pro-active review of charitable activities and due diligence procedures to ensure limitation of risk for the organization itself, as well as its directors, officers, employees, and members.
by admin | May 28, 2015 | Charity & Not-for-Profit Law
On April 29, 2015, Canada Revenue Agency (“CRA”) released a technical interpretation (CRA # 2014-
0559501E5) describing what type of activities are likely to be considered “primary services” or “secondary
services”, in relation to the definition of “eligible volunteer firefighting services” in the Income Tax Act
(“ITA”). This CRA View is only available in French. While it does not address the search and rescue
volunteer credit under section 118.07 of the ITA, in 2014, the ITA was amended to allow volunteer
firefighters or volunteers who perform search and rescue services and who perform 200 hours of eligible
service to claim a tax deduction.
“Eligible volunteer firefighting service” is defined under subsection 118.06(1) of the ITA as:
services provided by an individual in the individual’s capacity as a volunteer
firefighter to a fire department that consist primarily of responding to and
being on call for firefighting and related emergency calls, attending
meetings held by the fire department and participating in required training
related to the prevention or suppression of fires, but does not include
services provided to a particular fire department if the individual provides
firefighting services to the department otherwise than as a volunteer.
In this CRA View, CRA was asked, in particular, whether activities such as monthly practices, including
simulations of interventions, and prevention visits, such as visits to homes to inspect fire alarm systems,
fall within the above definition. In response, CRA provided general comments concerning its
interpretation of 118.06(1). Although the ITA itself does not refer to “primary” or “secondary” services
in relation to the volunteer firefighter tax credit, CRA administers the credit by referring to the services in the above definition, i.e., responding to and being on call for firefighting and related emergency calls as a firefighter; attending meetings held by the fire department; and participating in required training related to the prevention or suppression of fire as “primary services”. Other activities are also eligible for the credit as “secondary services”, such as time spent repairing and maintaining vehicles and equipment used by the fire department. Generally, the number of hours devoted to primary services must exceed the number of hours devoted to secondary services. In this regard, CRA stated that assessing such activities will be a question of fact and that in this specific situation, the monthly practices may be primary services where they include a portion related to the prevention or extinguishing of fires, but that prevention visits or verification of fire alarms were secondary services as they are not included in the definition at 118.06(1) of the ITA.
This commentary is noteworthy as more provinces introduce similar legislation. For example, Manitoba
recently introduced a tax credit for volunteer firefighters as part of its 2015 Budget
by admin | May 28, 2015 | Charity & Not-for-Profit Law
On May 14, 2015, the BC Societies Act (the “Act”) received Royal Assent. Once in force, the Act will
replace the current Society Act, enacted in 1977, which governs approximately 27,000 societies. This
modernization of the incorporation and governance framework for non-profit corporations corresponds
with recent modernization brought by the federal Canada Not-for-profit Corporations Act and the Ontario
Not-for-Profit Corporations Act, 2010, which the sector is still waiting to be proclaimed.
The Act contains new measures including distinguishing “member funded” societies from societies that
are funded by public donations or government, which will influence public disclosure requirements and
governance restrictions; imposing duties and rules on senior managers; requiring a “member proposal” be
added to the agenda of a members’ meeting if the proposal is signed by 5% or more of the society’s voting members; and implementing a new online filing system for incorporation, bylaw changes, and other filings at the corporate registry.
Once the Act is proclaimed, a pre-existing society must transition under the Act within two years by filing a constitution, by-laws (consolidated into a single set of bylaws) and a statement of directors and registered office of the society. Notice of enabling regulations and a timetable for implementation of the Act is pending.
