CRA News

by Dev User | Nov 1, 2019 | Uncategorized

November 2019 Charity & NFP Law Update

Update to the Guide for Completing Form T3010 Registered Charity Information Return

On November 12, 2019, the Canada Revenue Agency (“CRA”) released a revised Form T3010, Registered Charity Information Return and accompanying Guide T4033, Completing Form T3010 Registered Charity Information Return. While there are various minor changes to the T3010, the most notable change is replacing questions on political activities in Schedule 7 with questions on public policy dialogue and development activities (“PPDDAs”) that were introduced to the Income Tax Act (Canada) in December 2018. Under these new rules, charities may participate in PPDDAs without limitation, which has made the requirement to report the amount of a charity’s spending on political activities no longer relevant. To further reflect these new rules, the CRA also revised Form T1236, Qualified donees worksheet / Amounts provided to other organizations, removing the reporting requirement for the amount of gifts that were intended for political activities. 

In addition, Form TF725, Registered Charity Basic Information Sheet is no longer required to be filed with the T3010. As reported in the November 2018 Charity & NFP Law Update, as of November 14, 2018, the CRA no longer provides charities with peel and stick bar code labels, which were part of Form TF725, with the T3010 annual information return package. In addition to that, now Form TF725 has altogether been removed as a requirement.

Charities subject to the Ontario Corporations Act filing a paper return are also required to file Form RC232, Corporations Information Act Annual Return for Ontario Not-for-profits with the T3010. However, if a charity received Form RC232-WS from the CRA, then the charity may file this form instead of Form RC232. Formerly, Ontario charities were required to file either Form RC232-WS, Director/Officer Worksheet and Ontario Corporations Information Act Annual Return (containing prepopulated corporate information) sent to charities with their Registered Charity Information Return package, or Form RC232. 

Read the November 2019 Charity & NFP Law Update

IAPP and EY Jointly Release Privacy Governance Report

by Dev User | Oct 31, 2019 | Uncategorized

Oct  2019 Charity & NFP Law Update

In late September, 2019, the International Association of Privacy Professionals (“IAPP”) and Ernst & Young (“EY”) jointly released the fifth IAPP-EY Privacy Governance Report (the “Report”). The Report compiles and summarizes results from a global survey of IAPP members on issues related to privacy program structures (e.g. budget, staffing and career development), compliance with the EU’s General Data Protection Regulation (“GDPR”), and trends in privacy and data protection professionals’ daily routines, among other matters.

The Report, which surveyed respondents in the US, EU, UK, Canada, and other countries, reveals some interesting statistics. For example, by the first anniversary of the GDRP’s implementation, over 500,000 organizations had data protection officers (“DPOs”), far in excess of pre-GDPR estimates. While most organizations had DPOs because they were required to do so under the GDPR, the survey found that some respondents had a DPO even if they were not required to have one. With regard to the role of the board of directors, the Report states that the board’s role in privacy matters has been elevated as a result of the US Federal Trade Commission’s ruling on Facebook and Cambridge Analytica, which brought privacy risks to the forefront of organizations. Yet, when it comes to internal reporting on privacy, the Report found that, while EU-based privacy leaders generally report to the board of directors, US-based privacy leaders generally report to the general counsel and that boards in the EU are more likely to have direct oversight of privacy issues than those in the US.

The Report noted that, among organizations that must comply with the GDPR, the number of reported data “breaches”, defined as any unauthorized disclosure of personal data, had doubled from 16% in 2018 to 38% in 2019. In fact, 22% of respondents indicated they had reported ten or more breaches in the last year. The Report attributes this increase to the broad definition of data breach under the GDPR and to possible over-compliance by organizations, rather than to other causes, such as an increase in cyberattacks. Interestingly, only 2% of organizations reported being fined for a privacy breach, causing the authors of the Report to speculate that the whopping fines levied on organizations such as British Airways ($230 million) and Marriott ($125 million) may be outliers and that authorities may be choosing in most cases to work with organizations to address problems rather than resorting to fines and enforcement actions. Fewer than half of survey respondents, both within and outside of the EU, believed they were “fully” or “very” compliant with the GDPR, with one-tenth in the EU reporting that they are only “somewhat” compliant with the GDPR. The Report suggests that these statistics indicate the difficulty of complying with the GDPR, not that organizations do not take their privacy obligations seriously. 88% of respondents in the EU felt that their top priority was to comply with the GDPR or other law, whereas only 57% of US privacy leaders selected that as their top priority. Interestingly, 16% of US privacy leaders felt that safeguarding data from threats was one of their top three priorities whereas only 3% of EU leaders included that in their top three priorities.

Generally, respondents found that fulfilling their core GDPR privacy obligations, such as data portability requests, access requests and the right to be forgotten, had become less difficult over the past year. More than half of the organizations surveyed had received access and right to erasure requests over the last year. Organizations found locating unstructured personal data and monitoring data protection/privacy practices of third parties to be the most difficult types of data subject requests to handle. One area of growing uncertainty noted by the Report for organizations subject to the GDPR is cross border data transfers. The GDPR permits personal data to be transferred only to countries with adequate protection laws (such as Canada). To transfer to other countries, such as the US, organizations subject to the GDPR must put in place adequate safeguards to ensure GDPR compliance. Most organizations rely on standard contractual clauses or the EU-US Privacy Shield frameworks, both of which are currently before the Court of Justice of the European Union and could be invalidated. If that were to happen (as was the case with the former “Safe Harbor” framework) there will be a great deal of uncertainty about how to comply with the GDPR’s data transfer requirements. This problem will be magnified by Brexit, when the UK leaves the EU. It may become challenging to ensure continued data flows from the EU to the US, the UK and other countries. The Report found that most companies subject to the GDPR are “controllers” under the GDPR, with about 2/3 also being “processors”. It also states that 90% of organizations subject to the GDPR use other organizations to process data, with contracts being the most widely used method of ensuring third party processor compliance.

With regard to privacy program structures, the Report indicates that there are almost twice as many staff who devote part of their time to privacy matters as there are full-time privacy staff. Three out of ten privacy professionals also indicated that they expect to see full-time privacy staff increase in the coming year.
The Report provides a helpful look at the state of privacy matters on a global scale, and in particular highlights how the GDPR has affected organizations both within and outside of the EU. The findings will be of interest to Canadian charities and not-for-profits, which may be able to draw certain ideas for best practices in their privacy governance from the Report.

​Read the October 2019 Charity & NFP Law Update

Tribunal Awards Considerable Damages for Discriminatory Hiring Practice

by Dev User | Oct 31, 2019 | Uncategorized

Oct  2019 Charity & NFP Law Update

On August 23, 2019, the Human Rights Tribunal of Ontario (“HRTO”) released its Decision on Remedy in Haseeb v Imperial Oil Limited (“Decision on Remedy”) awarding damages to be paid by Imperial Oil Limited (“Imperial Oil”), in the amount of over $120,000, as a result of discrimination in its hiring practices on the protected ground of “citizenship” in the Ontario Human Rights Code (the “Code”). As was previously discussed in Charity & NFP Law Bulletin No. 430, the HRTO released its interim decision for this case on the issue of liability (“Decision on Liability”) on July 20, 2018, holding that Imperial Oil’s policy that required entry-level job applicants to disclose proof of their eligibility to work in Canada on a permanent basis was discriminatory on the ground of citizenship. In doing so, the HRTO adopted a novel approach by conducting a “detailed analysis of this ground in the Code and its relationship to various subgroups of non-citizens.”

Following this, Imperial Oil filed a Request for Reconsideration, which was denied on February 14, 2019. The HRTO ordered that the parties proceed with the hearing on remedial issues, which assessed the damages that were awarded against Imperial Oil. This Charity & NFP Law Bulletin summarizes the Decision on Remedy. 

For the balance of this Bulletin, please see Charity & NFP Law Bulletin No. 456.

​Read the October 2019 Charity & NFP Law Update

Court of Appeal Considers Freedom of Religion in Determination of Death

by Dev User | Oct 31, 2019 | Uncategorized

Oct  2019 Charity & NFP Law Update

A The Court of Appeal decision in McKitty v Hayani, released on October 9, 2019, concerns a freedom of religion challenge to the common law definition of when death has occurred. As the court’s analysis is complicated, only a brief summary of the main issues will be provided. In this case, Taquisha McKitty had suffered total brain death but was maintained on life support, which allowed her heart and lungs to continue functioning. Although the respondent, Dr. Hayani, had determined that Ms. McKitty had met the common law neurological criteria for death, Ms. McKitty’s parents, as her substitute decision-makers, were granted an interlocutory injunction preventing Dr. Hayani from withdrawing life support on the basis that, according to Ms. McKitty’s Christian beliefs, death only occurred when the heart stopped.

Although no Ontario legislation defines “death”, the court affirmed that the consensus of Canadian medical practice and the common law concur that death occurs “where there is either an irreversible loss of cardiorespiratory function or total loss of neurological function.” Ms. McKitty’s parents challenged the constitutionality of this approach to defining death, arguing that this view violated religious freedom, failed to accommodate religious obligations, and violated Ms. McKitty’s rights under the Canadian Charter of Rights and Freedoms (“Charter”). However, the application judge dismissed the application because (1) Ms. McKitty was physically incapable of exercising her Charter rights, and therefore did not fall under the scope of “everyone” under section 2 of the Charter and, as such, was “not a bearer of Charter rights”; and (2) because the Charter does not impose duties on private individuals such as Dr. Hayani who are not state actors.

Although Ms. McKitty had passed away prior to the appeal, rendering the appeal moot, the Court of Appeal considered the matter nonetheless. It upheld the common law definition of death which includes brain death, but also found that a common method of determining death was heart failure. While it found religious beliefs ought to be considered in determining when death has occurred , the Court did not decide whether Dr. Hayani’s declaration of death infringed Ms. McKitty’s Charter rights because this case did not have an adequate evidentiary record, due to the lack of participation by the Attorney General and because it was moot,

The Court of Appeal dismissed the lower court’s conclusion that Ms. McKitty was not a bearer of Charter rights as being overly broad, stating that many people are unable to exercise many of their Charter rights due to impairment, but that this has no bearing on their status as subjects of Charter rights, and that “…at least some of the Charter rights protect not only one’s interest in doing but simply in being. The rights govern how one is to be treated by others. These include, for example, the right not to be deprived of life and the right to equal benefit of the law.” Further, with regard to whether Ms. McKitty fell under the scope of “everyone”, the Court indicated that the lower court ought to have adopted the Privy Council’s approach in Edwards v Canada (Attorney General) by “apply[ing] a presumption of membership in the class (“everyone”) who is to benefit from the Charter.”

Concerning the Charter’s application, the Court found that Dr. Hayani did not owe any duties to Ms. McKitty under the Charter, as it could not be established that Dr. Hayani was performing a governmental function or acting as a government agent. Although the appellants argued that the Vital Statistics Act compelled Dr. Hayani to complete a medical certificate of death and therefore violated Ms. McKitty’s freedom of religion, the Court indicated that the main issue was the continuation of Ms. McKitty’s medical treatment, and left this matter to be decided by a future case.

The Court considered a “Charter rights argument” seeking to use section 52 of the Constitution Act, 1982 to invalidate the law relating to the definition of death and replace it with one that accommodates religious freedoms. In this regard, it found that Ms. McKitty’s beliefs fell within the protection of freedom of conscience and religion under subsection 2(a) of the Charter. In this regard, the Court characterized her religious beliefs to be that life stops when the heart ceases to beat, that stopping life support to stop a heartbeat would amount to intentionally killing Ms. McKitty, and that breaching the rule against killing would be to defy God. However, the Court also held that the question of whether Ms. McKitty’s right to freedom of religion had been limited would be “better left […] to a case with a more developed record.” 

The Court also considered a “Charter values argument” whereby the Court was asked to use its inherent power to “modify the common law to require religious accommodation.” Charter values arguments rely on “moral norms, principles, and aspects of well-being associated with the particular provisions of the Charter,” and are used in litigation between private parties to “guide incremental change to the common law.” However, Charter values are “not Charter rights by another name” and while they can change the common law, they cannot change legislation. The Court stated that Charter values should be approached with careful attention to the rules, as “unlike Charter rights, [Charter values] are not taken from a canonical text,” and have no methodology to guide their formulation or resolve priority in a conflict. Again, given the evidentiary deficiencies and that the appeal was moot, the Court concluded that “whether a common law rule should be crafted to provide accommodation for persons whose religious convictions cannot accept neurological criteria for  death, is a question that must, ultimately, be left for another case,” and dismissed the appeal.

Although the case lacked the proper evidentiary basis to do a full Charter rights or Charter values analysis and the case was moot, the Court’s distinction between Charter rights and Charter values and elucidation of the Charter values methodology has provided a helpful roadmap for similar cases in the future which are bound to arise.

​Read the October 2019 Charity & NFP Law Update

Ontario Court Upholds Membership Election of New Directors in Governance Dispute

by Dev User | Oct 31, 2019 | Uncategorized

Oct  2019 Charity & NFP Law Update

A The decision of Bose v Bangiya Parishad Toronto (“Bose Decision”), released on September 30, 2019, involved the Prabasi Bengal Cultural Association, which organizes cultural events for members of the Bengali community (“Cultural Organization”), and the Bangiya Parishad Toronto (“Religious Congregation”), which are both not-for-profit corporations incorporated under the Corporations Act (Ontario).

The Bose Decision considered two proceedings before Justice Belobaba. For several decades, the two organizations had operated in tandem. The two organizations had a common board of directors and issued consolidated financial statements. The Religious Congregation owns the community centre from which both organizations have carried out their programs over the years. Since a dispute arose in 2016, the Religious Congregation, under the control of its self-proclaimed board of directors, has excluded the Cultural Organization from the community centre.

The Cultural Organization was properly organized under its incorporating statute and held membership elections. In contrast, the Religious Congregation was never properly organized from a corporate law perspective. The board of directors of the Cultural Organization functioned as the board of directors for both corporations, and members of the Cultural Organization were always treated as members of the Religious Congregation, even though the by-laws of the Cultural Organization did not mention the Religious Congregation. 

When a dispute arose concerning the election of officers for the Religious Congregation as a result of factions at the two organizations, the president-elect for the Religious Congregation, supported by a minority of its directors, purported to nullify the election of directors for the Religious Congregation and self-proclaim a new board of directors and membership list for the Religious Congregation. As a result, there were competing boards of directors and uncertainty concerning the proper, lawful board of directors of the Religious Congregation. The Cultural Organization and its directors brought an application to determine this question in a proceeding which was heard in part on August 26, 2019 before Justice Belobaba. Pursuant to that application, Justice Belobaba provided a handwritten endorsement ordering a new election of the board of directors for the Cultural Organization and Religious Congregation, and adjourning the balance of the application (the “Order”). 

The second proceeding involved a motion filed on September 19, 2019 requesting a stay pending an appeal to the Court of Appeal from the Order. In this regard, the appellants (the self-proclaimed board of directors for the Religious Congregation) sought an urgent stay to prevent the election of a new board of directors for the Religious Congregation scheduled for that upcoming Sunday, September 22, 2019 and to preserve the status quo pending the appeal.

In dismissing the motion, the court found the balance of convenience was even or tilted slightly towards the respondents, and it was neither just nor convenient to grant a stay of the Order. In this regard, the court found that the appellants had failed to establish that they were likely to suffer irreparable harm unless the election was stayed. In addition, the court did not “see much risk of harm” in permitting the members to vote at the election. The court stated that even if the appeal was later allowed, “member democracy” was required to end the “wrongful usurpation” of the Religious Congregation.

This Bose Decision is instructive of what can happen when factions within a not-for-profit corporation attempt to take over control of the board of directors in a manner that is prejudicial to the rights of its members. This case also underscores the importance of complying with basic corporate law requirements (including adoption of an appropriate by-law and complying with by-law provisions) as one measure that may help to reduce the opportunities for factional interests to attempt to seize control and disrupt the governance of a corporation.

​Read the October 2019 Charity & NFP Law Update

CRA Provides View on Donations by Alter Ego Trusts After Settlor’s Death

by Dev User | Oct 31, 2019 | Uncategorized

Oct  2019 Charity & NFP Law Update

A On September 25, 2019, the Canada Revenue Agency (“CRA”) released CRA View, Document 2019-0798491C6 (“CRA View”), concerning donations from alter ego trusts to charities following a settlor’s death, as discussed at the 2019 STEP CRA Roundtable on June 7, 2019. As this CRA View is highly
detailed and nuanced, this article only provides a brief summary of the CRA’s position, and those interested should read the full CRA View, which is available via online subscription services.

The CRA View considers various questions concerning a hypothetical alter ego trust and donations made by it following the death of the settlor. In this regard, the question involves an alter ego trust that owns publicly traded securities that have appreciated in value and various scenarios where after the death of the settlor, donations are made to registered charities. In this regard, the CRA View indicates that where the settlor dies, there is a deemed year-end at the end of the day on which the settlor dies pursuant to subsection 104(13.4) of the Income Tax Act (“ITA”). Subsection 104(4) of the ITA indicates that the alter ego trust would also realize a capital gain at that time. The CRA View then looks at different scenarios where the alter ego trust makes donations to registered charities.

In this regard, where the residual beneficiary after the settlor’s death is a registered charity, and a distribution is made to that charity, the CRA View indicates that it is a mixed question of fact and law whether the payment from the trust to the charity is a charitable gift eligible for a subsection 118.1(3) donation tax credit, or a distribution of income or capital to a beneficiary of the trust. This would depend on the specific wording of the trust agreement and the trustee’s intentions in making the payment to the charity. Where the trustee has no discretion regarding whether the payment is made to the charity, the
payment would not qualify as a gift and would therefore not be eligible for the donation tax credit. Conversely, where the trustee is clearly given the discretion to decide how the funds are to be used, the payment to the charity would be voluntary and would be considered a charitable gift eligible for the donation tax credit. The CRA View also indicates that the same principle would apply where the residual beneficiaries are a class of registered charities as determined by the trustees, and where the trustees may make payments over a period of time, to those various registered charities.

Where the donation from the alter ego trust consists of certain publicly-traded securities, subparagraph 38(a.1)(i) of the ITA provides that “a taxpayer’s taxable capital gain for a taxation year from the disposition of a property is equal to zero if the disposition is the making of a gift to a qualified donee” of certain publicly-traded securities. In such circumstances, the CRA View indicates that the taxable capital gain of the trust resulting from the disposition would be equal to zero.

​Read the October 2019 Charity & NFP Law Update