by Dev User | Aug 29, 2019 | Uncategorized
Aug 2019 Charity & NFP Law Update
On June 28, 2019, the Tax Court of Canada released its decision in Promised Land Ministries v R, upholding the Minister of National Revenue’s (the “Minister”) decision to suspend the receipting privileges and qualified donee status of Promised Land Ministries (“PLM”) for one year. After an office audit for the fiscal years ending December 31, 2011 and 2012, the Minister found that PLM failed to maintain proper books and records, including invoices, receipts, and vouchers, for expenditures made on activities outside of Canada contrary to the ITA. Further, PLM had failed to comply with a compliance agreement (“Agreement”) arising out of a previous audit wherein it had agreed to take corrective measures with respect to maintaining proper books and records for its activities outside of Canada.
In Canada, PLM provided church services twice a week and offered spiritual help to individuals during the week. In addition, the Pastor went on mission trips outside of Canada to poor and remote areas to preach to other pastors about spiritual welfare. The costs of the mission trips included coordinators, accommodation, airline tickets, set up costs, lunches for the participants, and bus transportation. The Pastor was the founder, manager, and sole employee of PLM, responsible for making deposits and the custodian of PLM’s records.
Contrary to PLM’s submission that “it acted in good faith in providing what it believed the Minister was requesting” as a result of the office audit, the court noted that PLM did not appreciate the breadth of the definition of “records” under subsection 248(1) of the ITA, stating “[n]ot only does the definition of record include a “return”, it also includes invoice, voucher and “any other thing containing information, whether in writing or in any other form” which would include an expense receipt.”
The court also found that the Minister had followed the requirements set out in Prescient Foundation v MNR (“Prescient”), discussed in Charity Law Bulletin No. 313, which stated:
the Minister must ‘clearly identify the information which the registered charity has failed to keep’ and ‘explain why this breach justifies the revocation. It is not sufficient to simply state that the charity has failed to keep proper records.’ Natural justice requires that a charity be properly and adequately informed of the particulars of the alleged breach so that it may respond to the allegations.
In so finding, the court reasoned that the CRA had “clearly particularized the alleged breach” in its correspondence with PLM on multiple occasions. Despite being given the opportunity to respond over an extended amount of time, PLM had failed to provide the CRA with the invoices, vouchers and a breakdown of expenses made outside of Canada during the Pastor’s mission trips.
Although PLM argued that its poor recordkeeping was due to problems with its former accountants, and that obtaining receipts for expenses abroad was difficult as they were “cash economies,” the court found these arguments to be “self-serving,” particularly as PLM was well aware of the recordkeeping requirements set out in the Agreement. Having been put on notice, and aware that the CRA would follow up on compliance with the Agreement, it was up to PLM to find ways to substantiate its expenses for the mission trips. The Minister suggested a voucher book where details of the expenses could have been recorded and signed by the individual receiving the funds. The court also found that PLM could not blame the accountants for the inadequate recordkeeping because PLM had the ultimate responsibility for maintaining proper books and records. The court concluded that PLM’s repeated non-compliance in providing receipts for activities outside of Canada in a timely manner, and being unable to sufficiently account for half of the expenses, justified the suspension and upheld the Minister’s decision.
This case serves as a reminder to charities of the importance of complying with the obligations imposed on them, both under the ITA and in compliance agreements with the CRA. Registered charities must comply with their recordkeeping obligations, including maintaining records of expenses of activities outside of Canada, even in “cash economies” where receipts may be difficult to obtain. As demonstrated in this case, non-compliance can expose charities to the risk of suspension of their qualified donee status and receipting privileges, and even revocation of charitable status.
Read the August 2019 Charity & NFP Law Update
by Dev User | Aug 29, 2019 | Uncategorized
Aug 2019 Charity & NFP Law Update
Recent legislative changes to the Income Tax Act (Canada) (“ITA”) have opened the door for registered charities and registered Canadian amateur athletic associations (“RCAAAs”) to engage in “public policy dialogue and development activities” (“PPDDAs”). These changes, which were introduced through Bill C-86, Budget Implementation Act, 2018, No. 2 and received Royal Assent on December 13, 2018, removed all reference to “political activities,” and now permit charities (and RCAAAs) to engage in PPDDAs to the extent that PPDDAs further their charitable purpose. To this end, charities and RCAAAs may devote 100% of their resources to PPDDAs, which may include lobbying, as opposed to the previous 10% limit on permitted political activities.
With the upcoming Federal election, and recent amendments to the Canada Elections Act, which are meant “to increase transparency regarding the participation of third parties in the electoral process,” it is important that charities, RCAAAs, as well as other not-for-profits (“NFPs”) intending to carry out lobbying activities understand the legislation for which these activities are subject. In this regard, the lobbying activities carried out by charities and RCAAAs are subject to restrictions under the ITA. In addition, charities, RCAAAs, and other NFPs are subject to federal, provincial, and municipal elections and lobbying legislation. This Bulletin provides a very brief introduction to the federal and provincial lobbying legislation (collectively, “Lobbying Legislation”) and its impact on charities, RCAAAs and NFPs. This Bulletin also provides a very brief introduction to the recent legislative changes to the Canada Elections Act. As Lobbying Legislation is complicated in nature, it is beyond the scope of this Bulletin to discuss lobbying legislation as it applies to municipalities (including municipal by-laws), or to provide an in-depth analysis of Lobbying Legislation. As such, this Bulletin does not provide a detailed explanation of the law in this regard and the reader will therefore want to refer to the resources cited herein for further details.
For the balance of this Bulletin, please see Charity & NFP Law Bulletin No. 453.
Read the August 2019 Charity & NFP Law Update
by Dev User | Aug 29, 2019 | Uncategorized
Aug 2019 Charity & NFP Law Update
Corporations Canada Updates Policies under CNCA
Corporations Canada announced on August 15, 2019 that it updated its Policy on corrections of articles or a certificate – Canada Not-for-profit Corporations Act, to streamline and improve the process of requesting corrections of articles or a certificate for corporations under the Canada Not-for-profit Corporations Act (“CNCA”). A correction is a request to fix an error in a corporation’s articles or a certificate that occurred during the preparation of the articles or issuance of the certificate. This policy explains how a corporation may request a correction be made. These amendments include new, simplified templates for correction requests, with added model statements; removal of the requirement to explain the error and to provide a statutory declaration; allowing a corporation’s professional representative to sign the declaration where an error is obvious; and simplified policy language, with examples to further clarify what an “obvious error”, “non-obvious error” and “error attributable to Corporations Canada” are. It should be noted that the requirements permitting a correction have not been amended, and that this is merely an update to the policy.
BC Consultation on Proposed Societies Act Amendments
Since British Columbia’s Societies Act came into force on November 28, 2016, the BC government has been monitoring its roll-out to ensure its effectiveness for societies and their members. Based on the feedback received from societies, the legal community, and the public, the BC Ministry of Finance announced a consultation in July 2019, and provided a list of 36 proposed amendments to the Act to address various issues that have arisen. The purpose of these proposed amendments is to ensure the Act remains and becomes even more user-friendly by addressing ambiguities, omissions and inconsistencies within the Act and other legislation; streamlining, updating and refining processes; as well as removing unnecessarily burdensome Corporate Registry filing requirements. In this regard, the proposed amendments include clarifying certain provisions (such as directors’ terms of office, what meetings are referred to in specific provisions, what is meant by “register of directors” and “register of members”); providing new due diligence defence for senior managers; prohibiting anyone to act for absentee directors at board meetings; not requiring directors to disclose material interest in a contract or transaction, if the director reasonably had no knowledge of the contract or transaction until director becomes aware of the conflict; expanding reporting obligations concerning remuneration; and excluding bequests made by affiliated individuals from “public donations” and thereby would not affect a society’s ability to be a member-funded society. Of particular note, it has also been proposed that applications for transition from the previous Society Act to the current Societies Act that were filed late (after the November 28, 2018 deadline) would not be invalid. As well, the Registrar is proposed to have the power to dissolve those societies that failed to file a transition application or for failing to return a record the registrar has requested. While the consultation ended on August 23, 2019, it remains to be seen which amendments the government will proceed with.
BC Civil Resolution Tribunal Has Jurisdiction over Certain Society and Cooperative Disputes
British Columbia societies should be aware of a mechanism that may allow for a quick and efficient resolution to certain disputes between members and directors through the province’s Civil Resolution Tribunal. The Civil Resolution Tribunal is an independent, neutral online tribunal that has jurisdiction to make enforceable decisions and function as a fast and affordable alternative to the court action. British Columbia’s Bill 22, Civil Resolution Tribunal Amendment Act, 2018, which received Royal Assent and came into force on May 17, 2018, introduced Division 6 to Part 10 of the provincial Civil Resolution Tribunal Act, giving the tribunal jurisdiction to hear “society claims” respecting British Columbia societies on the following matters: (a) the interpretation or application of the Societies Act or a regulation, constitution or bylaw, including a request to inspect, or to receive a copy of, a record of a society; (b) an action or threatened action by the society or its directors in relation to a member; and (c) a decision of the society or its directors in relation to a member.
It can therefore resolve disputes, for example, where a society has not followed the Societies Act or its regulations, where a society has not complied with its constitution by-laws, where proper notice was not provided for meetings, where voting was carried out improperly or incorrectly, or where the society has not provided access to records. The tribunal is to be considered to have specialized expertise in respect of claims within its jurisdiction. Claims may be brought by societies, by society members, or by anyone who believes they have a right to view or obtain copies of a society’s records or financial statements.
However, there are many issues that are outside the jurisdiction of the tribunal, such as termination of membership in the society; liquidation, dissolution or restoration of a society; corporate reorganizations; certain claims that may be dealt with by the Supreme Court (such as powers of court respecting general meetings and remedies under Part 8 of the Societies Act); or claims to which all parties have agreed that the British Columbia Arbitration Act will apply.
Read the August 2019 Charity & NFP Law Update
by Dev User | Jul 1, 2019 | Uncategorized
Implications of Becoming a Charity
by Dev User | Jun 27, 2019 | Uncategorized
Jun 2019 Charity & NFP Law Update
Joint Statement by Federal, Provincial and Territorial Governments
On June 14, 2019, several representatives from federal, provincial, and territorial governments, including ministers responsible for anti-money laundering and beneficial ownership transparency, released a joint statement (the “Joint Statement”) to advance a new initiative to combat money laundering and terrorist financing in Canada.
The Joint Statement highlights the federal, provincial, and territorial governments’ commitment to protecting Canadians and the integrity of Canadian institutions. It also recognizes the importance of coordinated action by the different levels of government to prevent criminals from exploiting gaps and vulnerabilities across jurisdictions.
As well, the Joint Statement reaffirms the commitment to improving transparency of beneficial ownership information for law enforcement, tax and other authorities, with appropriate privacy safeguards, in order to target criminals who use corporations to hide or launder money, without deterring good corporate citizens from conducting their regular business activities.
In terms of next steps, the Joint Statement recognizes the importance of consultations with vulnerable sectors, and announced the creation of a new working group with the Federation of Law Societies of Canada. The representatives also agreed to work together on cross-government anti-money laundering best practices to be reported by January 2020.
Last FATF Plenary Meeting for the 2018-2019 Period
Between June 16 and 21, 2019, the Financial Action Task Force (“FATF”), an independent inter-governmental body that develops and promotes anti-money laundering and anti-terrorist financing policies and standards, had its last Plenary meeting for the 2018-2019 period. At this Plenary meeting, the FATF discussed the mitigation of risks from virtual asset activities and finalized the Interpretive Note to Recommendation 15 which sets out the application of the FATF Standards for the regulation and supervision of activities and service involving virtual assets.
Recommendation 15 and its Interpretive Note are annexed to the FATF’s “Guidance for a Risk-based Approach for Virtual Assets and Virtual Asset Service Providers” (the “Guidance”). The Guidance is intended to further assist countries and providers in complying with their anti-money laundering and counter-terrorism financing obligations. The Guidance describes how the FATF Recommendations apply to virtual asset activities and service providers. In the case of Recommendation 8, the Guidance provides that the risk-based approach to protect non-profit organisations from terrorist financing abuse must consider the clandestine diversion of funds through the use of virtual assets.
In anticipation of the FATF’s Interpretive Note to Recommendation 15 and the Guidance, the G20 Finance Ministers and Central Bank Governors Meeting, held between June 8 and June 9, 2019 in Japan, also reaffirmed their commitment to applying the FATF Standards to virtual assets and service providers for combating money laundering and terrorist financing.
Consortium for Financial Access Releases Guidance to Address Issue of De-risking
The Consortium for Financial Access, comprised of a number of large multi-national financial organizations, community banks, money services businesses, security firms, credit unions, charities, law enforcement, regulators, advisory firms and academics, who all originally came together by initiative of the Association of Certified Anti-Money Laundering Specialists and the World Bank, has released its guidance document entitled Banking Nonprofit Organizations – The Way Forward (the “Guidance”). The Guidance provides policy and practice recommendations for not-for-profits, financial institutions and governments, and it is aimed at improving financial access for not-for-profits.
The Guidance relies on the most recent National Terrorist Financing Risk Assessment by the United States Department of the Treasury, discussed in the March 2019 Anti-Terrorism/money Laundering Update, to emphasize that the not-for-profit sector does not present a uniformly high risk and, as such, financial institutions “should be careful to not require excessive or unnecessary information from [not-for-profits] and should ensure that all information collected from [not-for-profits] is relevant to the stated purpose, remembering that [not-for-profits] have legal and ethical obligations to protect the privacy of their donors, beneficiaries and members.”
Further, the Guidance calls for governments and financial regulators to promote financial access for not-for-profits by emphasizing appropriate due diligence for the sector, which is not inherently risky, clarifying that the policy objectives of combating money laundering and promoting humanitarian and development assistance are complementary goals, and with appropriate policy statements stressing governments’ support for the not-for-profit sector and its humanitarian and developmental efforts.
Read the June 2019 Charity & NFP Law Update
by Dev User | Jun 27, 2019 | Uncategorized
Jun 2019 Charity & NFP Law Update
Bill C-97, Budget Implementation Act, 2019, No. 1, Receives Royal Assent
On June 21, 2019, Bill C-97, Budget Implementation Act, 2019, No. 1 (“Bill C-97”), received Royal Assent. Bill C-97, which was discussed in the April 2019 Charity & NFP Law Update, implements new tax measures with respect to Canadian journalism, removes the “national importance” criteria with respect to donations of cultural property for the purposes of receiving a tax benefit, and implements several health-related measures.
Bill C-59, An Act respecting national security matters, Receives Royal Assent
Also on June 21, 2019, after two years of debates in both Chambers of Parliament, Bill C-59, An Act respecting national security matters (“Bill C-59”), received Royal Assent. As mentioned in the June 2017 Anti-Terrorism Law Update, Bill C-59 was introduced in the House of Commons on June 20, 2017 and later amended by Committee, as discussed in the May 2018 Anti-Terrorism/Money Laundering Update. Bill C-59 introduces a number of changes to the Criminal Code and various other federal statutes, and enacts the National Security and Intelligence Review Agency Act, Avoiding Complicity in Mistreatment by Foreign Entities Act, Intelligence Commissioner Act, and the Communications Security Establishment Act.
Trademarks Act Amendments Now in Force
On June 17, 2019, amendments to the Trademarks Act arising from Bill C-31, Economic Action Plan 2014 Act, No 1 (“Bill C-31”) came into force enabling Canada to accede to the Singapore Treaty, the Madrid Protocol, and the Nice Agreement. The amendments in Bill C-31 as discussed in Charity Law Bulletin No 360 and the November 2018 Charity & NFP Law Update, introduce significant changes to Canada’s trademarks regime, including, the removal of the “use” requirement to register a trademark, the introduction of new types of trademarks, the ability to file international applications through the Madrid System, the requirement to classify goods and services according to the Nice Classification, a shortened registration term, and expanded enforcement tools as further discussed in Trademark Amendments In Force: What To Do Now, below.
Ontario Bill 117, OPSCA (Interim Period), 2019 Receives Royal Assent
On June 6, 2019, Ontario Bill 117, Ontario Society for the Prevention of Cruelty to Animals Amendment Act (Interim Period), 2019 (“Bill 117”) received Royal Assent. Bill 117 was introduced as a result of the Ontario Society for the Prevention of Cruelty to Animals’ (“OSPCA”) decision to relinquish its responsibilities with respect to the enforcement of animal welfare legislation in Ontario once its contract with the government ended on March 31, 2019, as reported in its March 4, 2019 news release. The move to end its enforcement services came in response to a recent Ontario Superior Court decision, Bogaerts v. Attorney General of Ontario (discussed in the January 2019 Charity & NFP Law Update), in which the court found that it was unconstitutional for the government to enact legislation that delegated law enforcement responsibilities to a private organization because of the lack of transparency and accountability to the public. As such, the court invalidated the provisions that govern the powers of the OPSCA with respect to warrantless search and/or seizure powers, but suspended such declaration for an interim period of one year to allow legislation to establish a new framework with respect to animal welfare enforcement.
Bill 117 addresses this interim period and amends the existing Ontario Society for the Prevention of Cruelty to Animals Act (the “Act”) by adding section 21.1, which authorizes the Solicitor General to appoint any person as the Chief Inspector for the interim period. Further, O Reg 101/19 was filed on May 17, 2019 and amended the General Regulation (“O Reg 59/09”) under the Act by expanding on the responsibilities of the Chief Inspector. The Amending Regulation states that the Chief Inspector has the authority to establish standards for the inspectors and agents of the OPSCA “in the performance of their functions” and generally oversees “the performance of their functions.” It also makes clear that the Chief Inspector does not have authority over inspectors and agents of affiliated societies that were appointed by the OPSCA or Chief Inspector. However, affiliated societies may make a written request to the Chief Inspector, which the Chief Inspector may accept or decline, to appoint one of the societies’ employees as an inspector or agent. The Chief Inspector may also revoke any such appointments that were made.
Bill 116, Foundations for Promoting and Protecting Mental Health and Addictions Services Act, 2019
On May 27, 2019, Ontario Bill 116, Foundations for Promoting and Protecting Mental Health and Addictions Service Act, 2019 was introduced to the Legislative Assembly of Ontario. If Bill 116 is passed, it will enact two Schedules, the Mental Health and Addictions Centre of Excellence Act, 2019 (“Mental Health Act”) and the Opioid Damages and Health Costs Recovery Act, 2019 (“Opioid Act”). The Mental Health Act lays the foundation to support a “mental health and addictions strategy” (the “Strategy”) in Ontario that would recognize mental health and addictions care as a “core component of an integrated health care system”. Further, under the Mental Health Act, Ontario Health will establish and maintain the Mental Health and Addictions Centre of Excellence to implement the Strategy, provide mental health services, collect data and research on the system, as well as provide resources and support to health service providers, integrated care delivery systems and other related parties.
The Opioid Act sets out a framework under which the government of Ontario may seek to “recover the cost of health care benefits caused or contributed to by an opioid-related wrong” against manufacturers and wholesalers of opioid products. Ontario would have a “direct and distinct action”, could seek to recover costs on an aggregate basis, and defendants could be held jointly or severally liable. Further, the Opioid Act sets out unique limitation period rules, allowing Ontario to commence an action for damages or for the recovery of the cost of health care benefits with respect to opioid-related wrong within 15 years after the relevant provision in the Act comes into force. The Opioid Act is being enacted in part to support Ontario’s participation in a national class action lawsuit British Columbia launched in August 2018 against more than 40 opioid manufacturers and wholesalers, on behalf of provincial, territorial, and federal governments.
Read the June 2019 Charity & NFP Law Update
