by Dev User | May 31, 2018 | Uncategorized
May 2018 Charity & NFP Law Update
The European Union’s Regulation 2016/679, General Data Protection Regulation (“GDPR”) came into force on May 25, 2018 and could have a significant impact upon some charities and not-for-profits in Canada.
As discussed in Charity & NFP Law Bulletin No. 419 and in the March 2018 Charity & NFP Law Update, the GDPR introduced sweeping changes to the privacy rights of individual “data subjects” with global effects that may extend to organizations operating in Canada.
In the wake of the long lead-up to the May 25, 2018 deadline, a number of Canadian organizations have been updating their privacy policies in order to comply with the GDPR and have been informing their users of the changes to their terms.
Similarly, as discussed in the March 2018 Charity & NFP Law Update, Canadian charities and not-for-profits that may collect or process personal data of European Union residents could be caught by the GDPR. In light of the significant penalties associated with a breach of the GDPR, such Canadian charities and not-for-profits should take proactive measures to review and update their privacy policies and consent mechanisms in order to ensure that they comply with the GDPR, and should be bringing those changes to the attention of their clients, users and other stakeholders.
Read the May 2018 Charity & NFP Law Update
by Dev User | Apr 26, 2018 | Uncategorized
Apr 2018 Charity & NFP Law Update
New Data Breach Reporting Regime under PIPEDA in Force on November 1, 2018
On March 26, 2018, Order in Council PC 2018-0369 fixed November 1, 2018 as the day on which several provisions of the Digital Privacy Act, amending the Personal Information Protection and Electronic Documents Act (“PIPEDA”), will come into force. The most significant aspect of the amendments to PIPEDA is the addition of Division 1.1, which will impose certain obligations on organizations that experience a “breach of security safeguards.” In particular, such organizations will be required to notify affected individuals and report to the Privacy Commissioner of Canada if the breach poses a “real risk of significant harm to an individual.” Also on March 26, 2018, Order in Council PC 2018-0368 ordered the publication of the Breach of Security Safeguards Regulations, which will complement the implementation of the statutory regime under Division 1.1 of PIPEDA as discussed in the September 2017 Charity and NFP Law Update, and which will also come into force on November 1, 2018.
Draft Regulations under Ontario’s Health Sector Payment Transparency Act, 2017
On February 21, 2018, Ontario’s Ministry of Health and Long-Term Care released new draft consultation regulations (the “Draft Regulations”) under the Health Sector Payment Transparency Act, 2017 (the “HSPTA”), which was part of omnibus Bill 160, Strengthening Quality and Accountability for Patients Act, 2017. As discussed in the October 2017 Charity and NFP Law Update, when the new HSPTA comes into force, it will make it mandatory for “recipients”, such as health care professionals and organizations, to disclose payments and other transfers of value of any kind they receive and to make that information available to the public.
The Draft Regulations add meat to the bone of the HSPTA by specifying a lengthy list of the categories of individuals and organizations that will be considered to be “recipients” under the HSPTA. These include members of regulated health professions, hospitals, long-term care homes, community health centres, community mental health and addiction service providers, palliative care providers, advocacy organizations, as well as foundations and other charitable corporations established to raise funds for prescribed recipients. The Draft Regulations also set out the categories of payments and benefits that will constitute a “transfer of value” under the HSPTA. These include cash, securities and other investment interests, honoraria, membership fees, hospitality, travel, rental payments, leasehold improvements, referral fees, in-kind items or services, event sponsorships, personal gifts, as well as charitable contributions made in the name of a “recipient”, as defined in the Draft Regulations. The Draft Regulations also set out a number of exemptions to the mandatory reporting regime under the HSPTA, including transactions with a dollar value of less than $10.00 and medical products to be provided to patients free of charge.
BC’s Bill 2, Budget Measures Implementation Act, 2018
On March 15, 2018, British Columbia’s Bill 2, Budget Measures Implementation Act, 2018 (“Bill 2”) received Royal Assent. Bill 2 amends section 20.1 of the Income Tax Act (BC), extending the farmer’s food donation tax credit in British Columbia until January 1, 2020, previously until January 1, 2019. The farmers’ food donation program provides a tax credit that is in addition to any charitable tax credit claimable by the donor and is meant to encourage agricultural producers in the province, either individuals or corporations, to donate their products to registered charities such as food banks or school meal programs.
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by Dev User | Apr 26, 2018 | Uncategorized
Apr 2018 Charity & NFP Law Update
As reported in the January 2018 Charity & NFP Law Update, the Senate of Canada debated and adopted a motion to appoint a Special Committee on the Charitable Sector (“Special Committee”) on January 30, 2018. Since its appointment, the Special Committee began its study on “the impact of federal and provincial laws governing charities [and not-for-profits], and […] the impact of the voluntary sector in Canada” as per its mandate.
In order to better understand key policy issues for the charitable and not-for-profit sector and to better focus its studies, the Special Committee has begun discussions with witnesses and stakeholders in the charitable and not-for-profit sector. In this regard, on April 16, 2018, the Special Committee discussed the impact of public policy on charities, not-for-profits, and the voluntary sector with three witnesses, professors Peter Elson, Rachel Laforest, and Susan Phillips. On April 23, 2018, it also discussed the impact of federal and provincial laws and policies governing charities and not-for-profits, as well as the impact of the voluntary sector in Canada, with five witnesses from the Department of Finance Canada and the Canada Revenue Agency (“CRA”).
In this regard, witnesses have so far identified various issues affecting the charitable and not-for-profit sector in Canada in order to provide the Special Committee with a clearer direction and better understanding of the sector as it continues its study. These issues so far have included, for example, the non-uniformity of the discourse and political dynamics across Canadian provinces and territories, the looming demographic shifts affecting organizations, internally through retirement, as well as externally through decreased donations and volunteer numbers, the need for better data about trends in giving and volunteering, the need for clarification on political activities (of which a report was published by the Consultation Panel on Political Activities of Charities in May 2017, outlined in Charity & NFP Law Bulletin No. 403), and coordination between the CRA, provincial regulators, and the charitable and not-for-profit sector.
Charities and not-for-profits will want to carefully follow the Special Committee’s study of the sector as it works toward completing its study and preparing its report to be submitted by their own deadline date of December 31, 2018.
Read the April 2018 Charity & NFP Law Update
by Dev User | Apr 26, 2018 | Uncategorized
Apr 2018 Charity & NFP Law Update
As reported in the January 2018 Charity & NFP Law Update, the Standing Committee on Industry, Science and Technology (the “Committee”) conducted a statutory review of Canada’s anti-spam legislation (“CASL”) and on December 13, 2017 presented its findings in its report “Canada’s Anti-Spam Legislation: Clarifications are in Order” (the “Report”). On April 16, 2018, the Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development, presented a response (“Response”) to the Report on behalf of the Government of Canada (“Government”). The Response states that the Government will need to work with stakeholders in order to identify solutions that minimize compliance costs and administrative burdens for Canadian businesses, charities and not-for-profits.
Given the length of CASL’s long title, the Response states that the Government agrees with the Committee’s recommendation to consider adopting a short title for CASL. In response to various recommendations from the Committee to clarify certain definitions and provisions under CASL, including recommendation 8 pertaining specifically to charities and non-profit organizations, the Government noted the concerns and stated its intention to work with stakeholders to make improvements. With regard to the Committee’s recommendation to increase education and transparency related to CASL, the Government stated that it had begun engaging with CASL enforcement agencies, including the Canadian Radio-television and Telecommunications Commission (“CRTC”), to improve education and transparency. Pertaining to the Committee’s recommendation to further investigate the impact of implementing the private right of action which is currently suspended, as reported in the June 2017 Charity & NFP Law Update, the Government agreed to further investigation and consideration of implementation options as part of its broader consultations with stakeholders. The Government also agreed with the Committee’s recommendation to consider how the CRTC can share information with domestic law enforcement agencies in order to best enforce CASL, stating that “additional information sharing and collaboration between federal departments and agencies could serve to enhance the privacy and security of Canadians, especially in an active online environment.”
The Response concludes with the Government’s stated commitment to facilitating innovation and an efficient marketplace, and to considering further how best to improve CASL. As the Response contains no commitments to timeframes, charities and not-for-profits should continue to monitor further responses and action taken by the Government to refine CASL.
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by Dev User | Apr 26, 2018 | Uncategorized
Apr 2018 Charity & NFP Law Update
On April 9, 2018, the Tax Court of Canada (the “TCC”) delivered its decision in Markou v The Queen, an appeal from an assessment made under the Income Tax Act (Canada) (“ITA”) for the 2001 and 2002 taxation year filings of a group of individuals (the “Appellants”). The Appellants participated in the same leveraged donation program that was rejected by the TCC, which court’s ruling was later upheld by the Federal Court of Appeal, in Maréchaux v The Queen (“Maréchaux”), discussed in Charity Law Bulletin No. 184 and in the November/December 2010 Charity & NFP Law Update. The Appellants argued that this case could be distinguished from Maréchaux.
The leveraged donation program in Maréchaux, the same as in this case, worked by issuing donation tax receipts to participants whose transfer to the charity was mainly funded with a loan obtained from parties related to the sponsor of the program. In some cases, the loans were up to 85% of the total amounts transferred to the charity, with the remainder being paid by the participants with their own funds. In Maréchaux, the TCC found the leveraged donation scheme disentitled the participants to any donation tax credits from the program on the basis that there was no gift under section 118.1 of the ITA. The TCC held there was no gift because the benefits received by the participants of the program showed a lack of donative intent on their part.
The first argument of the Appellants, in support of their claim that Maréchaux could be distinguished, was that the Appellants were unaware of the circular flow of funds in the program and that, according to a previous TCC decision which found that the Appellants “did not have any legal or beneficial interest in the loan proceeds prior to the transfer”, the obligation to transfer the loans to the charity was sufficient to conclude that the Appellants had the required donative intent and should, therefore, be entitled to charitable donation tax credits for the entire amount of their transfers. The TCC rejected the Appellants’ interpretation and, following the Federal Court of Appeal’s decision in Maréchaux, held that the benefit to the Appellants arose from the manner in which they had contracted for the delivery of the loans.
The second argument of the Appellants was that any benefit they received did not vitiate the entire gift and, therefore, a portion of the tax credits should be allowed under the split receipting rules previously recognized by either the common law or Quebec’s Civil Code and later contained in subsection 248(30) of the ITA, which was added in 2013 and applies to gifts made after December 20, 2002. The Appellants argued that the portion of the transfers that was composed of their own funds, i.e. not including the loans, was transferred with donative intent and should, therefore, be entitled to donation tax credits.
In rejecting this second argument, the TCC canvassed the common law of gifts, both outside the tax law context and in tax jurisprudence, in order to determine whether a split gift could have been made for the purposes of the ITA as it read when the facts of this case arose, prior to the addition of the split receipting rules for gifts made after December 20, 2002. In this regard, but without deciding whether a split gift could have been made before subsection 248(30) of the ITA came into force, the TCC concluded that:
Split gifts require that the gift portion of a transaction be separated from the non-gift portion, and that the gift portion be supported by donative intent. In Maréchaux, Woods J. found that it would not be appropriate to allow a charitable donation tax credit for the taxpayer’s cash outlay because the transfer to the Foundation could not be split into two transactions and no part of the transfer was made with donative intent.
[…]
In light of the contractual arrangements entered into by the Appellants, it cannot be said that any portion of their donations to the Foundation was made with donative intent.
This case confirms that the 80% threshold in subsection 248(30) of the ITA, allowing charitable donation tax credits for transfers to qualified donees in the presence of a benefit or consideration to the donor, will only be considered where the CRA, and ultimately the courts, are able to split the transfer into two transactions and identify the appropriate donative intent. Charities should carefully review, and ensure compliance with, the CRA’s multiple guides on split receipting, such as Income Tax Folio S7-F1-C1, Split-receipting and Deemed Fair Market Value.
Read the April 2018 Charity & NFP Law Update
by Dev User | Apr 26, 2018 | Uncategorized
Apr 2018 Charity & NFP Law Update
On March 8, 2018, the Ontario Superior Court of Justice released its decision in Barton v Kingston Flying Club, concerning a claim arising from a loan made to a registered charity, the Kingston Flying Club (“Club”), by its past president (“President”), as well as for the value of other benefits provided to the President by the Club in exchange for his services over the years. While not explicitly stated in the decision, it appears that the President was an officer and employee of the Club, but not a director.
The President claimed that he had loaned money to the Club by personally paying fees that it owed to a contractor for installation work, which he classified as a demand loan. He also claimed the value of 14 months’ rent for storage of his aircraft, which he indicated the Club agreed to provide for three years given his past contributions of time and materials. In response, the Club argued that its debt to the President should be set off against the hangar rental fees that he owed, as well as the value of the personal credit card points that he earned in making past purchases for the Club. Since the value of these items exceeded the monies owed to the President, the Club sought the dismissal of the President’s claim. Interestingly, the Club also argued that, as a charity, the Charities Accounting Act (Ontario) (“CAA”) prohibited directors, officers and employees of registered charities from receiving a benefit, and therefore, the President, as an officer and an employee, was not entitled at law to free hangar rent or to retain the credit card points for his personal use.
The court found that the President made a demand loan to the Club, and that the hangar rent and credit card points were not connected to the said loan but were only put forward by the Club as legal set-offs against the debt owed to the President. However, as legal set-offs, the court indicated that they were subject to the two-year limitation period under the Limitations Act, which the Club had not complied with. As a result, the court allowed the President’s full claim. The court’s decision did not address the Club’s argument that the CAA prohibited the President from being entitled to benefits, save and except to indicate that “there is no such provision in the Act preventing a benefit being extended.”
The case is a good reminder of the importance for charities to always ensure there is proper loan documentation in place so that the terms of any loans are clearly understood by all of the parties to the transactions and in order to avoid any future disputes over such loans. This case also shows the importance of charities being aware of limitation periods when making claims for legal set-offs.
Read the April 2018 Charity & NFP Law Update
