by Dev User | Mar 29, 2018 | Uncategorized
Mar 2018 Charity & NFP Law Update
New Business Numbers No Longer Required for Internal Divisions
In the September 2017 Charity & NFP Law Update, it was reported that the Canada Revenue Agency (“CRA”) would be assigning unique nine-digit business numbers to charities’ internal divisions that were sharing the business numbers of their head bodies in order to access the CRA’s online services through the Charities IT Modernization Project. However, on March 1, 2018, the CRA announced through an e-mail sent to certain stakeholders, as well as through an update to its Guidance CG-028, “Head bodies and their internal divisions”, that the new initiative announced in September 2017 will no longer be required in order to allow internal divisions to access the CRA’s online services. This means that the CRA is reverting back to its long-standing practice of assigning internal divisions with the same business numbers as their head bodies followed by a program identifier “RR”, as well as a unique four-digit reference number following RR to help distinguish between different head bodies and internal divisions.
CRA Releases Video on Gift Certificates and Gift Cards
On February 28, 2018, the CRA published a video outlining when and how registered charities can issue official receipts for gift card or gift certificate (“Gift Card”) donations. Gift Cards are akin to promises to issue a gift which are fulfilled upon a transfer of property through redemption of the Gift Card. In this regard, if a charity that received a Gift Card directly from an issuer (i.e. the individual or business that issues the Gift Card and from whom the Gift Card can be redeemed for services or property), the charity can only issue a donation receipt to the issuer once the charity has used the Gift Card to purchase a product or service, and only for the amount that the charity redeemed from the Gift Card. On the other hand, a charity that received a Gift Card from a Gift Card holder (i.e. a third party non-issuer who purchased the Gift Card from an issuer) can issue a donation receipt to the donor for the amount of the Gift Card because the holder purchased the Gift Card, giving it a monetary value. As such, it is important for charities to know whether the donor of a Gift Card is an issuer or a holder of a Gift Card.
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by Dev User | Mar 29, 2018 | Uncategorized
Mar 2018 Charity & NFP Law Update
On March 7, 2018, the CRA released Interpretation 2017-0698191E5, “Gift of securities by executors of a will” that addresses the income tax implications of three hypothetical scenarios involving gifts made by executors of the estate of a deceased individual. More specifically, the facts presented to the CRA described a will in which there was no designation of the amounts to be given to charities, although the three co-executors were given flexibility to make donations in their discretion. It was also indicated that the deceased’s assets included a mutual fund investment account with a $4 million total fair market value with an inherent capital gain of $1 million. In response, the CRA addressed the resulting tax implications of this situation by way of three different scenarios.
The first scenario addressed whether a charitable donation of $500,000 cash from a graduated rate estate’s (“GRE”) sale of mutual fund units could be used to offset personal taxes owed on the deceased’s final return. In this regard, the CRA stated that, subject to subsection 118.1(13) of the Income Tax Act, a gift made by an estate is deemed to be made by the estate, as opposed to by the deceased, under subsections 118.1(4.1) and (5). It further stated that the cash would constitute property substituted for the property that the estate acquired on and as a consequence of the death of the deceased for the purposes of paragraph 118.1(5.1)(b), concerning gifts by GREs. Therefore, the donation credit could be claimed on the deceased’s final return pursuant to clause 118.1(1)(c)(i)(C) on the definition of “total charitable gifts.”
The second scenario considered the same facts as the first scenario with the exception that the donation is in-kind rather than cash. In this regard, the CRA stated that where subsection 118.1(5) applies to a gift, the gift is not considered to be made until the gifted property is transferred. While the capital gain on mutual fund units would be calculated at the time of death, subparagraph 38(a.1)(ii) provides for a nil taxable capital gain where the property disposed of is a unit of a mutual fund corporation or trust and the gift is subject to subsection 118.1(5.1) and is made by a GRE to a qualified donee.
The third scenario was also a donation in-kind as in the second scenario. However, the question was whether the capital gain from an increase in the fair market value of the mutual fund units between the time of deemed disposition immediately before death and the time of the units’ transfer to a qualified donee would also be eligible for a nil taxable capital gains. The CRA answered that the difference between these two values will result in a gain or a loss to the estate, as applicable. However, where the gift is given to a qualified donee and the taxable capital gain of that gift is nil pursuant to paragraph 38(a.1), as discussed above, any subsequent increase in value from the date of death to the date of disposition by the GRE will also be nil pursuant to subparagraph 38(a.1)(i).
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by Dev User | Mar 29, 2018 | Uncategorized
Mar 2018 Charity & NFP Law Update
On February 28, 2018 the House of Commons’ Standing Committee on Access to Information, Privacy and Ethics (the “Committee”) tabled for consideration its report “Towards Privacy by Design: Review of the Personal Information Protection and Electronic Documents Act” (the “Report”). The Report contains 19 recommendations that would update the Personal Information Protection and Electronic Documents Act (“PIPEDA”) and align it with the European Union’s General Data Protection Regulation (“GDPR”), which is coming into force in May, 2018.
Several of the recommendations in the Report deal with consent under PIPEDA. The Report recommends that consent remain the core model for PIPEDA’s privacy regime but that the consent model be enhanced and clarified by additional means (Recommendation 1). In response to concerns about organizations using personal information for secondary purposes such as marketing, the Report recommends that an opt-in system of consent – in which users explicitly choose to disclose their personal information – be implemented as the default for any use of personal information for secondary purposes and, potentially, for all purposes (Recommendation 2). Affirming that the right to revoke consent is a key element in maintaining a consent-based privacy model, the Report recommends that the government study the issue of revocation of consent and its legal and practical implications, particularly in relation to social media, where personal information may have been copied and shared with others (Recommendation 4). The Report examines the challenges of the consent-based model when dealing with minors, particularly in light of the GDPR and the United States Children’s Online Privacy Protection Act, both of which mandate parental consent for collecting personal information from children below a prescribed age. The Report recommends that the government consider implementing specific rules of consent for minors and for the collection, use and disclosure of their personal information, which would limit the ability of organizations to collect, use and disclose the personal information of minors (Recommendation 9).
The Report also makes a number of recommendations that address new rights inspired by the GDPR. The Report recommends that PIPEDA be amended to provide for a right to data portability which would allow users to request and easily transfer their personal information from one provider to another (Recommendation 10). The Report recommends that the government consider including in PIPEDA a framework for a right to erasure in which online information could be deleted, including, at a minimum, the right for minors to have their information taken down (Recommendation 11). The Report also recommends that the government consider including a framework for a right to de-indexing, which would not delete the information but would ensure that it no longer appears in online searches, and that this right would be expressly recognized in the case of personal information posted online while a person was a minor (Recommendation 12). This was similarly recommended in the Office of the Privacy Commissioner of Canada’s Draft Position on Online Reputation, discussed in Charity & NFP Law Bulletin No. 416.
The Report also recommends that PIPEDA be amended to make “privacy by design” a central principle. Privacy by design, which has been entrenched in the GDPR, means that privacy considerations are taken into account at all stages of a service or system and that measures to protect personal information are implemented proactively and preventively (Recommendation 14).
A number of recommendations would grant new enforcement and audit powers to the Privacy Commissioner of Canada (Recommendations 15 and 16). The Report also recommends a collaborative approach with the European Union and with the Canadian provinces and territories to maintain Canada’s adequacy status under the GDPR (Recommendations 17 and 19) and that the government consider what changes must be made to PIPEDA to maintain its adequacy status under the GDPR (Recommendation 18). Adequacy status is required in order to ensure that data can continue to flow from the European Union to Canada.
As privacy continues to be a growing concern for legislators and the global community, charities and not-for-profits should continue to monitor these developments. Should the recommendations of the Report find their way into PIPEDA or any other Canadian legislation, these may potentially affect interactions with donors, volunteers, beneficiaries of charitable programs, and contractual counterparties, including employees and service providers.
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by Dev User | Mar 29, 2018 | Uncategorized
Mar 2018 Charity & NFP Law Update
As reported in the August 2017 Charity & NFP Law Update, Proposal Number 17-MAG008 (the “Amendments”) containing draft amendments to Ontario Regulation 4/01 under the Charities Accounting Act (“CAA”) were posted by the Office of the Public Guardian and Trustee of Ontario (“PGT”) on July 10, 2017. The Amendments outlined certain circumstances where charitable corporations would be authorized to pay directors and related persons for goods, services, or facilities, which would provide relief from the common law rule prohibiting the remuneration of directors of charitable corporations and persons related to them. After a period of consultation, the Amendments will come into force on April 1, 2018 as new s. 2.1 of Ontario Regulation 4/01 with no changes from the original draft posted earlier last summer.
As of April 1, 2018, charitable corporations will no longer need to obtain a s. 13 consent order under the CAA, or from open court, to remunerate directors where the circumstances outlined in s. 2.1 of the Ontario Regulation 4/01 apply, subject to the charitable corporation meeting a number of conditions.
The Amendments ease the process for incorporated charities in Ontario that want to rely upon their board members who can provide services in another capacity without the need for a s. 13 consent order or authorization from a court. As the process to obtain such orders can be time intensive, and generally requires the assistance of legal counsel, the upcoming amendments are a welcome change. New section 2.1 of Ontario Regulation 4/01 makes reference to the fact that the board must consider “any guidance respecting payments made under this section.” Charities should monitor the PGT’s publications for such guidance to be available in the immediate future once the Amendments come into force.
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by Dev User | Mar 29, 2018 | Uncategorized
Mar 2018 Charity & NFP Law Update
As commented on in the Charity & NFP Law Bulletin No. 417, Budget 2018 proposed to amend the definition of “qualified donee” so that universities outside Canada are no longer required to be listed in Schedule VIII, which had previously been the case prior to the 2011 federal budget implementing a separate registration for “prescribed universities”. As a consequence, Budget 2018 proposed repealing section 3503 and Schedule VIII of the Income Tax Regulations so that there would be only one list of universities outside Canada that are qualified donees for the CRA to maintain, and for the public to check to determine qualified donee status.
On March 22, 2018, a Notice of Ways and Means Motion to implement Budget 2018 was posted by the Ministry of Finance. In it, the Ministry clarified that those universities named in Schedule VIII at the end of February 26, 2018 were “deemed to have applied for registration”. This clarification was in response to a number of practitioners pointing out that the original drafting of the proposed amendments in Budget 2018 may have inadvertently excluded a number of universities outside Canada that had previously been qualified donees due to the proposed amendments to the Income Tax Act and the repealing of Schedule VIII. These amendments have been proposed through Bill C-74. Charities should continue to monitor the status of Bill C-74 for further progress on its implementation.
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by Dev User | Mar 29, 2018 | Uncategorized
Mar 2018 Charity & NFP Law Update
On February 26, 2018, three judgments were released by the Ontario Superior Court in Arriola v. Ryerson Students’ Union, Naggar v. The Student Association at Durham College and UOIT, and Zettel v. University of Toronto Mississauga Students’ Union. The three applications were argued together and the judgements were released simultaneously.
The background facts for the three cases were very similar. The applicants in each case were students at a publicly funded university who were members of their university’s student union or association (“Student Unions”). Each of the Student Unions were not-for-profit corporations that were separately incorporated and independent from the respective university. In each of the three cases, the applicants applied to have their student group officially recognized by their Student Union, which would have resulted in the group receiving funding from the respective university, as well as other minor benefits. In each of the three cases, the applicants applied for judicial review of the decisions of their respective Student Unions to deny their application to obtain status as official student groups and also sought orders quashing the decisions of the Student Unions.
In the Arriola v. Ryerson Students’ Union case, the applicants sued Ryerson Students’ Union for refusing official student group status to their student group known as “the Men’s Issues Awareness Society”, which had the purpose of bringing social awareness to issues that disproportionately affect men and boys, such as higher rates of suicide, homelessness, workplace injuries and failure in school. In the Naggar v. The Student Association at Durham College and UOIT and Zettel v. University of Toronto Mississauga Students’ Union cases, the respective Student Unions denied official student group status to pro-life student groups.
The court noted that the applicable laws and the legal analysis to be applied were identical in all three cases. The court affirmed that the “private law of groups” applied and further confirmed that a court has limited jurisdiction to review the conduct and decisions of an organization, including enforcement of contracts and limited jurisdiction to carry out judicial review over the decisions of an organization. The court affirmed it is not the role of the courts to review the merits of an organization’s conduct or decision but instead courts are to review whether the procedure followed by an organization in arriving at its decision was done in accordance with the organization’s own rules, in accordance with natural justice and without bad faith. The court noted that courts may decline to exercise their judicial review jurisdiction when the internal dispute resolution mechanisms of an organization have not been exhausted.
In each of the cases, the applicants sought declarations on a number of grounds, including an allegation that the Student Union’s decision was ultra vires because the Student Unions exceeded its jurisdiction and its decision was contrary to its own policies and rules; the decision was made contrary to the principles of natural justice and done in bad faith; and that the decision was unreasonable and contrary to the Canadian Charter of Rights and Freedoms by failing to respect the students’ freedom of association and freedom of expression. Orders were also sought prohibiting the Student Unions from limiting access to services on account of a student’s beliefs and directing the Student Unions to recognize each applicant as a student group.
While there were some differences in the background facts of the three cases, based on the court’s review of the facts in each individual case, all three applications were dismissed. Firstly, the court held that public law does not apply, since the Student Unions are all private student organizations on a university campus (as opposed to a federal, provincial or municipal government actor). In Arriola v. Ryerson Students’ Union, the court confirmed that it has the jurisdiction to review the activities of the Student Union since the applicants had exhausted all of the internal remedies at the Student Union. The court also found in each case that the Student Unions did not violate their own rules and regulations in exercising their discretion to refuse to grant student group status to the applicants.
The court found that the principles of natural justice were not violated in the three cases. In that regard, the court stated, as follows:
The content of the principles of natural justice are flexible and depend on the particular circumstances of the association, but the minimum requirements are: (a) adequate notice of what is to be determined and the consequences; (b) an opportunity to make representations; and (c) an unbiased tribunal. The scope of the requirements of natural justice depend on the subject-matter that is being dealt with, the particular legislative or administrative context, the circumstances of the case, the nature of the inquiry, and the rules under which the tribunal is acting, and the ultimate question is whether the procedures adopted were fair in all the circumstances.
The court found there had been no interference with the applicant’s freedom of association or freedom of expression because the applicants were free to gather and express their views on campus, even without being officially recognized by the Student Union. In that regard, the court stated that the funding given to recognized student groups is a discretionary privilege, as opposed to being an entitlement. The court also found no evidence of bad faith by the Student Groups after reviewing the facts of each case.
This case affirms previous case law which reflects the reluctance of the courts to become involved in the internal affairs of a charity or not-for-profit organization where steps taken by an organization vis-à-vis its members, reflects the requirements of natural justice. This case also affirms that the requirements of natural justice that apply to a given situation may be flexible depending on the background facts involved.
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