by Dev User | Jan 31, 2018 | Uncategorized
Jan 2018 Charity & NFP Law Update
In a decision released December 18, 2017, the Tax Court of Canada in Lichtman v The Queen considered whether three ordained rabbis (“Appellants”) teaching Judaic studies in a Jewish elementary day school were “ministering to a…congregation” in order to be eligible for the clergy residence deduction (the “Deduction”) under s. 8(1)(c)(ii)(B) of the ITA. This Deduction allows qualifying individuals to deduct from their personal income a specified amount in relation to their housing, whether rented or owned, when filing their personal income tax return.
In order to qualify for the Deduction, the court stated that an individual is required to meet a two-fold test for status and function set out under s. 8(1)(c) of the ITA. The status test requires the individual to be a member of the clergy or of a religious order, or a regular minister of a religious denomination (a “Clergy Member”). In this regard, the Appellants met the first part of the test as members of clergy. The function test asks whether the individual is performing one of the functions outlined in s. 8(1)(c)(ii) of the ITA. In this regard, as s. 8(1)(c)(ii)(B) allows for the Deduction where a Clergy Member is “ministering to a diocese, parish or congregation,” the issue was whether the Appellants’ activities and functions could be considered “ministering” and whether the students could be considered a “congregation.”
In its consideration of whether the Appellants were “ministering”, the court held that “a rabbi teaching Torah to Orthodox Jewish children [would need to represent] a specialized ministry within the context of Orthodox Judaism,” and that the students would have to constitute a congregation for the purposes of s. 8(1)(c). Through its review of expert evidence, the court concluded that there was no consensus on the spirituality of Torah education or that learning Torah “is any more of a spiritual or religious act than it is an academic and intellectual pursuit”. Further, while it noted that rabbis may engage in a variety of specializations, including education, it held that in contrast to a music minister at a Pentecostal church, which was found to be a specialized ministry in Austin v The Queen, the Appellants’ activities did not amount to a specialized ministry within the context of Orthodox Jewish ministry. Of note, the Appellants’ employment contracts and work duties, which stipulated that they were employed as teachers of Judaic studies at the day school, were contrasted with the activities and duties of a synagogue rabbi, and the Appellants’ duties were found to be those that “would be typically required of any teacher in a typical school setting.”
Concerning whether the students constituted a “congregation”, the court reviewed the ordinary meaning of “congregation” and found that, in the context of Orthodox Jewish rabbis, the term was used in relation to synagogues. In its review of legislation and case law, it held that the term had to be read contextually in reference to a “diocese, parish or congregation”, as outlined in s. 8(1)(c)(ii) of the ITA. It held that these three words “share the common element of regularized religious worship in an organized institutional setting,” and that elementary school students gathered for Jewish religious education and instruction were not a congregation in this regard. The court also took a purposive approach to the ITA provision, concluding that the purpose, history and general scheme of the ITA further supports the conclusion that the students, in this case, were not a congregation, and that teachers of religious studies could not be considered to be ministering to the students. Based on its findings, the court dismissed the appeal, holding that the Appellants were not eligible for the Deduction.
While the s. 8(1)(c) two-fold status and function test is not new, this case is a good example of the court’s application of the test to determine an individual’s eligibility for the Deduction. In this regard, individuals applying for the Deduction under s. 8(1)(c)(ii)(B) should be aware that they may need to satisfy the CRA and, if applicable, satisfy the court that they are Clergy Members, that their activities constitute ministry and that those to whom they minister can be considered a congregation.
Read the January 2018 Charity & NFP Law Update
by Dev User | Jan 31, 2018 | Uncategorized
Jan 2018 Charity & NFP Law Update
On January 5, 2018, the Court of Queen’s Bench of Alberta released its decision in Chinese Benevolent Association of Edmonton v Chinatown Multilevel Care Foundation. In this case, the plaintiffs sought a declaration that the general operating by-law adopted by the Chinatown Multilevel Care Foundation (the “Foundation”) in June 2009, was invalid and that the governing bylaws were those adopted in 1985 (the “1985 Bylaw”). The plaintiffs also sought a determination concerning who the members of the Foundation were, together with a court order on other corporate matters.
The plaintiffs included Mei Hung and Frank Gee (who were members of the Foundation), as well as the Chinese Benevolent Association (the “Association”) and directors of the Association. On the issue of who had valid standing to bring the application, the court found that only Ms. Hung and Mr. Gee had standing given their capacity as members of the Foundation. The court stated “There is no evidence to suggest that the [Association] or its Directors have any material interest in the [Foundation] and therefore any direct stake in the [Foundation]’s affairs such as to justify granting them standing….” The court also stated, “I agree with the Defendants that merely applying for membership in the [Foundation] is not sufficient to grant standing and that the board of directors was entitled to employ Selection Criteria in making membership decisions for the [Foundation] as a private society.”
The Foundation was incorporated under the Alberta Societies Act and had registered its bylaw in 1985 under that Act. At a meeting held on June 16, 2009, (the “June 2009 Meeting”) members of the Foundation passed a special resolution replacing the 1985 Bylaw with a new bylaw (the “2009 Bylaw”) which introduced a number of changes, including limitations on the maximum number of members to ten and limitations on the term of office for directors. The special resolution approving the 2009 Bylaw was signed by nine of the Foundation’s members who were also directors of the board at the time.
Based on the evidence, including the individuals listed by name on the 2009 Bylaw filed with the Alberta corporate registry, the court found that the members of the Foundation were the same as the directors at the time of the June 2009 Meeting. Accordingly, the court found that only those ten individuals (who were directors and members of the Foundation) were entitled to receive notice of and vote on the 2009 Bylaws.
The court also found that those ten members received adequate notice of the June 2009 Meeting. In that regard, the court stated:
While notice of the meeting was given by email or telephone, there is no evidence that any of the members/directors in attendance at the meeting objected to the adoption of the 2009 Bylaws or to the sufficiency of the notice given in relation to that meeting until six years later in the case of the Plaintiffs, Mr. Gee and Ms. Hung. The evidence establishes that the board was considering new bylaws, a subcommittee had been appointed to review the bylaws, and at no time was there any indication, certainly not from Mr. Gee and Ms. Hung, that the members/directors did not understand the bylaws or the purpose of the June 2009 Meeting.
As such, given the court’s finding that the Foundation had ten members/directors who had received sufficient notice, it found that the threshold 75% required for a special resolution under the Alberta Societies Act was met and that the 2009 By-laws were therefore validly implemented. On this basis, the court dismissed the Appellant’s claim.
This decision, in addition to confirming that simply applying for membership is not sufficient to grant standing as members in a court proceeding, more importantly clarifies that directors and/or members who wish to raise objections to the validity of a bylaw must do so on a timely basis and ensure that such objections are properly documented.
Read the January 2018 Charity & NFP Law Update
by Dev User | Jan 31, 2018 | Uncategorized
Jan 2018 Charity & NFP Law Update
On January 4, 2018, the CRA released a GST/HST ruling (CRA document #176875) concerning qualifying non-profit organizations (“Qualifying NPOs”) and the public service body rebate (“PSB Rebate”) under the ETA. In the ruling, the CRA was asked to clarify whether an organization was a Qualifying NPO and if so, whether it was entitled to claim the PSB Rebate and at what percentage. The organization in question was a corporation without share capital that was resident in Ontario and was not a government, a specified crown agent under s. 123(1) of the ETA, or a selected public service body. It received its funding through government appropriations which is not consideration for a supply.
In the ruling, the CRA stated that in order to be a Qualifying NPO under s. 259(2) of the ETA, the organization must be a “non-profit organization” as defined under s. 123(1). In this regard, it is a question of fact whether an organization meets the definition for a non-profit organization at any particular time. As well, whether the organization is operating for a purpose other than profit must be determined on an ongoing basis. Further, to be a Qualifying NPO, the organization must receive at least 40% of its funding through government funding, which is determined in accordance with s. 3 of the Public Service Body Rebate (GST/HST) Regulations.
With respect to the PSB Rebate, the CRA stated that an organization that meets the requirements to be a Qualifying NPO on the last day of their claim period or of their fiscal year that includes that claim period is entitled to the PSB Rebate under s. 259(3), subject to exclusions that do not apply in this case for reasons not mentioned. In this regard, a Qualifying NPO that is not a selected public service body (as defined under s. 259(1) of the ETA) is entitled to claim PSB Rebates on the non-creditable tax charged in respect of properties or services (other than prescribed properties or services) for the claim period which is 50% of the goods and services tax (or the federal part of the Ontario harmonized sales tax). The calculation is clarified in GST/HST Memorandum 13.5, Non-creditable Tax Charged. In addition, a Qualifying NPO resident only in Ontario is also entitled to PSB Rebates of 82% of the provincial non-creditable HST charged in respect of property or a service (other than a prescribed property or service) for the claim period regardless of in which province the HST was paid or payable. More information is available on the PSB Rebate in Info Sheet GI-184, Public Service Bodies’ Rebate for Qualifying Non-profit Organizations Resident Only in Ontario.
While CRA rulings provide an indication of the CRA’s position on how portions of the ETA apply to a specific fact situation, charities and not-for-profits should keep in mind that they are only binding with respect to those specific facts disclosed to the CRA.
Read the January 2018 Charity & NFP Law Update
by Dev User | Jan 31, 2018 | Uncategorized
Jan 2018 Charity & NFP Law Update
On September 28, 2017, the Ontario Superior Court of Justice released its decision in Anderson v Confederation College. The decision involved a summary judgment motion by the defendant, a registered charity and a college of applied arts and technology, seeking an order to dismiss the claim by the plaintiff (“Anderson”) on the basis that Anderson had signed an “Informed Consent Form for Physical Activities” (the “Consent Form”) that barred his claim. In its decision, the court determined that the liability waiver wording in the Consent Form did not bar Anderson’s claim. This Bulletin reviews this decision, as well as the importance of properly drafted liability waivers and risk management practices for charities and not-for-profits.
For the balance of this Bulletin, please see Charity & NFP Law Bulletin No. 414.
Read the January 2018 Charity & NFP Law Update
by Dev User | Jan 31, 2018 | Uncategorized
Jan 2018 Charity & NFP Law Update
As reported in the August 2017 Charity & NFP Law Update, Bill 89, Supporting Children, Youth and Families Act, 2017, which contains the Child, Youth and Family Services Act, 2017 (“CYFSA”) in Schedule 1, received Royal Assent on June 1, 2017. Part X of CYFSA establishes a new consent-based regime for the collection, use and disclosure of clients’ personal information by child, youth and family service providers. Although CYFSA is not expected to come into force until the spring of 2018 at the earliest, on December 4, 2017 the Ministry of Children and Youth Services (the “Ministry”) released a set of draft regulations under CYFSA concerning personal information (the “Draft Regulations”), which were open for comment until January 26, 2018.
The Draft Regulations address a number of matters that CYFSA had left to be prescribed by regulation and create a number of new obligations that will have to be satisfied by entities that meet the definition of “service provider” under CYFSA, including charities and not-for-profits. The definition of “service provider” under CYFSA includes the Minister of Children and Youth Services (the “Minister”), holders of adoption or residential licenses under CYFSA and persons or entities that provide a service funded under the Act (“Service Providers”). Some of the requirements set out in the Draft Regulations will require Service Providers to change or improve their day-to-day practices and to gather statistical information concerning their privacy practices and procedures.
Section 8 of the Draft Regulations provides details of what information Service Providers will be required to provide to clients whose privacy has been breached pursuant to section 308(2) of CYFSA, including plain language descriptions of what occurred and the steps taken by the Service Provider to mitigate the breach and prevent future losses. Section 9 of the Draft Regulations sets out the circumstances in which Service Providers must notify the Minister and the Ontario Information and Privacy Commissioner (the “Commissioner”) of a breach pursuant to s. 308(3) of CYFSA. These circumstances include the use or disclosure of personal information without authority, theft of personal information and significant breaches such as those involving highly sensitive personal information or large volumes of personal information.
Section 10 of the Draft Regulations sets out the details of the requirements for the secure retention, transfer and disposal of records of clients’ personal information (pursuant to s. 309(1)(b) of CYFSA). Service Providers must take reasonable steps to protect records containing clients’ personal information from theft, loss, or unauthorized use or disclosure, to ensure that the personal information in a record cannot be reconstructed or retrieved (this requirement would require Service Providers to, for example, permanently wipe or physically destroy hard drives and flash drives and not just erase them or delete files) and to document that a record has been disposed of in a manner that does not actually document any of the personal information it contained. Section 10 also requires Service Providers to put in place and comply with a detailed records retention policy and prohibits Service Providers from transferring a record containing a client’s personal information to a new Service Provider unless the new Service Provider has a records retention policy in place for the type of record being transferred.
Section 11 of the Draft Regulations will now require Service Providers to gather and file annually with the Commissioner specific data such as the number of requests received for access to or correction of records in the previous year, the number of times it granted or refused such request and within which time frames, and details concerning the number and type of privacy breaches (losses, thefts, unauthorized uses and disclosures and so on) that occurred in that year.
Charities and not-for-profits that are Service Providers under CYFSA should continue to monitor the status of CYFSA as well as the Draft Regulations. In particular, when CYFSA is proclaimed, and if Draft Regulations are enacted, Service Providers will have significant requirements to comply with under the new legislation.
Read the January 2018 Charity & NFP Law Update
by Dev User | Jan 31, 2018 | Uncategorized
Jan 2018 Charity & NFP Law Update
Updates to T4063, Registering a Charity for Income Tax Purposes
The Canada Revenue Agency (“CRA”) updated its T4063, Registering a Charity for Income Tax Purposes on January 12, 2018. While many of the changes are administrative, the CRA has updated its answer to the “Will the Charities Directorate accept draft governing documents” section. While the T4063 had previously stated that the Charities Directorate would review draft governing documents on a one-time basis, it has been amended to state that the Charities Directorate will not review applications submitted with draft governing documents, and that the CRA will treat such applications as incomplete and will return them to the applicant. The amendments also clarify that for an application to be considered complete, certified governing documents must be included with the submission. These changes conform with the CRA’s amended policy that it will no longer review applications submitted with draft governing documents as of July 1, 2017, as outlined in our June 2017 Charity & NFP Law Update.
Implementation of Proposed Changes to VDP
In our August 2017 Charity & NFP Law Update, it was reported that the Ministry of National Revenue announced changes to the CRA’s Voluntary Disclosures Program (“VDP”) to take effect as of January 1, 2018. These changes, which narrow the eligibility criteria for the VDP, were outlined in two proposals, Draft Information Circular – IC00-1R6 – Voluntary Disclosures Program and Draft GST/HST Memorandum 16.5 – Voluntary Disclosures Program (the “Proposals”). On December 15, 2017, the CRA published an announcement indicating that changes to the VDP would be effective March 1, 2018 rather than January 1, and that to be considered under the current VDP program, the CRA must receive applications on or before February 28, 2018. The announcement includes links to revised versions of the Proposals for IC00-1R6 and Memorandum 16.5. The VDP has application to non-profit organizations (“NPOs”). However, it has only limited application to registered charities in the context of employee source deductions and Harmonized Sales Tax (“HST”).
New Video – Who is the True Donor of this Gift?
On December 4, 2017, the CRA published a new video, Who is the True Donor of this Gift?. As charities cannot issue official donation receipts unless they know who is the true donor, the video discusses how to determine the true donor in order to issue the corresponding donation receipt. In this regard, the video discusses various methods to identify individual and corporate donors, and briefly outlines issues that may arise when trying to identify the true donors. For example, the video explains when receiving a cheque from a joint account showing the name of two individuals, the receipt can be in one name or both names regardless of who signed the cheque. Another example provided is that of a corporation collecting funds from its employees and making a donation to a charity; in that case, the charity may not issue a donation receipt to the corporation, but may issue individual donation receipts to each of the employees who donated the funds for the corresponding amount of each employee donation, provided the charity is provided with that information, including each employee’s address. Other examples include anonymous donations and cash donations.
Read the January 2018 Charity & NFP Law Update
