Aug 2018 Charity & NFP Law Update
On August 3, 2018, the Canadian Bar Association Charities and Not-for-Profit Law Section (“CBA”) provided recommendations to the federal government in response to the government’s call for submissions and recommendations on the 2019 Pre-Budget Consultation, as reported in the June 2018 Charity & NFP Law Update. The CBA advocated for the modernization of the regime for charities and not-for-profits, for amendments to the ITA to allow charities and not-for-profits to innovate, conduct business and earn tax-exempt profit in certain circumstances, and for the removal of barriers that restrict registered charities from working with non-registered charities or other not-for-profit organizations in order to maximize the work of the groups.
With regard to modernization of the regime for charities and not-for-profits, the CBA highlighted the federal government’s support for social enterprise and social finance initiatives, and stated that a modern regulatory system was not only in line with the government’s interests, but that it was needed to allow organizations to work more effectively and promote a sustainable environment within the sector. With regard to amendments to the ITA, the CBA recommended that the ITA should “clarify that charities and not-for-profit organizations must be able to innovate, carry on business activities and earn tax exempt profits, as long as those profits are used for the purposes of the organization and not for the undue benefit of any party or the personal benefit of any director, shareholder or member, directly or indirectly.”
The CBA indicated that these changes would benefit charities and not-for-profits by increasing certainty in the area of compliance to the law and decreasing the administrative costs and burden of dealing with compliance issues. This increased efficiency and productivity would in effect not only result in a sustainable regulatory environment for the organizations, but also “significantly increase its contributions to the growth and expansion of Canada’s economy.” Given that the deadline to submit recommendations for Budget 2019 has now passed, charities and not-for-profits will need to wait until the government’s release of Budget 2019, generally done in the spring, to see its impact on the charitable and not-for-profit sector.