By Adam Aptowitzer The structure of the Income Tax Act is such that if one earns a dollar, one pays taxes on the dollar. If one earns a dollar and gives away the dollar to charity then, in days gone by, the individual is really out of pocket only the after tax amount that they would have otherwise had if they did not donate the dollar; and the governments (federal and provincial combine) are out the tax ...
By: Karen Cooper As part of a number of business income tax measures intended to increase federal revenues, Budget 2022 proposes to eliminate the flow-through share regime for oil, gas, and coal activities. This may have an important impact on a significant donation tax shelter structure. Flow-through shares are tax-based financing incentives available to the oil and gas, as well as the mining sectors. In the 1990s, the mining and resource industry experienced low mineral ...
By: Alexandra Tzannidakis As expected, Budget 2022 brings a change to the rules around how much money registered charities are allowed to keep tucked away in their investment portfolios. There has long been a ‘disbursement quota’ that registered charities have to meet each year, a minimum spend calculated as part of the overall value of the charity’s assets. Since 2004, each charity has been required to spend in each year a minimum of 3.5% of ...
By: Adam Aptowitzer Canadian charities proudly participate in important work around the world. Until now, the law requires that registered charities meet the ‘own activities’ test. On a practical level this means that they need to maintain control and direction over their funds and resources, and perhaps even more difficult, they need to keep records showing this control and direction. In our experience, as the CRA can always make the argument that there is insufficient ...
The structure of the Income Tax Act is such that if one earns a dollar, one pays taxes on the dollar. If one earns a dollar and gives away the dollar to charity then, in days gone by, the individual is really out of pocket only the after tax amount that they would have otherwise had if they did not donate the dollar; and the governments (federal and provincial combine) are out the tax revenue ...
Not everyone understands what it is that lawyers do or the technicalities that can sometimes impose themselves on donations to charities. Unfortunately, sometimes it takes the case of a donation gone wrong to illustrate some of the complexities that can accompany large donations. Once such instance recently arose in the Tax Court in the case of Odette (Estate) v. the Queen[1]. The case was decided by Chief Justice Rossiter and dealt with a situation where ...
Ontario’s new Not-for-profit-Corporations Act (“ONCA”) is finally coming into effect on October 19, 2021, nearly a dozen fashionably-late years after it was first passed. The ONCA replaces an older act, the Ontario Corporations Act (“OCA”) which is over a century old and has become drastically outdated and out-paced by the more modern legislation modelled by the federal Canada Not-for-Profit Corporations Act and several similar provincial acts over the past few years. Whether your corporation has ...
Most charities in Canada are focused on their annual T3010 filing with the CRA. Generally, charities incorporated outside of Ontario also have an annual corporate filing with their home jurisdiction. Since 2008, Ontario charities have been able to fulfill this obligation by filing an additional schedule with the T3010 return and the CRA has shared this information with the Ontario government. For reasons which we surmise are related to the humiliation that this is debacle ...
One of the bills on Parliament’s table this session is C-256,[1] a private members’ bill sponsored by a Conservative MP from Manitoba. The bill is called “Act to amend the Income Tax Act (donations involving private corporation shares or real estate)” and it proposes the elimination of capital gains tax on the items in its title. That is to say, if you sell real estate or private corporation shares, and donate the proceeds from that ...
We have written previously about the difficulties that arise when CRA conducts oral interviews of taxpayers. While there is clear authority to do so, and indeed merit in having a conversation to explain the nature of a business, all interviews are fraught with danger. This can be as a result of a language difficulty or a simple miscommunication. In our experience, once an auditor labors under a misimpression it requires another oral interview (namely examinations ...
By: Lex Klombies The federal government’s Budget 2021 was released earlier today. Much of the proposed spending is relevant to non-profit organizations and charities, such as a ten-fold increase in capacity building for Black-led not-for-profit organizations and an extension of existing covid-19 recovery benefits. One of the items in Budget 2021 that charities should be aware of is the proposal[1] to launch public consultations with registered charities on the subject of increasing the disbursement quota ...
By: Lex Klombies Budget 2021 proposes[1] to provide more funding for Black-led organizations’ workplaces and community spaces through the Supporting Black Canadian Communities Initiative (the “Initiative”). The Initiative is a social development partnerships program administered by Employment and Social Development Canada (“ESD Canada”). The Initiative supports capacity-building of Black-led charities and non-profit organizations so they can better serve Black Canadian communities. Its objectives are: To support research and give advice to leaders within a Black ...
By: Lex Klombies Budget 2021 confirmed[1] the current federal government’s intention to proceed with amending the Income Tax Act provisions relating to Qualified Canadian Journalism Organizations.[2] Specifically, to proceed with the legislative proposals released on April 17, 2020 to clarify support for Canadian journalism. The proposals were summarized in a news release April 17, 2020 as follows: “Today, the Government is releasing draft legislative proposals[3] that would make adjustments to these tax measures to help ...
By: Karen Cooper The impacts of COVID-19 have highlighted gaps in our social systems and have spurred innovative ideas about ways to build a better economy and country. Prior to the pandemic, the federal government had taken some preliminary steps through the creation of a number of social innovation and social financing initiatives, including the creation of a Social Finance Fund and launch of the Investment Readiness Program through Budget 2019 (see “Another Run at ...
By Alexandra Tzannidakis Budget 2021 has some expansive spending plans, and a significant part of that spending is, predictably, focussed on helping the economy recover from the pandemic. We are glad to note that the budget recognizes the important role that charities and non-profits have to play in social recovery, alongside their for-profit counterparts. As such, a lot of the support provided for businesses has been, or continues to be, extended to the non-profit sector ...
By Adam Aptowitzer Several years ago, we argued a case to the Supreme Court of Canada. In the Guindon matter the director of a charity (and not incidentally its legal advisor) was fined for signing tax receipts, which turned out to be false, in circumstances which amounted to ‘culpable conduct’. The Act defines culpable conduct as: …conduct that is tantamount to intentional conduct, or that shows an indifference as to whether the Act is complied with, or ...
By: Adam Aptowitzer Over the years we have written many times of the constitutional truism that the responsibility for regulating the charity sector rests with the Provinces. It is only through the indolence of the Provinces in legislating in this area has the CRA become the regulator of charities in the public interest. From time to time, Parliament passes new rules which, although they may have dubious constitutional authority to do so, are important because ...
What’s the hold up with rent assistance for small business, charities, and non-profits in Canada? In part it has to do with the way that Canada divides power between the federal and provincial government. While programs like the Canada Emergency Response Benefit could be rolled out quickly by a single government, rent relief is a little more complicated. The provinces are each responsible for property owner-tenant relationships within their jurisdiction, but a single pan-Canadian rent ...
The Government of Canada announced additional information of interest to non-profits and charities today (April 8, 2020). The changes to the Canada Summer Jobs program will help small businesses hire and keep the workers they need so they can continue to deliver essential services. According to today’s press release:[1] The temporary changes to the program for this year include: an increase to the wage subsidy, so that private and public sector employers can also receive ...
To help charities and not-for-profits keep up with the fast paced changes to Canada’s emergency relief, we are sharing a news release[1] made by the Department of Finance today (April 8, 2020) which provided further details on the eligibility criteria for businesses, charities, and non-profits for the proposed Canada Emergency Wage Subsidy (CEWS) (often referred to as simply the “75% wage subsidy”). If you are unfamiliar with the details, here is a quick overview of ...
The current pandemic and its impact on markets reminds us of the economic crisis of 2009-2010. Leaving aside for the experts the question of whether the pandemic has triggered or will trigger an economic crisis leading to a recession, the current volatility of financial markets is raising questions for charitable organizations and foundations about how to manage their investments and whether they can (and/or should) be contributing to the federal and provincial governments’ current strategy ...
In light of the state of emergency,[1] corporations under the jurisdiction the Ontario Corporations Act (the”OCA”) are temporarily[2] being given more flexibility in holding their directors’ and members’ meetings. This is good news for non-profits and charities under the jurisdiction of the OCA who have looming deadlines to hold their AGMs or who have governing documents which prohibit them from holding meetings virtually or via conference call. We have summarized how the temporary measures published ...
The Covid crisis is unprecedented for all, including charities. To deal with the crisis both federal and provincial governments have implemented a number of different programs. Elsewhere in this newsletter, Karen Cooper discusses the steps the Office of the Public Guardian and Trustee has taken with respect to restricted funds. But there are a number of other programs that governments have unveiled to help various actors in the economy. This article is intended to bring ...
While the situation is quickly evolving, we want to update our readers on how the COVID-19 pandemic may affect charities and non-profits’ regulatory obligations and their access to government services: Extended deadline for T3010s. The Charities Directorate is extending the filing deadline to December 31, 2020, for all charities with a Form T3010, Registered Charity Information Return due between March 18, 2020 and December 31, 2020. For example, a charity with a fiscal year end ...
The Ontario Office of the Public Guardian and Trustee (“PGT”) within the Ministry of the Attorney General issued a special statement on March 30, 2020 titled Accessing Restricted Purpose Trust Funds Prior to Obtaining a Court Order During the COVID19 Pandemic (the “Statement”). The Statement indicates that the PGT has developed temporary guidelines to allow charities that are in danger of closing to access the income and capital of restricted purpose trust funds when necessary ...
People buy life insurance policies for a number of reasons. These reasons may include to fund potential business obligations or to protect a young family. In either case, the purpose of the policy may disappear if the individual outlives the need for which they purchased the insurance in the first place. In the case of the previous examples, this may occur in situations where the business is sold or the children are grown while the ...
The Ontario Not-for-Profit Corporations Act (the “ONCA”), received royal assent in October 2010. After nearly ten years, it has neither been proclaimed into force nor been given an official date to be proclaimed into force. This limbo state is sometimes referred to as being “unproclaimed”, as the bill has passed but there is no official date on which the legislation will be proclaimed into force. For the last two years, the ONCA has been expected ...
Calgary Flames fans were riling up Edmontonians this January by fundraising for a billboard ad in the Edmonton Oilers’ turf featuring a Flames player. An Edmonton woman came up with a charmingly Canadian response to the show of friendly rivalry between the two Albertan hockey teams’ fans. She made a donation to a Calgary-based charity in honour of Oilers’ player Zack Kassian and tweeted a screenshot challenging other Oilers fans to do the same. Charities ...
Charitable and non-profit entities may receive a range of tax advantages, some of which can potentially be quite significant. One such advantage is a break on property taxes. In Ontario, the Assessment Act provides a full exemption from property tax to various charitable and non-profit outfits, including religious organizations, care homes, child care centres, cemeteries, educational institutions, public hospitals, and more. Similar exemptions can be found throughout Canada, as well as abroad. These exemptions can ...
Canadians are well used to attending at various tribunals, boards, and panels. The assumption is that the decision makers at these bodies are subject to certain rules to ensure that they operate fairly and come to decisions that are applied legally. Parliament and the various provincial legislatures have set up these quasi-courts to take advantage of the specialized experience they ostensibly wield in their various areas. So, one would expect that a member of the ...
A recent ruling from the CRA dealing with the “Loanback Provisions” of the Income Tax Act as they affect charities will be of some interest. The ruling was in response to a written request for CRA views regarding the application of the loanback provisions found in subsection 118.1(16) of the Income Tax Act to two situations described in your request In the interest of accuracy, we reproduce the response verbatim. “Briefly, in the first situation, ...
Most organizations that are pursuing charitable status are incorporated. Part of the requirement for achieving such status is that the corporation is organized to pursue charitable purposes. But that by itself is not enough for charitable registration and so prospective charities must apply to the CRA for registration. The question then arises about the tax status of those corporations that are not yet (and may never be) registered charities, and what are their responsibilities? Just ...
Over the past several years, the Charities Directorate has been enthusiastically anticipating some much-needed technological modernizations to its operations. On June 1, 2019, the Directorate finally rolled out online applications for charitable registration (Form T2050) and the annual charity returns (Form T3010), which had previously been paper-only. The new automated system, dubbed CHAMP, shows promise – but also some serious concerns. It was clearly not planned very well, to the point that it seems questionable ...
Those with long memories in the charity sector will recall that the voluntary sector initiative of the 1990's promoted the introduction of sanctions for offences that were less than revocation. It also advocated that appeals of these sanctions be heard by the Tax Court, and hoped that before long a body of case law would be developed to provide additional guidance to charities seeking to avoid these penalties. Amongst these intermediate sanctions (as they were ...
We have written before about the risks posed to Canadian charities from the international movement of financial institutions towards “de-risking”. De-risking is the response of these institutions to the movement by the Financial Action Task Force (“FATF”) and its related partner entities to force financial institutions to aid in the fight against money laundering and the financing of terrorism. Because of the additional costs involved for the banks in monitoring risky accounts – and the ...
Prime Minister Justin Trudeau visited the Governor General, Julie Payette, the morning of Wednesday, September 11th, 2019 to have the writs issued for the federal election, thus beginning the election period.[1] This came in the window between the deadline on Sunday, September 14 and Manitoba’s early Election Day on September 10th. Now that the writs have been issued, it is useful to reconsider what this means for not-for-profits who engage in advocacy. As we have ...
The Charities Directorate of the Canada Revenue Agency has restarted their in-person educational program for the charitable sector after a being cancelled in 2013 under Prime Minister Stephen Harper. The first Charities Information Session was held in Ottawa the morning of May 28th, 2019. We audited the first class to get a feel for whether we would recommend attending it. If your charitable organization or foundation is considering sending a board member, a treasurer, a ...
At the National Convention of STEP held in Toronto in June of this year, there was a roundtable with the CRA and one of the questions will have importance to some planners with regard to donations for an alter ego trust to a charity. This is always a highly technical issue and we are reproducing the full question and answer as any attempt to summarize may cause readers to miss some of the nuances. Query: ...
On Thursday, June 20, 2019, the Senate Special Committee on the Charitable Sector, which was established to review the impact of the voluntary sector in Canada and the federal and provincial laws and policies governing charities and non-profit organizations, released its report, Catalyst for Change: A Roadmap to a Stronger Charitable Sector (hereinafter the “Report”). The Report (190 pages – a tour de force) contains the results of the committee’s 24 public hearings, including the ...
As lawyers, we are often contacted when a dispute arises amongst members of an association. Inevitably, the dispute will devolve into a review of the legality of the actions of one or both sides. Given that most associations are corporations, there are, in fact, laws which must be followed in order that the authority of the corporation is properly wielded. So, when there is a dispute, it does not take long for a suggestion that ...
Does your organization send out information about an issue? Does it have a position on that issue? Might that issue become a hot topic in the 2019 Federal election? If so, your organization might unknowingly be election advertising once the writ drops in September 2019. Yes, even if the position is presented in a non-partisan manner. And there are penalties for failing to register as a third-party and follow the rules in the recently amended ...
Readers of the business news are often treated to headlines that CEOs receive compensation in the multi-millions of dollars. A large portion of this may be cash but, generally when the compensation goes from the absurd to the ludicrous, stock options are involved. Stock options are often given by start-up business to incentivize employees to work in a cash poor business in the hope that it will ‘hit it big’. The drafters of the Income ...
A recently published CRA memorandum, which despite redactions, appears to refer to a proposed financing scheme at the provincial level will be some substantial interest to secondary educational institutions and may open the door to some private or charitable planning.[1] It has been edited to try to make it somewhat clearer. “This memorandum is in reply to your request for our views on the proposed program for student loans. It is our understanding that the ...
As of June 1, 2019, the Canada Revenue Agency offers new digital services for charities through their platform, My Business Account (“MyBA”). You, your employee, or your Authorized Representative can do the following tasks online: apply to become a registered charity, a registered Canadian amateur athletic association (RCAAA), or registered national arts service organization (RNASO)Note the online platform is replacing the paper applicationscomplete and file your annual T3010 Registered Charity Information ReturnPaper returns are currently ...
One of the most common questions asked by the lay taxpayer is for how long they need to keep their tax records. And while there is a legislated answer for this, one wonders whether it is ever safe to destroy records. Paragraph 27 of IC 78-10R5 summarizes the retention periods as follows: for a corporation, two years from the date of the dissolution of the corporation (in the case of corporations that amalgamate or merge, ...
Social Impact Bonds (SIBs) are an interesting part of the larger trend of ‘impact investing’ that has been rising in Canada and around the world in recent years. An SIB is essentially an investment model that allows a government to fund innovative social programs without having to risk its own assets up-front. The concept is fairly simple but rather ingenious. The government chooses a new social program, partners with an appropriate civil organization, and then ...
By: Lex Klombies Part II: The Nitty-Gritty on the Canada Elections Act Amendments for Non-Profits and Charities The next Canadian federal election is on October 21st, 2019, and many of our readers are curious about what they need to be mindful of if they engage in public policy dialogue and development activities near election time. Part I of this series was dedicated to helping our readers get a sense of what kinds of charitable activities ...
Part I: Will My Charity Be Affected by the Canada Elections Act? The next Canadian federal election is on October 21st, 2019, and many of our readers are curious about what they need to be mindful of if they engage in public policy dialogue and development activities near election time. Two major changes to the field of political participation received royal assent on December 13th, 2018: changes to the charities’ political activities rules in the ...
By: Arthur Drache More and more often we have been seeing significant payments by businesses to charities, not just modest support of annual campaigns but often payment in the tens of thousands of dollars. The fundamental question which must be understood by both the business and the charity is whether the transfer of funds is in fact a donation or whether it is, to use the common but imprecise term, a sponsorship. In the past ...
Every so often the media reports that there are people in the world who do not have access to banking services, the so-called “underbanked”. For those of us in Canada, it is almost impossible to imagine such a situation, given the ubiquity of our banks and the plethora of services that they offer. However, for registered charities and for Canadian not-for-profits operating overseas this situation is becoming an everyday reality. Many, if not most, governments ...
