By C. Yvonne Chenier, Q.C.
I have kept a file, with various CRA communications, that I call “Stuff the CRA says” ever since my colleague Adam Aptowitzer got a laugh with a somewhat saltier version of the same line at a slide presentation given to fellow lawyers at a continuing legal education seminar in Alberta. I now have something new to add to the file – the text of a recent speech given by the Director General of the CRA Charities Directorate.
Most years at the Canadian Bar Association and Ontario Bar Association National Charity Law Symposium the Director General of the Charities Directorate is invited to speak at lunch. This year, however, unlike previous years the CRA published the text of the speech on their website. The speech was about the federal government budgets in 2011 and 2012, both of which affected charity regulation in Canada. The Director General’s Speech is on the “What’s New” page of the CRA, Charities and Giving website page at http://www.cra-arc.gc.ca/chrts-vng/chrts/bdgts/2012/dgspch-eng.html.
Referring to Budget 2011 the Director General indicated that the CRA Charities Directorate is currently “implementing “the measures in that budget. I was anticipating guidance on how to advise charities about the new laws that applied to them. The biggest concern I had arising out of Budget 2011 was the new “ineligible director” rules. Corporate statutes, such as the Canada Business Corporations Act (s. 105) and the new Canada Not-for-Profit Corporations Act (s. 126) clearly state which individuals are disqualified from being a director of a corporation i.e. minors, incompetents, and bankrupts. This is not so simple anymore for charities. The “ineligible director “rules for charities have been legislated to stop the really bad guys from getting involved with charities and the General Director admitted as much. What makes it difficult to give advice in this area and to create a proactive process for charities is that the CRA has been given a broad discretion to establish who is an “ineligible director”. Those of us who were hoping to hear any specifics about how the CRA was exercising this discretion were very disappointed.
The Director General started on a promising note by saying “the key question for both you and for us is: how will we establish if an individual is “ineligible?” However, after acknowledging that the legislation talks about offences involving financial dishonesty being relevant, and those not involving financial dishonesty, being potentially relevant depending on the situation and type of charity, no further specifics were given. The Charities Directorate will be having further consultations. The Director General then turned to the more obviously defined part of the new rules i.e. “ineligible directors” being those who had been involved with an organization that had its status revoked for a serious breach, and stated “there may be circumstances, such as tax shelters and false receipting cases, when we will enforce the new rules even as we continue to fully develop our processes.” It was a disappointment to hear that than a year after the measures were first introduced there were no further details forthcoming. We were provided no further clarity to help with the task of advising directors , current or future, of what lurking in their past life in Canada or elsewhere might be the subject of their “ineligibleness”.
One specific point bears repeating verbatim if only because it may be foreshadowing of things to come. The Director General said as follows:
“I would add as well, that while our role as regulator does not extend directly to issues of governance, there is, with these new provisions, some overlap. Both the common law and relevant related statutes oblige directors to put the best interests of the organization ahead of their own (particularly in exercising their fiduciary duties), to be diligent in familiarizing themselves with all aspects of their organization, and to protect the organization’s interests and property. So, to my mind, the general thrust of these provisions is not inconsistent with existing rules.”
The point, if I understood it correctly, is that the CRA feels that those who have committed certain offences should know that by serving as a director of a charity they would not be fulfilling their duty. If they do not know then it is acceptable for a federal agency to overlap jurisdiction with those that have the legislative authority to deal with these governance issues. I will be mulling this viewpoint for a while as the CRA makes decisions in this new environment of saying who can and cannot be involved in the management of a charity.
When the Director General turned to the measures targeting charities announced in Budget 2012, my expectations of gleaning anything concrete was at a very low level and those expectations were not exceeded. All I can conclude is that any charities that may even think they are doing anything political (fewer than 500 out of the many thousands of charities state they are in their returns said the Director General) should be prepared to fill out more paperwork. The Director General confirmed “new intermediate sanctions will be introduced for violating the rules governing political activities and for failing to provide a complete and accurate information return”. We already knew from the Budget 2012 proposed legislation that there would be increased transparency about political activities and funding from foreign sources. The Director General confirmed that would necessitate changes to the Registered Charity Information Return (Form T3010) i.e. a new and improved political activities schedule where the charity will enter details of the political activity and its funding. The question that was left unanswered was what they will do with all this new information.
Budget 2012 has also proposed to change the rules for foreign organizations considered to be “qualified donees”. The new law would allow them registration as a “qualified donee” for a 24-month period that includes the time at which Her Majesty in right of Canada has made a gift to the foreign organization, if among other things the foreign organization is “carrying on activities in the national interest of Canada”. The Director General anticipated that we might be wondering what would be considered “activities in the national interest of Canada” but could only advise us at this point that the Charities Directorate “will be developing guidance in consultation with our colleagues from the Department of Finance”.
To wrap up the Director General reiterated that implementation plans for budget 2012 measures for the CRA Charities Directorate are still very much in the preliminary stages. It appears that they still are for Budget 2011 as well. I look forward to next year’s speech to see if these old and new measures can be the subject of advice to charity given with any more certainly. Otherwise it will just be another file in my folder.