Not-for-Profit and Charity Law: CHARITY LAW NEWS

December 2005: Charities Directoriate - Structure, Mission and Vision Diagram - Canada Revenue Agency.

Registered Charities Newsletter No. 25 - Fiscal period end changes, New and upcoming policies, FAQs about volunteers. (Canada Revenue Agency, Charities Directorate.)

December 2005
2006 Fraud-Free Calendar - Ontario Ministry of Government Services. (Download)

December 2005: Registered Charities: What's New? Important Changes to the Law Affecting Registered Charities - Canada Revenue Agency

December 2005: Charities Regulatory Reform - Jurisdictional Collaboration

In Canada, the regulation of charities is shared between the federal government and the provinces and territories. Provincial governments are responsible for establishing, maintaining, and managing charities operating in and for the provinces [s. 92(7) of the Constitutional Act, 1867], and Parliament has given the same jurisdiction to the territories. The CRA is the federal authority responsible for regulating charities under the Income Tax Act and for registering and revoking charitable tax-exempt status.

Consistent with the March 2004 Budget's commitment to charities regulatory reform the CRA is building working relationships with provincial and territorial governments that seek to collaborate in regulating charities. The following is a brief overview of some activities the CRA has organized to develop relationships and create opportunities for collaboration.

In fall 2004, the CRA proposed a collaborative framework to its provincial and territorial counterparts that covers five areas:

Joint education and public awareness
Information sharing on charities between regulators
Information sharing for compliance purposes
Deceptive fundraising
Community-based and triparite initiatives
For complete article, see the Registered Charities Newsletter No. 24, published by Revenue Canada Agency, Charities Directoriate.

December 2005: First Nations and Qualified Donee Status

The CRA's former position was to treat certain Indian bands as Canadian municipalities for the purposes of sections 110.1 and 118.1 of the Income Tax Act. This position effectively gave qualifying bands status as qualified donees. However, in Tawich Development Corporation v. Deputy Minister of Revenue of Quebec, the Quebec Court of Appeal found that merely exercising municipal functions was not sufficient to attribute to a body the status of a municipality. Instead, the Court held that this status could only be achieved as a result of statute, letters patent, or order. Accordingly, it was necessary for the CRA to revise its poistion to reflect the current state of the law.

In response to the Tawich decision, the CRA consulted with the Department of Finance and, as a result, proposed technical amendments to the Income Tax Act were released on February 27, 2004. These amendments include "public bodies performing a function of government" within the category of qualified donees.

Once these amendments are passed into law, the CRA will again be able to formally recognize certain bands as qualified donees under the Act. To qualify for such recognition, a band must be considered to be a public body performing a function of government.

For complete article, see the Registered Charities Newsletter No. 24, published by Revenue Canada Agency, Charities Directoriate.

October 2005: Pre-budget submission to the House of Commons Standing Committee on Finance - Voluntary Sector Forum

September 2005: CEDNet 2005 Conference - Building Communities: Inclusive and Alternative Approaches.

Mark your calendars for Oct. 17-19. The AB CEDNet 2005 Conference: Building Communities: Inclusive and Alternative Approaches, sponsored by Alberta Community Economic Development, is being held in Red Deer at the Capri Centre. The conference focuses on issues like Creating and supporting small business, developing employability skills, and identifying and nurturing economic development opportunities. Bookmark the Alberta Community Econ

June 2005: Risk Managing Organizations Governance for Results - Presentation by W Laird Hunter at Calgary Vitalize 2005 (PDF)

June 2005: Charities in a Nutshell: Much Ado About Something - Presentation by W Laird Hunter at Connections Networking Conference 2005 (PDF)

In 2004 Gus Barron ran for the nomination to be the Progressive Conservative party candidate in the provincial riding of Calgary Montrose. The nominating committee disqualified him. He asked the Court of Queen’s Bench to review the decision and the judge ruled that his disqualification did not meet the basic requirements of procedural fairness or natural justice, and was unreasonable and wrong. The judge awarded Mr Barron $38,000 in costs, to be paid within sixty days by the members of the Riding Association Board of Directors and members of the Nominating Committee, among others. The defendants asked the Court of Appeal to stay the order for payment of costs against them until after their appeal of the original decision was heard.

Madam Justice Fruman of the Alberta Court of Appeal refused the board members request. She noted that there is a three-part test for a stay of a court order:

Justice Fruman ruled that the defendants failed to meet the requirements of the test. She wrote, “It is to be noted that courts are generally reluctant to stay money judgments. Having to pay money alone is not an irreparable harm. An appellant’s lack of assets is not a reason to stay a judgment…” Justice Fruman specifically rejected the evidence of one appellant that she would be forced into bankruptcy, commenting “In my view, it defies belief that approximately 30 adults who are responsible enough to hold leadership positions within the Riding Association are unable to ante up less than $1,300 each, without being tipped into the financial abyss.”

A necessary resource for Alberta non-profits! Volunteers and the Law in Alberta is an essential resource developed to increase awareness of the legal issues involved in incorporating volunteers into your organization. Volunteers and the Law is intended to give you a simple and general overview of the various areas of law and how these areas relate to your volunteer programs, your Board of Directors, and to the volunteers themselves.

A limited number of books are available from Volunteer Alberta. To order your copy at a cost of $10 (including GST and mailing), please call, or email or fax:

March 2005: Information Sessions delivered by the Charities Directorate (Roadshow)

Charities will be receiving an invitation to the information sessions delivered by the Charities Directorate (the Roadshow) for 2005. The sessions will focus on the Registered Charity Information Return, form T3010A, which has been significantly revised to reflect the changes in the spring 2004 budget and pending legislative changes. In particular, there have been significant changes to the way the disbursement quota is calculated, and these will be covered in these sessions. This year we will also be covering new regulations and sanctions, and new receipting rules and gifting. Updated information on the Roadshow will be added to the CRA website at www.cra.gc.ca/tax/charities/roadshow as it becomes available. There is no charge to attend. http://www.cra-arc.gc.ca/tax/charities/roadshow/

Cy-près - Where property is given in trust for a particular charitable purpose and it is or becomes impossible, impractical, or illegal to carry out the particular purpose, the trust will not necessarily fail if the intention of the trust is to devote the property to charitable purposes. The court can apply the cy-près doctrine and direct the property to some charitable purpose that falls within the general charitable intention of the trust.

Fiduciary duty - A duty to act for someone else's benefit exclusively. It is the highest standard of duty implied by law (e.g., trustee, guardian). For charities, this means to accept and hold a public trust to maintain, preserve, and develop the organization's resources to be used for charitable purposes, to ensure that the organization's activities remain charitable, and to manage the organization for the benefit of the public.

Charitable trusts - A legal relationship created for the benefit of a class or the public generally, and established for charitable purposes (e.g., religious, edeucational).

Estoppel - The doctrine under which a person cannot change previously made statements, acknowledged facts or conduct if doing so would be detrimental to another person who has acted on those statements, facts, or conduct.

March 2005: Can we transfer gifts donated for a specific purpose to our general funds?

If a charity has raised funds or accepted a donation for one of its specific purposes, it cannot simply use these funds for another purpose. However, the charity may transfer funds raised if it clearly indicated while soliciting from donors that excess funds which cannot be used for a particular purpose may be used for another purpose.

For tax purposes, an ecological gift is defined to be a gift of land, including a covenant or an easement, or, in the case of land in Quebec, a real servitude. The land must be certified by the Minister of the Environment or a person designated by the Minister to be ecologically sensitive land whose conservation and protection is important to preserving Canada's environmental heritage. The recipient of the gift must be Her Majesty in right of Canada or a province, a municipality in Canada (including, for gifts made after May 8, 2000, a municipal or public body performing a function of government in Canada), or a registered charity that has been approved by the Minister of the Environment.

In a previous issue, we explained how the Charities Directorate differentiates between amalgamations, mergers and consolidations for the purpose of determining whether the originating organization will continue to exist (and thus can keep their BN) or cease to exist (and need to apply for charitable registration as the new entity).

Amalgamations When two or more charities amalgamate, they bring their membership, assets, and liabilities into the entity that emerges. However, the original charities do not cease to exist or dissolve. While they no longer have separate identities, they continue their existence within a single entity - the amalgamated charity.

Mergers In mergers, one entity winds up its affairs and transfers its assets to another.

Consolidations In consolidations, all the original bodies dissolve and transfer their assets to a new entity.

Q. Why does the T3010A now ask for the dates of birth of directors? I'm not comfortable having this made public. Do I have any alternative?

A. Revisions to the information requirements of the Return were deemed necessary to facilitate the administration and enforcement of the Income Tax Act. Collecting this information allows the Canada Revenue Agency to better identify those organizations that misuse the generous tax incentives available to charities and their donors for non-charitable or unlawful activities. Requesting directors' dates of birth provides the CRA with a means of identifying, with certainty, the directors/trustees who are responsible for managing a charity.

Q. Are the regulations concerning the minimum number of meetings that the board of a charity must hold, or is this regulated in the by-laws of individual charities?

A. The Income Tax Act is silent on the issue of the number of meetings required. These may well be regulated by the by-laws of an individual charity and may also be affected by provincial or territorial regulations.

Based on court decisions, it can be said that, regardless of the province or territory in which they operate, directors and like officials should not be passive. They have a fiduciary responsibility to ensure that a charity is being operated in the public interest. They have a duty of diligence that requires them to be knowledgeable about the workings of the charity and ensure that the charity and its assets are cared for property. Arguably, one of the implications of the duty of diligence is that directors must ensure that the board of directors meets regularly. Insufficient knowledge due to a lack of such meetings or poor attendance does not absolve directors of legal responsibility.

Charities and their directors may wish to seek professional advice on their legal obligations in this regard.

A. To qualify for registration as a charity, an organization must be legally established by a governing document (e.g. letters patent, articles of incorporation, trust document, or constitution). The governing document identifies the charity, states its purposes, and provides information on the organization's structure and internal procedures.

When a charity's purposes change, these must be reflected in an amendment to its governing document.

The CRA has issued a Fact Sheet reminding investors that the proposed legislative changes announced by the Department of Finance on December 5, 2003, to limit the tax benefits of charitable donations made under tax shelter and other arrangements are effective throughout the 2004 and subsequent tax years.

The CRA wants to make sure potential donors know about the risks associated with participating in certain tax shelter donation arrangements, including gifting trust arrangements, leveraged cash donations, and buy-low, donate-high arrangements.

January 2005: Imagine Canada - New organization to support those who work for stronger, more vibrant communities. Press Release

November 2004: How do Canadian courts regard court cases from other countries when looking at charity law decisions? Canada Revenue Agency, Charities Directorate

November 2004: New Online Publication - Charities in the International Context

October 2004: Consultation on Proposed Guidelines for Registering a charity: Meeting the Public Benefit Test

September 2004: Consultation on Proposed Policy: Applicants Assisting Ethnocultural Communities