As the charitable sector awaits an announcement from the federal government on when and how it will be responding to the Report to the Minister of National Revenue of the Consultation Panel on the Political Activities of Charities (the “Panel”), a couple of lower profile regulatory developments have come to the fore.
Consultation Panel on the Political Activities of Charities
Many readers may recall that the Panel was struck in the wake of an initiative by the previous government to more closely scrutinize and regulate registered charities’ political activities and a commitment in the 2015 Liberal election platform to clarify the rules in this area.
While there is widespread agreement in the charitable sector on the need to address the political activities question, there is also significant support for more sweeping change. The need for such change was also reflected in the Liberal platform, which referenced modernization of charitable and not-for-profit sector regulation. This reference was picked up by the Panel in one of their recommendations calling for an update of the legislative framework governing the charitable sector. Still, the scope of what the government will do when it acts on this is uncertain.
In the meantime, there have been announcements of more routine developments in the Canada Revenue Agency’s (the “CRA”) administration of current federal charity law in the areas of Ineligible Individuals and disaster relief.
Ineligible Individuals
In 2011, Ineligible Individual provisions were added to the Income Tax Act registered charity legislation in an effort to prevent people with problematic tax abuse or criminal histories from being on the governance bodies or in senior leadership positions of charitable sector organizations. The legislation permits revocation and other sanctions against a charity or denial of registration of an applicant where such an individual is in a governance or key leadership role.
The measures were quite sweeping, and potentially caught a wide group of people beyond those who posed a genuine risk to the organizations with whom they were affiliated or more broadly to the reputation of the sector and integrity of the regulatory regime. In its guidance on how it would be applying these provisions, however, the CRA indicated that the statutory language provided it with discretion and that it would allow organizations to take steps to dispute the designation of a particular person, or remove or manage the risk stemming from having the impugned individual hold a position in their group. It did not provide detailed information on how organizations could reconcile governance obligations or labour law concerns with removing someone who was offside. Nor did it fully explain how its administration of the measures would be discharged in accordance with privacy legislation.
In 2011, Ineligible Individual provisions were added to the Income Tax Act registered charity legislation in an effort to prevent people with problematic tax abuse or criminal histories from being on the governance bodies or in senior leadership positions of charitable sector organizations.In September, the CRA published a notice on its website, outlining its privacy practices with respect to those involved with registered charities or groups seeking registration. The notice indicates that the CRA has broad authority for extensive collection of personal information, to use that information for registration assessment, administrative and enforcement purposes, and to disclose certain of the information about charity officials for transparency purposes. It also flags the practice of sometimes sharing information within the CRA, within the federal government and even with other Canadian governments.
The document encourages groups to inform their officials that their personal information will be collected and disclosed and why. It goes on to state: “[t]his gives applicant organizations the chance to withdraw their application, and gives officials the chance to recuse themselves from an organization, if they do not wish to be subject to the rules and obligations of registration.”
The notice advises that, beyond information provided through the registration process and regulatory filings, the CRA can seek personal information from other sources and that the scope of this information could include: “an individual’s social insurance number, gender, language, marital status, citizenship status, personal tax information, financial information, bankruptcy and consumer insolvency information, credit history, biographical information, criminal checks, opinions or views about individuals and details of suspected non-compliance with CRA investigations or audits.”
This additional information can be sought from “open-source internet searches, internal CRA systems, third parties such as financial institutions, third-party suppliers, beneficiaries, donors, informants, other qualified donees, and from other government departments and agencies.”
While this publication can be seen as the government merely doing its privacy due diligence, the tone of the document is somewhat troubling and may have a chilling effect on director recruitment or decisions to apply for registration. Whether or not that happens, its dissemination of the document and anecdotal reports suggest that the CRA is now more actively pursuing application of the Ineligible Individual provisions.
Disaster Relief
In a different part of the regulatory landscape, the CRA has responded to questions raised during disaster relief efforts about permissible funding of recovery or restoration of for-profit small businesses by amending its Community Economic Development guidance. The broad issue of when a charity’s programs or support crosses the line into impermissible private benefit is always a difficult one.
In the wake of the devastation caused by events such as the Fort McMurray wildfire, the CRA has updated its discussion of relief to small business in the context of such events.
As well as recognizing that help to small business can be appropriate is such circumstances, the revised guidance usefully provides some conditions for when funding or supplying resources to small business will be incidental private benefit and some information on what would put such efforts offside (see Section E of the revised guidance, especially paragraphs 89-94).
So while some of the big answers in charity regulation may still be pending, on some smaller matters we have some idea where things are going.
About Peter Broder
