Stuff the CRA says
is a file I have been keeping ever since my colleague Adam Aptowitzer got a
laugh with a somewhat saltier version of the same line 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
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 its website. The speech was about the federal government
budgets in 2011 and 2012, both of which affected charity regulation in Canada.
What exactly makes a
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
105) and the new Canada Not-for-Profit Corporations
(s. 126) clearly state which individuals are disqualified from being a
director of a corporation i.e. minors, incompetents, and bankrupts.
For charities, this is not so simple any more. 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 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
Still consulting on
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, more 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 events lurking in their past life in
Canada or elsewhere might be the subject of their ineligibility.
admits jurisdiction overlap
One specific point bears repeating verbatim, if only because
it may foreshadow things to come. The Director General said,
"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 in doubt, fill
the form out
When the Director General turned to the measures targeting
charities announced in Budget 2012, my expectations of gleaning anything
concrete were very low, 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
The Director General confirmed that "new intermediate
sanctions will be introduced for violating the rules governing political
activities and for failing to provide a complete and accurate information
Use of new
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 the CRA will do with all this new information.
What is "national
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 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 certainty. Otherwise, it will just be another file in my folder.
Yvonne Chenier prefers to
work for clients in the philanthropic and aboriginal sectors, acting as general
legal counsel and advising on planning, organizational, regulatory and
She has served as a
trustee, board member or founder of numerous organizations. She is actively
involved in her professional associations and speaks frequently to various
groups on topics ranging from legal to financial matters.
Contact her by email or through www.drache.ca.