{"id":28469,"date":"2019-07-05T12:16:22","date_gmt":"2019-07-05T16:16:22","guid":{"rendered":"https:\/\/www.cccc.org\/news_blogs\/?p=28469"},"modified":"2019-07-05T12:16:29","modified_gmt":"2019-07-05T16:16:29","slug":"the-senate-report-on-the-charitable-sector-what-you-need-to-know-policies-and-guidance","status":"publish","type":"post","link":"https:\/\/www.cccc.org\/news_blogs\/legal\/2019\/07\/05\/the-senate-report-on-the-charitable-sector-what-you-need-to-know-policies-and-guidance\/","title":{"rendered":"The Senate Report on the Charitable Sector: What You Need to Know, Policies and Guidance"},"content":{"rendered":"<div class=\"pps-series-post-details pps-series-post-details-variant-classic pps-series-post-details-38706\" data-series-id=\"416\"><div class=\"pps-series-meta-content\"><div class=\"pps-series-meta-text\">This entry is part 4 of 5 in the series <a href=\"https:\/\/www.cccc.org\/news_blogs\/series\/senate-report\/\">Senate Report<\/a><\/div><\/div><\/div>\n<p>We\u2019re continuing our look at the <a href=\"https:\/\/sencanada.ca\/en\/committees\/CSSB\">Special Senate Committee on the Charitable Sector<\/a>\u2019s report, <a href=\"https:\/\/sencanada.ca\/content\/sen\/committee\/421\/CSSB\/Reports\/CSSB_Report_Final_e.pdf\">Catalyst for Change: A Roadmap to a Stronger Charitable Sector<\/a>. This installment will look at the policies and guidance that could be reviewed as a result of the Committee\u2019s recommendations. <\/p>\n\n\n\n<p>In <a href=\"https:\/\/www.cccc.org\/news_blogs\/noteworthy\/2019\/06\/24\/the-senate-report-on-the-charitable-sector-what-you-need-to-know\/\">Part One<\/a>, we looked\nat the context of uncertainty surrounding the report; there is no guarantee the\nrecommendations will be pursued. In <a href=\"https:\/\/www.cccc.org\/news_blogs\/noteworthy\/2019\/06\/25\/the-senate-report-on-the-charitable-sector-what-you-need-to-know-donations-legislation\/\">Part Two<\/a>, we looked\nat recommendations about donations and legislation. <a href=\"https:\/\/www.cccc.org\/news_blogs\/noteworthy\/2019\/06\/27\/the-senate-report-on-the-charitable-sector-what-you-need-to-know-reporting\/\">Part Three<\/a>\nconsidered potential reporting requirements for charities.<\/p>\n\n\n\n<p>Canada Revenue Agency (\u201cCRA\u201d) gives information to charities\nin the form of guidance, summary policies, policy commentaries, and policy\nstatements. It is helpful to know and understand the regulator\u2019s point of view,\neven if charities find the information unwieldy or the policies restrictive.<\/p>\n\n\n\n<p>One such guidance document is <a href=\"https:\/\/www.canada.ca\/en\/revenue-agency\/services\/charities-giving\/charities\/policies-guidance\/guidance-002-canadian-registered-charities-carrying-activities-outside-canada.html\">Canadian registered charities\ncarrying out activities outside Canada, CG-002<\/a>. CG-002 explains the\nCRA\u2019s interpretation of the <a href=\"https:\/\/laws-lois.justice.gc.ca\/eng\/acts\/I-3.3\/page-181.html#docCont\"><em>Income Tax Act<\/em><\/a>(\u201c<em>ITA<\/em>\u201d) provision that\nto be a charitable organization, all resources must be \u201cdevoted to charitable\nactivities carried on by the organization itself\u201d or through grants to\nqualified donees<a href=\"#_edn1\">[1]<\/a>\n(more on that later). <\/p>\n\n\n\n<p>The focus is whether the charity is carrying on its \u201cown\nactivities.\u201d It can do this either by using its own employees or through an\nintermediary, always maintaining \u201cdirection and control.\u201d When working with an\nintermediary, a charity is expected to direct and control projects by, for\nexample, deciding how and where an activity is carried out, its goals,\nbeneficiaries, budget, start and end dates. To demonstrate the charity is\nmaintaining direction and control, CG-002 lists items the charity should have\nin place: a signed and implemented written agreement, a detailed description of\nthe activities, ongoing instructions to the intermediary, systems for\nmonitoring and supervising, periodic transfers based on progress and\nevaluation, and segregated funds, books, and records. <a href=\"#_edn2\">[2]<\/a><\/p>\n\n\n\n<p>Without going into further detail, one can already foresee some of the many challenges that arise in this context: administration, working within international networks, inconsistency with development policy that is focused on partnership and empowerment for local leaders and communities. Not surprisingly, all of these concerns were reflected in the report. <a href=\"#_edn3\">[3]<\/a> Recommendation 30 therefore directs CRA to revise CG-002 with the intention of shifting from a \u201cdirection and control\u201d test to an \u201cexpenditure responsibility test\u201d.<a href=\"#_edn4\">[4]<\/a> <\/p>\n\n\n\n<p>The expenditure responsibility test stems from the US model.\nIt requires granting organizations to exert all reasonable efforts and to\nestablish adequate procedures to ensure the grant money is spent on its\nintended charitable purpose, to obtain full reports from the recipient on how\nthe funds are spent, and to make full and detailed reports to the US regulator.\nReasonable efforts include asking about the identity and history of the\ngrantee, and having a written agreement, reporting mechanisms and records.<a href=\"#_edn5\">[5]<\/a><\/p>\n\n\n\n<p>What is the difference? The key difference is that Canadian charities\ncurrently have to exercise ongoing operational control, setting parameters on\n\u201csignificant issues\u201d and demonstrating a real, ongoing, active relationship\nwith any intermediary. Even having a director, volunteer or employee work for\nboth the charity and intermediary \u201cis not likely to be enough\u201d to show\ndirection and control over the use of its resources.<a href=\"#_edn6\">[6]<\/a>\nMoving from direction and control to expenditure responsibility would ease\nrestrictions but maintain transparency and accountability.<\/p>\n\n\n\n<p>In a similar vein of easing restrictions, the report also\nrecommends that CRA develop, implement and evaluate a pilot project allowing\nregistered charities to make gifts to non-qualified donees in limited\ncircumstances.<a href=\"#_edn7\">[7]<\/a>\nThe gifts would be subject to careful monitoring and used exclusively for\ncharitable purposes. Qualified donees was the topic of another recommendation,\nthat the <a href=\"https:\/\/www.canada.ca\/en\/revenue-agency\/programs\/about-canada-revenue-agency-cra\/corporate-reports-information\/advisory-committee-charitable-sector.html\">Advisory Committee on the\nCharitable Sector<\/a> (\u201cACCS\u201d) review the policy considerations\nsurrounding qualified donee status with \u201ca view to establishing a\nprinciple-based framework for new categories of qualified donee.\u201d<a href=\"#_edn8\">[8]<\/a><\/p>\n\n\n\n<p>Based on witness\u2019 concerns about permissible business\nactivities lagging behind the times, the current regime\u2019s failure to address\ntechnological advances, a decline in donor base, and increasing demand for\ncharitable services, the report recommends CRA revisit <a href=\"https:\/\/www.canada.ca\/en\/revenue-agency\/services\/charities-giving\/charities\/policies-guidance\/policy-statement-019-what-a-related-business.html\">CPS-019, What is a Related\nBusiness<\/a> to \u201cprovide greater clarity on permissible revenue\ngeneration activities\u201d with a particular focus on new technological\nopportunities.<a href=\"#_edn9\">[9]<\/a> <\/p>\n\n\n\n<p>Out of that discussion, another pilot project was\nrecommended, this one to consider implementing a \u201cdestination of funds\u201d test,\ngiving charities greater latitude to undertake revenue-generating activities.<a href=\"#_edn10\">[10]<\/a>\nThis would be no small change in CRA policy. As the CRA explained in its <a href=\"https:\/\/www.canada.ca\/en\/revenue-agency\/services\/forms-publications\/publications\/charitiesnews-17\/archived-registered-charities-newsletter-no-17-winter-2004.html\">newsletter<\/a><a href=\"#_edn11\">[11]<\/a>\nupon the release of CPS-019, it had received many comments encouraging a\ndestination of funds test; however, a 2002 Federal Court of Appeal decision<a href=\"#_edn12\">[12]<\/a>\nheld that a business does not become a related business simply because profits\nare used for charitable purposes or activities. <\/p>\n\n\n\n<p>While there are practical concerns with a \u201cdestination of\nfunds\u201d test such as unfair competition with the private sector, one witness\npointed to a more fundamental question about clouding the character of charity\nand the \u201cculture of giving \u2026 the choice to share.\u201d<a href=\"#_edn13\">[13]<\/a>\nFor faith-based charities in particular, this is worth further consideration. As\nChristians, we are called to serve,<a href=\"#_edn14\">[14]<\/a>\nto sacrificially and generously give,<a href=\"#_edn15\">[15]<\/a>\nto give not only out of abundance but poverty, <a href=\"#_edn16\">[16]<\/a>\nand so let our light shine before others and give glory to God.<a href=\"#_edn17\">[17]<\/a>\nThere are, to be sure, the realities of raising funds and the practicalities of\npaying bills, but there is something distinct about the heart and hands that\nserve despite the cost. <\/p>\n\n\n\n<p>In the discussion of policy, taxes, fundraising, and\ninternational agency agreements, let\u2019s not forget our primary purpose and\nidentity as servants of Christ.<br><\/p>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<p><a href=\"#_ednref1\">[1]<\/a> <em>ITA<\/em>, RSC 1985 c.1 (5<sup>th<\/sup>\nSupp.), s.149.1(1)<\/p>\n\n\n\n<p><a href=\"#_ednref2\">[2]<\/a>\nCCCC has extensive resources on this topic, including a decision tree <a href=\"https:\/\/www.cccc.org\/documents\/members\/contractual_agreement_decision_tree.pdf\">Contractual Arrangements for\nOperating Outside of Canada<\/a>; Charities Handbook sections on <a href=\"https:\/\/www.cccc.org\/members_ch_show\/chapter_3#h3_3\">Carrying out Charitable\nActivities Outside Canada<\/a>, and <a href=\"https:\/\/www.cccc.org\/members_ch_show\/chapter_3#h3_6\">Direction and Control<\/a>;\ndiscussion on <a href=\"https:\/\/www.cccc.org\/bulletin_article\/325\/\">What Overseas Ministries Think\nof CRA\u2019s Foreign Activity Guidance<\/a>; sample <a href=\"https:\/\/www.cccc.org\/members_sample_documents_view\/html\/1\">Agency Agreement<\/a>;\nwebinar on <a href=\"https:\/\/www.cccc.org\/cart\/view_item\/webcast\/63\">Foreign Activities<\/a>;\nand Bulletin articles on <a href=\"https:\/\/www.cccc.org\/bulletin_article\/280\">Books and Records for Foreign\nActivities<\/a>, <a href=\"https:\/\/www.cccc.org\/bulletin_article\/302\">CRA\u2019s Guidance on Foreign\nActivities<\/a>&nbsp;&nbsp;&nbsp;&nbsp; <\/p>\n\n\n\n<p><a href=\"#_ednref3\">[3]<\/a>\nThe report also makes reference to an article by Andrew Valentine, \u201c<a href=\"https:\/\/thephilanthropist.ca\/2016\/11\/foreign-activities-by-canadian-registered-charities-challenges-and-options-for-reform\/\">Foreign Activities by Canadian\nRegistered Charities: Challenges and Options for Reform<\/a>,\u201d <em>The Philanthropist<\/em>, 21 November 2016\nwhich outlines these concerns, and others, in more detail, along with\ndiscussion of many of the proposed solutions mentioned in the Senate report.<\/p>\n\n\n\n<p><a href=\"#_ednref4\">[4]<\/a>\nReport, pp.92-97<\/p>\n\n\n\n<p><a href=\"#_ednref5\">[5]<\/a>\nValentine, <em>note <\/em>3 at p.3<\/p>\n\n\n\n<p><a href=\"#_ednref6\">[6]<\/a>\nCG-002, section 7.5<\/p>\n\n\n\n<p><a href=\"#_ednref7\">[7]<\/a>\nRecommendation 31, pp.97-99<\/p>\n\n\n\n<p><a href=\"#_ednref8\">[8]<\/a>\nRecommendation 26, pp. 78-80<\/p>\n\n\n\n<p><a href=\"#_ednref9\">[9]<\/a>\nRecommendation 29, pp. 88-92<\/p>\n\n\n\n<p><a href=\"#_ednref10\">[10]<\/a> Recommendation\n28, pp.88-92<\/p>\n\n\n\n<p><a href=\"#_ednref11\">[11]<\/a>\nCRA, <a href=\"https:\/\/www.canada.ca\/en\/revenue-agency\/services\/forms-publications\/publications\/charitiesnews-17\/archived-registered-charities-newsletter-no-17-winter-2004.html\">Registered Charities\nNewsletter No. 17 &#8211; Winter 2004<\/a> [Archived]; see also CRA <a href=\"https:\/\/www.canada.ca\/en\/revenue-agency\/services\/forms-publications\/publications\/news90\/news90-excise-gst-hst-news-no-90-fall-2013.html\">Excise and GST\/HST News &#8211; No.\n90 (Fall 2013)<\/a>, \u201cThird Party Fundraising &#8211; Income Tax Issues\u201d<\/p>\n\n\n\n<p><a href=\"#_ednref12\">[12]<\/a> <a href=\"https:\/\/www.canlii.org\/en\/ca\/fca\/doc\/2002\/2002fca498\/2002fca498.html\"><em>Earth Fund v Canada (Minister of National Revenue)<\/em><\/a><em>, <\/em>2002 FCA 498, paras 26-31<\/p>\n\n\n\n<p><a href=\"#_ednref13\">[13]<\/a>\nReport, p.90, citing Professor A.Parachin, <em>Evidence<\/em>\n(8 April 2019)<\/p>\n\n\n\n<p><a href=\"#_ednref14\">[14]<\/a> 1\nPeter 4:10-11, Matthew 20:28, 25:35-40, John 13:12-14, James 2:14-17<\/p>\n\n\n\n<p><a href=\"#_ednref15\">[15]<\/a>\nProverbs 19:17, 2 Corinthians 9:6, Hebrews 13:16, 1 John 3:17 <\/p>\n\n\n\n<p><a href=\"#_ednref16\">[16]<\/a>\nMark 12:41-44<\/p>\n\n\n\n<p><a href=\"#_ednref17\">[17]<\/a>\nMatthew 5:16<\/p>\n","protected":false},"excerpt":{"rendered":"<div class=\"pps-series-post-details pps-series-post-details-variant-classic pps-series-post-details-38706 pps-series-meta-excerpt\" data-series-id=\"416\"><div class=\"pps-series-meta-content\"><div class=\"pps-series-meta-text\">This entry is part 4 of 5 in the series <a href=\"https:\/\/www.cccc.org\/news_blogs\/series\/senate-report\/\">Senate Report<\/a><\/div><\/div><\/div><p>We\u2019re continuing our look at the Special Senate Committee on the Charitable Sector\u2019s report, Catalyst for Change: A Roadmap to a Stronger Charitable Sector. This installment will look at the policies and guidance that could be reviewed as a result of the Committee\u2019s recommendations. In Part One, we looked at&#8230; <a href=\"https:\/\/www.cccc.org\/news_blogs\/legal\/2019\/07\/05\/the-senate-report-on-the-charitable-sector-what-you-need-to-know-policies-and-guidance\/\" class=\"linkbutton\">More<\/a><\/p>\n","protected":false},"author":10,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"ts_fic_featured_image_caption":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[137],"tags":[],"series":[416],"class_list":["post-28469","post","type-post","status-publish","format-standard","hentry","category-uncategorized","series-senate-report"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>The Senate Report on the Charitable Sector: What You Need to Know, Policies and Guidance - CCCC Blogs<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.cccc.org\/news_blogs\/legal\/2019\/07\/05\/the-senate-report-on-the-charitable-sector-what-you-need-to-know-policies-and-guidance\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Senate Report on the Charitable Sector: What You Need to Know, Policies and Guidance - CCCC Blogs\" \/>\n<meta property=\"og:description\" content=\"We\u2019re continuing our look at the Special Senate Committee on the Charitable Sector\u2019s report, Catalyst for Change: A Roadmap to a Stronger Charitable Sector. 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Every organization\u2019s circumstances are unique. 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