Evidence of meeting #59 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was tax.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

  • Ted Cook  Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance
  • Sean Keenan  Director, Personal Income Tax Division, Tax Policy Branch, Department of Finance
  • Brian McCauley  Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
  • Pierre Mercille  Senior Legislative Chief, Sales Tax Division, GST Legislation, Tax Policy Branch, Department of Finance
  • Lucia Di Primio  Chief, Excise Policy, Sales Tax Division, Excise Act, Tax Policy Branch, Department of Finance
  • Gordon Boissonneault  Senior Advisor, Economic Analysis and Forecasting Division, Demand and Labour Analysis, Economic and Fiscal Policy Branch, Department of Finance
  • Jane Pearse  Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
  • Annie Hardy  Chief, Financial Institutions Division, Structural Issues, Financial Sector Policy Branch, Department of Finance
  • Ling Wang  Chief, Financial Institutions Division, Housing Finance Review, Financial Sector Policy Branch, Department of Finance

5:10 p.m.

Conservative

Brian Jean Fort McMurray—Athabasca, AB

In this particular case, for instance, legalization would obviously be something that this particular organization would want. And if they advocated for the Liberal Party to be elected or for that member in that area, would that be considered to be contravening the section? That's my first question.

Second, I'm not sure how this would be considered, but if the Green Party endorsed another party before they had a member of Parliament, would they be a charity or a non-profit group? I guess they'd be a political party because they endorsed the Liberal Party for the same purpose, for the same reason, for legalization.

But I'm wondering about the issue with Canada's Culture. Would that be a contravention, and how would you judge whether or not it would be within the 10%?

5:15 p.m.

Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance

Ted Cook

It's a threshold issue in terms of how the legislation is structured. The Income Tax Act requires that the charity operate exclusively for charitable purposes and conduct exclusively charitable activities. A specific provision in the Income Tax Act provides that as long as you're devoting substantially all of your resources to those charitable purposes, you can devote some of your resources to political activities.

That particular rule in the Income Tax Act is where we find the requirements that those political activities have to be...the term is “ancillary and incidental” to the charitable activities of the organization. That's also where we have a specific exclusion that what we've been calling the prohibited political activities do not include the direct or indirect support of or opposition to any political party or candidate for public office. The prohibition with respect to partisan political activities is specifically in the Income Tax Act. So if you cross those hurdles and you devote some portion of your political activities, then the Income Tax Act deems all your resources to be deemed for charitable activities.

The act does use the term “resources”. So an assessment has to be done in terms of what constitutes the resources of the charity, because obviously a charity has financial resources but may also have human and physical resources that are used for their purposes. So that's the overarching structure of the act with respect to political activities.

I don't know whether my colleague from the CRA has any specific comments about....

5:15 p.m.

Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency

Brian McCauley

I think that answers the question about whether or not you could directly support a candidate for office.

5:15 p.m.

Conservative

Brian Jean Fort McMurray—Athabasca, AB

Indeed, and how many resources you put toward it, depending on what resources are available.

5:15 p.m.

Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance

Ted Cook

There's a specific prohibition to.... It doesn't fall within the 10%. You just cannot participate in partisan political activities.

5:15 p.m.

Conservative

Brian Jean Fort McMurray—Athabasca, AB

Great. Thank you.

5:15 p.m.

Conservative

The Chair James Rajotte

We'll suspend, and we'll come back after the votes.

I want to thank officials for being here and for their patience. We should be back in about 45 minutes, hopefully.

6:35 p.m.

Conservative

The Chair James Rajotte

I call this meeting back to order, the 59th meeting of the Standing Committee on Finance. We are continuing our discussion of Bill C-38, An Act to implement certain provisions of the budget tabled in Parliament on March 29, 2012 and other measures.

We have with us here witnesses from both CRA and Finance. We want to thank them for staying with us tonight. We're on part 1; I believe we're just finishing it up.

I do have a note from Mr. McKay that he has a question.

Are there any other members at this point who want to be on the question list?

Okay, we'll start with Mr. McKay with part 1, please.

May 16th, 2012 / 6:35 p.m.

Liberal

John McKay Scarborough—Guildwood, ON

Thank you, Chair. Thank you for your generosity.

I apologize for not being here earlier, but I'm not a regular member of this committee.

The issue is with respect to political activities and those that are partisan. I can imagine that this leads to some interesting conversations as to what is or is not and whether one breached or did not breach.

Can you explain how this is going to be different from what currently exists?

6:35 p.m.

Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance

Ted Cook

With respect to political activities, the measure in part 1 essentially provides a look-through rule to the Income Tax Act. So as a general matter, what constitutes a political activity for a registered charity or a registered Canadian amateur athletic association? What is a political activity at its base level will not be changing as a result of this bill. What is changing is that we put in a definition of political activities. It's not a definition that defines political activities in the normal sense; it's just a definition that says political activities include the making of a gift where a purpose of the gift can reasonably be considered to support the political activities of a qualified donee who receives the gift.

Essentially it does not change, from an overall perspective, what constitutes a political activity, but rather where funds are given from one registered charity or a registered Canadian amateur athletic association to another qualified donee. Currently, under the act, where these kinds of gifts are made, it's automatically considered to be for charitable purposes for the charity giving the gift. What the provision does is simply provide a look-through rule that says to look at the purpose of the gift, and if a purpose of the gift is to support political activities of the recipient and the qualified donee, then that will be considered a political activity for the registered charity or RCAAA.

6:35 p.m.

Liberal

John McKay Scarborough—Guildwood, ON

Your argument is that you're not actually changing what constitutes political or partisan activity. Your argument is that this section says that in the donation from one entity to another you're going to, in effect, lift the corporate veil.

6:35 p.m.

Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance

Ted Cook

That's essentially correct.

6:35 p.m.

Liberal

John McKay Scarborough—Guildwood, ON

Is that a good way of putting it?

6:35 p.m.

Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance

Ted Cook

That's a fair analogy.

6:35 p.m.

Liberal

John McKay Scarborough—Guildwood, ON

Okay.

We're all partisans sitting around this table—well, maybe there are some exceptions, but I don't know who they are. If we go to a church and advocate for a particular activity, whatever the activity might be, and that church, for whatever reason, decides that we're going to donate to what might be considered an entity, where is it that the church gets itself in trouble?