Bill C-470 (Historical)

An Act to amend the Income Tax Act (revocation of registration)

This enactment amends the Income Tax Act to revoke the registration of a charitable organization, public foundation or private foundation if the annual compensation it pays to any single executive or employee exceeds $250,000.

Income Tax Act

[Albina Guarnieri, Liberal, Mississauga East—Cooksville, ON]

moved that Bill C-470, An Act to amend the Income Tax Act (revocation of registration), be read the second time and referred to a committee.

Royal Recommendation and Ways and Means Motions

[The Deputy Speaker, Conservative, Andrew Scheer]

Before we begin private members' business today, I would like to make a brief statement regarding the issue of royal recommendation and ways and means motions with respect to private members' business

Just as individual items of private members' business continue their legislative progress from session to session, the Chair's rulings on those same items likewise survive prorogation.

Specifically there are nine bills on which the Chair either commented, ruled or has heard a point of order with regard to the issue of the royal recommendation. There was also one bill on which a point of order was raised regarding the requirement for a ways and means motion.

The purpose of this statement is to remind the House of those rulings and of the questions that remain to be dealt with.

Members will recall that, during the last session, some private members’ bills were found by the Chair to require a royal recommendation. At the time of prorogation, there were seven such bills on the order of precedence or in committee.

Let us review briefly the situation in each of these seven cases.

Three of these bills were awaiting report stage in the House at the time of prorogation, namely: Bill C-201, An Act to amend the Canadian Forces Superannuation Act and the Royal Canadian Mounted Police Superannuation Act (deletion of deduction from annuity), standing in the name of the member for Sackville—Eastern Shore;

Bill C-241, An Act to amend the Employment Insurance Act (removal of waiting period), standing in the name of the hon. member for Brome—Missisquoi;

Bill C-280, An Act to amend the Employment Insurance Act (qualification for and entitlement to benefits), standing in the name of the hon. member for Algoma—Manitoulin—Kapuskasing.

On May 12, 2009, the chair had ruled that Bill C-201, in its form at second reading, needed to be accompanied by a royal recommendation. In committee, all clauses of the bill were deleted. In its present eviscerated form, Bill C-201 need no longer be accompanied by a royal recommendation.

As for Bill C-241 and Bill C-280, the chair ruled on April 22, 2009 and on June 3, 2009 respectively, that these bills in their present forms required royal recommendation. The committee stage has not altered this finding.

The following four bills were at committee stage: Bill C-290, An Act to amend the Income Tax Act (tax credit for loss of retirement income), standing in the name of the hon. member for Richmond—Arthabaska was before the Standing Committee on Finance; Bill C-308, An Act to amend the Employment Insurance Act (improvement of the employment insurance system), standing in the name of the hon. member for Chambly—Borduas was before the Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities;

Bill C-309, An Act establishing the Economic Development Agency of Canada for the Region of Northern Ontario, standing in the name of the hon. member for Nipissing—Timiskaming, was before the Standing Committee on Industry, Science and Technology;

finally, Bill C-395, An Act to amend the Employment Insurance Act (labour dispute), standing in the name of the hon. member for Berthier—Maskinongé was before the Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities.

The Chair ruled that all these bills in their present forms needed to be accompanied by a royal recommendation. The rulings were given on October 23, 2009 for Bill C-290, on October 29, 2009 for Bill C-308, on June 16, 2009 for Bill C-309 and, more recently, on November 16, 2009 for Bill C-395.

Furthermore, points of order were raised by the hon. Parliamentary Secretary to the Government House Leader at the end of the last session with respect to the need for a royal recommendation for two bills. These are: Bill C-343, An Act to amend the Canada Labour Code and the Employment Insurance Act (family leave) standing in the name of the hon. member for Compton—Stanstead and Bill C-471, An Act respecting the implementation of the recommendations of the Pay Equity Task Force and amending another Act in consequence standing in the name of the hon. member for Etobicoke—Lakeshore. Both of these bills were at second reading.

Just as was done in the last session, the Chair invites other members who would like to make arguments regarding the need for a royal recommendation for those two bills or any of the other bills on the order of precedence to do so at an early opportunity in order for the Chair to come back to the House with a ruling as soon as possible.

Finally, a point of order was raised during the last session regarding Bill C-470, An Act to amend the Income Tax Act (revocation of registration), standing in the name of the hon. member for Mississauga East—Cooksville, arguing that it should have been proceeded by a ways and means motion. The Chair has taken the matter under consideration and a ruling will be delivered in the days to come.

I thank hon. members for their attention.

It being 1:35, the House will now proceed to the consideration of private members' business as listed on today's order paper.

Bill C-470

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

Mr. Speaker, I rise in support of the point of order just raised by my colleague from Mississauga East—Cooksville regarding the point of order brought forward earlier today by the Parliamentary Secretary to the Leader of the Government in the House of Commons with respect to the bill being withdrawn.

In my opinion Bill C-470 does not require a ways and means motion as the bill simply broadens ministerial discretion. I firmly believe that the bill should move forward through the necessary steps in order to ensure that there be a thorough discussion on the issue in the House of Commons.

I think that we have seen, over the years, how the amounts of money being siphoned off in some of these organizations certainly do need to be addressed and I think that this is the proper venue to do that. So, again, Mr. Speaker, I ask for your consideration on this issue.

[Albina Guarnieri, Liberal, Mississauga East—Cooksville, ON]

Mr. Speaker, earlier today the parliamentary secretary to the government House leader raised a point of order asking that Bill C-470 be ruled out of order.

Bill C-470 addresses exorbitant salaries at charities that abuse the generosity of millions of Canadian donors. At present, the revocation of a charity that violates requirements of the Income Tax Act is at the discretion of the minister.

Bill C-470 does not reduce that ministerial discretion. It simply adds to the existing grounds available to the minister. That being the case, the minister would act in the same way as before, and there is no certainty of a change in tax exempt status regardless of the behaviour of a particular charity.

The bill provides an effective date of 2011, which adds to the context and the purpose of the bill which clearly is not to increase taxation or government revenues.

Mr. Speaker, let me draw to your attention to one key word in subsection 149.1 of the Income Tax Act. That word is “may”. It says:

The Minister may, in the manner described in section 168, revoke the registration of a charitable organization for any reason described in subsection 168(1) or where the organization

(a) carries on a business that is not a related business of that charity; or

(b) fails to expend in any taxation year, on charitable activities carried on by it and by way of gifts made by it to qualified donees, amounts the total of which is at least equal to the organization’s disbursement quota for that year.

If Bill C-470 becomes law:

(c) pays to a single executive or employee annual compensation exceeding $250,000.

So in addition to five requirements in section 168 and two requirements in section 149, Bill C-470 adds one more. But what it does not do is change the word “may” to “shall”. So it remains in the discretion of the minister as to whether to allow funds to be legally skimmed from charities into private fortunes.

There is no change to the tax rate or tax payable of any charity affected by this bill. It simply provides the minister with expanded grounds under which he may choose to act in the interest of Canadians.

The parliamentary secretary made reference to a case in 2007 where the chair ruled Bill C-418 out of order as it would impose a change in the tax deductibility of remuneration beyond a certain level.

Bill C-470 operates in a materially different way. It expands the requirements that a charity must comply with or be exposed to the discretion of the minister. It cannot be reasonably expected that any charity will choose not to comply and face de-registration, and it cannot be certain that the minister will revoke the status of an organization that fails to comply.

Bill C-470 does not impose a tax or other charge on the taxpayer. It does not require the imposition of a new tax, the continuation of an expiring tax, an increase in the rate of an existing tax, an extension of the incidence of a tax so as to include persons not already payers, nor an increased or accelerated tax burden on any class of taxpayers.

As such, it does not violate any of the principles set out by Marleau and Montpetit or Beauchesne.

Bill C-470 does impose responsibility on the minister. It is a responsibility to the millions of Canadians who donate billions of dollars to charity every year.

If the provisions of Bill C-470 were in place and they continue to see their donations going toward million-dollar payments to CEOs, money intended for the sick or starving going into luxury lifestyles, they would know that the minister had the power to stop it and chose not to.

Bill C-470 would give charities a powerful incentive to maintain the trust of their donors and would give the minister the responsibility, capacity and discretion to respond to breaches of that trust.

If the government does not want greater capacity to protect millions of Canadians who donate to charity, it can choose to vote against this bill. However, the facts remain clear. There is no certainty, or even likelihood, of any change to taxation that would require a ways and means motion.

[Tom Lukiwski, Conservative, Parliamentary Secretary to the Leader of the Government in the House of Commons]

Mr. Speaker, I rise on a point of order with respect to Bill C-470, standing in the name of the member for Mississauga East—Cooksville.

Without commenting on the merits of Bill C-470, An Act to amend the Income Tax Act (revocation of registration), I submit that the bill would extend the incidence of a tax and therefore should have been preceded by House concurrence in a ways and means motion for the bill.

The second edition of House of Commons Procedure and Practice states on page 900 that:

The House must first adopt a ways and mean motion before a bill which imposes a tax or other charge on the taxpayer can be introduced.

In addition, citation 980 of the sixth edition of Beauchesne's Parliamentary Rules and Forms states:

A ways and means motion is a necessary preliminary to the imposition of a new tax, the continuation of an expiring tax, an increase in the rate of an existing tax, or an extension of the incidence of a tax so as to include persons not already payers.

I would further note that on page 898 of the 23rd edition of Erskine May, it states:

A Ways and Means motion resolution is required to authorize extension of the scope of a tax, for example, to cover new classes of tax-payers.... The requirement for a Ways and Means resolution also applies to any proposal for a change in tax law or the administration of tax collection which may lead, albeit incidentally, to an increased or accelerated tax burden for any class of taxpayers.

By way of precedent, on November 28, 2007, the Speaker ruled in the case of Bill C-418, An Act to amend the Income Tax Act (deductibility of remuneration) that:

If adopted, this measure would therefore have the effect of increasing the tax payable by certain corporations.... In other words, the bill deals with an issue of ways and means....

In my view, Bill C-418 imposes a charge on the taxpayer, but it was not preceded by a ways and means motion....

Accordingly, the Chair must now direct that the order for second reading of the bill be discharged and the bill withdrawn from the order paper.

The purpose of Bill C-470 is to allow the revocation of the registration of a charitable organization, public foundation or private foundation, if a particular entity is paying an annual compensation that exceeds $250,000 to any of its executives or employees.

Let me explain why the bill would result in the extension of a tax. For the information of members, subsections 149.1(2) to 149.1(4) of the Income Tax Act provide rules upon which the Minister of National Revenue can deregister a charity. Bill C-470 would amend the Income Tax Act by adding paragraph (c) to subsection 149.1(2) of the act, adding paragraph (f) to subsection 149.1(3) and adding paragraph (e) to subsection 149.1(4). This would add a new condition where the Minister of National Revenue can deregister a charity. Let me explain in detail, if I may, how that may work.

At present, upon the issuance of a notice of revocation of its registration under any of the current subsections from 149.1(2) to 149.1(4), an entity is facing an additional tax burden. Subsection 188(1.1) of the Income Tax Act, read in conjunction with subsection 188(1), provides that such an entity is liable to a tax calculated in accordance with the formula found in subsection 188(1.1). This additional tax liability is known as the revocation tax.

Bill C-470 would add the new circumstances described in subsections 149.1(2) to 149.1(4) for deregistration of charities by providing that the Minister of National Revenue can, in addition to the current circumstances described in the Income Tax Act, deregister an entity on the basis that it pays more than $250,000 in compensation to one of its executives or employees.

Charities that would be deregistered under the new circumstances in Bill C-470 would be liable to pay the revocation tax imposed under subsection 188(1.1).

In addition, paragraph 149(1)(f) of the Income Tax Act provides that registered charities are exempt from taxation. Upon deregistration of an entity in the circumstances proposed by Bill C-470, that entity loses its tax exempt status as a registered charity and, assuming it remains a charity, it will not be able to benefit from the other exemptions from tax provided for in subsection 149.1(1).

In other words, Bill C-470 would result in an extension of the incidence of a tax by including entities that are not already paying the revocation tax or, potentially, a tax on their income. This means that the bill should have been preceded by the concurrence of the House in a ways and means motion for the bill.

As a result, I submit that the order for second reading of the bill should be discharged and the bill be withdrawn from the order paper.

Income Tax Act

[Albina Guarnieri, Liberal, Mississauga East—Cooksville, ON]

moved for leave to introduce Bill C-470, An Act to amend the Income Tax Act (revocation of registration)

Mr. Speaker, I would like to thank my colleague from Brampton West for graciously seconding the bill before us.

Seven thousand years is how long it would take for a typical $30-a-month donor to the Sick Kids Foundation just to pay the salary and severance of its CEO.

This bill would limit the bounty of charities by putting a quarter million dollar cap on their taxpayer-supported salaries.

(Motions deemed adopted, bill read the first time and printed)