Bill C-470 (Historical)

An Act to amend the Income Tax Act (disclosure of compensation — registered charities)

This enactment amends the Income Tax Act to require that every registered charity disclose any compensation it pays to any single executive or employee exceeding $100,000.

Bill C-317—Income Tax Act—Speaker's Ruling

[The Speaker, Andrew Scheer]

I am now prepared to rule on the point of order raised by the hon. member for Windsor—Tecumseh concerning ways and means proceedings on Bill C-317, An Act to amend the Income Tax Act (labour organizations) standing in the name of the hon. member for South Surrey—White Rock—Cloverdale.

I would like to thank the hon. member for Windsor—Tecumseh for having raised this matter, as well as the bill's sponsor, the hon. member for South Surrey—White Rock—Cloverdale, for their interventions and the hon. member for Kitchener—Conestoga for his comments.

The hon. member for Windsor—Tecumseh pointed out in his remarks that the purpose of Bill C-317 is to require that labour organizations provide specific financial information to the minister for public disclosure. The member also pointed out that failure of a labour organization to comply with this new requirement could result in a labour organization losing its tax exempt status, noting, as well, the subsequent impact this would have on dues-paying members of that organization.

He characterized the effect of Bill C-317 in the Debates, on October 18, 2011, page 2171, as follows:

—the income tax exemptions that apply to labour organizations and the reduction of taxable income as a result of writing off the dues paid by their members would easily qualify as alleviations of taxation. Further, the provisions of Bill C-317 would repeal those alleviations by terminating the labour organization's Income Tax Act exempt status.

The member for Windsor—Tecumseh explained that any labour organization not in compliance with the financial disclosure requirements outlined in the bill would no longer enjoy the tax exempt status as provided for in section 149(1)(k) of the Income tax Act. He argued that this would have the effect of taxing a person, or in this case an organization, that was not already a taxpayer. He concluded therefore that Bill C-317 should have been preceded by the adoption of a ways and means motion.

In his submission, the hon. member for South Surrey—White Rock—Cloverdale in the Debates, on October 25, 2011, page 2438, contended that the purpose of Bill C-317 was limited simply to providing a mechanism for the public disclosure of union finances and only augmented the existing types of information that the Canada Revenue Agency was already empowered by its mandate to compel organizations or taxpayers to provide.

He also referred to a ruling from the 40th Parliament on Bill C-470, An Act to amend the Income Tax Act (revocation of registration). He found a parallel between Bill C-317 and Bill C-470. Where it had been argued that charitable donations were discretionary so that Bill C-470 did not affect any existing alleviation of tax, the hon. member argued that in the case of Bill C-317 payers of union dues could exercise their discretion by opting to join a union or labour organization that adhered to the financial disclosure provisions of Bill C-317 and, thus, maintain the tax exempt status of their dues.

Before analyzing the arguments presented, it is important to take into consideration the context of this discussion as it is worth noting that the financial procedures of the House are based on long-established and strictly observed rules of procedure, procedures that are based on the concept of the financial initiative of the Crown. This concept is clearly presented in Erskine May’s Parliamentary Practice, 23rd edition, at page 848:

—it is for the Commons, acting on the sole initiative of Ministers, first to authorize the relevant expenditure (or 'Supply') and, second, to provide through taxes and other sources of public revenue the 'Ways and Means' deemed necessary to meet the Supply so granted.

The role of the Speaker in the present situation is to determine if Bill C-317 is a legislative initiative which imposes a tax or other charge on the taxpayer and therefore would have required the prior adoption of a ways and means motion by the House.

In order to respond to that question, it may be useful to examine more closely the different precedents cited by the members who intervened on the present case.

During his initial point of order, the member for Windsor—Tecumseh referred the Chair to the ruling of November 28, 2007, on Bill C-418, An Act to amend the Income Tax Act (deductibility of remuneration). In that ruling, at pages 1463 and 1464 of the Debates, the Chair made reference to Erskine May's Parliamentary Practice, 23rd edition at page 896, where it explains, “the repeal or reduction of existing alleviations of taxation” must be preceded by a ways and means motion.

The Chair concluded that Bill C-418 removed an existing tax exemption which then resulted in an increase in the tax payable by certain corporations. In the Chair's view, this constituted a reduction of an alleviation of taxation and therefore required that it be preceded by a ways and means motion. I would ask hon. members to retain the phrase, “alleviation of taxation”, as I will return to that concept shortly.

First, let me address the differing interpretations of how an individual union member’s rights are affected by Bill C-317. The member for Windsor—Tecumseh argued that union members do not have the automatic individual right to stop paying dues to an organization that no longer enjoys a tax exempt status. The member for South Surrey—White Rock—Cloverdale countered that, in his estimation, union members would have the ability to select a labour organization that complies with the provisions of C-317 to ensure that they maintain their tax exemption. While this is more a question of labour law than procedure, the Chair is aware that members of a labour organization cannot easily change which union they belong to nor can they simply withhold paying their union dues except in extremely limited situations provided for in the law. As pointed out by the member for Windsor—Tecumseh, this is in stark contrast to donors to a charity who may choose whether they wish to contribute, the organization they wish to contribute to and the timing of any such contribution.

The Chair must agree with the hon. member for Windsor—Tecumseh that the non-compliance of the labour organization would also remove a current income tax deduction for the dues-paying members of the union. For the Chair, there can be no doubt that this also can be characterized as the removal of an existing alleviation. For this reason alone, Bill C-317 would need to be preceded by a ways and means motion.

Let us return to the larger context. The Chair appreciates the point made by the member for South Surrey—White Rock—Cloverdale that the Canada Revenue Agency already enjoys the authority to compel the financial disclosure of certain financial information. However, it is not the power of the CRA to require the disclosure of certain information that is at issue.

It is true, as the member for South Surrey—White Rock—Cloverdale claims, that Bill C-317 changes the reporting requirements for labour organizations. However, contrary to what the member asserted, that is not all it does. In stating that non-compliance with these new requirements makes a labour organization ineligible for tax deductions available to labour organizations, Bill C-317 potentially removes an alleviation of taxation and in so doing, the bill potentially creates a new statutory authority that removes what is currently an unqualified exemption.

Perhaps the distinction can be better understood by looking again at the example offered by Bill C-470 in the third session of the 40th Parliament. That bill changed the definition of a class of taxpayers, specifically registered charities, but the alleviation of tax for registered charities as a class of taxpayer remained unchanged. By contrast, Bill C-317 does not change the definition of a labour organization. It demands disclosure of certain types of information, failing which disclosure, the bill provides that the tax alleviation in place for labour organizations will no longer apply to non-complying labour organizations.

This is a subtle difference, but it is a crucial distinction for the Chair.

The ruling on Bill C-470 determined that the bill altered the conditions and requirements for an organization to be classified by the minister as a registered charity but did not alter the class of taxpayer. In more basic terms, Bill C-470 proposed to alter the definition of what constituted a registered charity but did not change the tax exemptions for registered charities. In the ruling on C-470, delivered on March 15, 2010, and found on pages 419 and 420 of the Debates, I stated:

It seems to me that the bill instead seeks to provide a new criterion that would allow the minister to determine into which existing class of taxpayer an organization falls. The existing tax regimes and the existing tax rates are not affected.

However, unlike Bill C-470, Bill C-317 does not attempt to alter the conditions or requirements for an organization to be classified as a labour organization.

According to the provisions of Bill C-317, under the Income Tax Act, a labour organization would remain a labour organization, whether it complied with the proposed disclosure requirements or not. If enacted, Bill C-317 would thus create a situation whereby labour organizations can be differentiated into two distinct categories, those that comply with the financial reporting mechanism and those that do not.

In the Chair's opinion, this new category of labour organization would constitute a class of taxpayer that does not currently exist. Labour organizations in the newly created class, that is those that do not meet the financial reporting requirements outlined in the bill, would see the removal of their current tax-exempt status. Put simply, Bill C-470 did not alter the tax-exempt status of registered charities, whereas, in contrast, Bill C-317 proposes to alter the current tax-exempt status of labour organizations.

As a result of this determination, I find that Bill C-317, by distinguishing between certain labour organizations, creates a new class of taxpayer and that this new class of taxpayer would then be subject to a removal of an alleviation of taxation.

For the reasons stated, I must, therefore, rule that Bill C-317 should have been preceded by a ways and means motion. Consequently, I also rule that all proceedings on the bill to date, namely introduction and first reading, have not respected the provisions of our Standing Orders and are, therefore, null and void. Accordingly, the Chair directs that the order for second reading of the bill be discharged and the bill be withdrawn from the order paper.

However, I am reluctant to deny the member what is likely his only opportunity in this Parliament to have an item on the order of precedence.

As members are well aware, Standing Order 94(1) provides the Speaker with the authority to “make all arrangements necessary to ensure the orderly conduct of Private Members' Business”.

In light of the unique nature of this particular situation, the member for South Surrey—White Rock—Cloverdale will be permitted to substitute another item onto the order of precedence. The substitution shall be done pursuant to the spirit of Standing Order 92.1, which allows a member 20 sitting days to substitute another item of private members' business for the item that has been discharged and withdrawn. Should the member choose not to replace the item within the next 20 sitting days, his name will then be dropped from the order paper.

I thank the House for its attention.

Bill C-317--Income Tax Act

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Mr. Speaker, I appreciate the opportunity to respond to the point of order raised by the member for Windsor—Tecumseh regarding my private member's bill, Bill C-317. The thrust of the argument was that my bill would do something that only the government is allowed to do.

The history behind this is that, within our parliamentary system of democracy, only ministers of the day have the authority to propose new taxes. Before they are allowed to propose a tax, they must bring forward a ways and means motion to notify the House of Commons of their intention.

At page 900 of the House of Commons Procedure and Practice, second edition, it states:

The House must first adopt a ways and means motion before a bill which imposes a tax or other charge on the taxpayer can be introduced. Charges on the people, in this context, refer to new taxes, the continuation of an expiring tax, an increase in the rate of an existing tax, or an extension of a tax to a new class of taxpayers.

Thus, this has been a limitation on the use of private member's bills.

No one is suggesting that Bill C-317 proposes a new tax, or is the continuation of an expiring tax, or an increase in the rate of an existing tax. The member is only trying to object to my bill on the grounds that it is the repeal of an existing alleviation of taxation and an extension of a tax to persons who are not already taxpayers--in other words, a new class of taxpayer.

If that were the case, then he would be correct to suggest that the bill be discharged. However, my colleague has read more into my bill than actually exists. He is mistaken because he fails to recognize the limited purpose and effect of the bill, which is to simply require more complete and public disclosure of a union's finances on a regular basis.

First, his assertion that the bill “repeals the existing alleviation of tax” is incorrect. The bill does not remove any tax deduction. Bill C-317 maintains the status quo and does not grant the Canada Revenue Agency any powers, including any taxation powers, that it does not already have. The CRA is already empowered to compel financial disclosure. It can do so as a result of its mandate to ensure that organizations with tax exempt status do not engage in activities that would no longer justify that status. This power, the power it already has, is a simple function of its mandate to ensure compliance with the Income Tax Act. It is a mandate that the CRA exercises in respect of all classes of taxpayers who must comply with the act.

It is true that the bill would change things. The failure to comply with the additional disclosure proposed by the bill could also result in a union losing its tax exempt status. However, this loss of tax exempt status would result from the already existing enforcement provisions of the Income Tax Act and not from any provision contained in Bill C-317.

In other words, if a union violates the current requirement to disclose, the CRA can remove its tax exempt status. That is true whether my bill passes or not. All my bill would do is increase the quantity and public nature of that disclosure with the same enforcement authority that the CRA already has.

My colleague also raised the issue of my bill creating a “new class of taxpayer”. According to the Income Tax Act, the term “taxpayer” is defined to include “any person whether or not liable to pay tax”. Even if an individual earns no income, he or she is still a taxpayer. However, the class contemplated in the member's unlikely example of a labour organization that chose to violate the Income Tax Act already exists. This existing class is the class of taxpayers who pay union dues. He is trying to pretend that the class is those who are in one tax bracket or another and who may change their tax bracket and tax payable as a result of a union losing its tax exempt status.

In the context of the loss of dues deductability, differentiating on the basis of income tax brackets is irrelevant to identifying a class of taxpayer. In fact, those who are affected by the loss of the union's tax exempt status have only one thing in common: they are a single class of taxpayers under the Income Tax Act who pay union dues.

The legislation only has the potential to affect this already existing class of taxpayers. Their tax bracket does not matter. The point is their loss of dues deductibility. That is their class and it is an already existing class. Whether they pay more or less tax as a result of rulings by the CRA is a function of the CRA's normal day-to-day operations, not the result of this bill. In other words, this class of taxpayers is already subject to fluctuations in the level of taxation to which it may be subject under the current legislation and CRA 's interpretations and administration of the act.

I have one more point to make in response to my colleague's point of order. He claimed that the ruling in Bill C-470 from the 40th Parliament should be distinguished from this case because union members would be obligated to pay dues while charitable donations are discretionary. Even if it is accepted that the bill may have the effect claimed by my colleague, and I do not concede that it would, it must be pointed out that union members whose union has lost its tax exempt status for refusing to disclose have the right to exercise certain options. Those options include the option to be represented by another union, a union that has maintained its tax exempt status. This would serve to ensure that member dues continue to be eligible for a tax deduction. Therefore, the ruling in Bill C-470 is a relevant precedent to be relied upon on this particular point.

Those points conclude my response to the point of order raised by the member for Windsor—Tecumseh.

Bill C-317—Income Tax Act

[Joe Comartin, NDP, Windsor—Tecumseh, ON]

Mr. Speaker, I rise on a point of order regarding Bill C-317, An Act to amend the Income Tax Act (labour organizations), standing in the name of the member for South Surrey—White Rock—Cloverdale.

The bill proposes to amend the Income Tax Act in an effort to force labour organizations to submit for all to see, that is complete public disclosure, an incredibly onerous level of detailed financial information about their work on behalf of their members. While labour organizations already abide by financial disclosure rules, mostly imposed at the provincial level of government, they do that because it ensures they are accountable to their members and not just because they are driven by legislation.

The bill, which is mostly ideologically motivated, would seek to expose virtually every last detail of a labour organization's financial books. The risk of this is that it gives access to other business organizations in which members may be involved in labour negotiations or labour disputes, exposing their knowledge base to some risk in that regard.

Aside from the privacy concerns over making this level of financial detail available to the public, it shows the thrust of the government, as we have seen with the labour disputes, back-to-work legislation recently and more threats of it at this point, but that culminates now by a government member bringing forth as a private member's bill what should in fact be a government bill, and that is really where my point of order lies. By imposing these types of conditions Conservatives, they are precipitating action that should only be precipitated by a government bill.

The measures set out in the bill include a threat of delisting the labour organization for non-compliance. One of the points that has been missed in this regard about its consequences, because we are not just talking about national labour organizations or national unions, is it includes a local labour council, a union local, even a small one of say 20 or 30 members, a national labour organization, or even a federation of labour. It covers all of them. My concern with the admissibility of the bill is it would have the effect of raising taxes, which is the exclusive prerogative of ministers in the House of Commons and cannot be done by private members' business. At page 1114 of House of Commons Procedure and Practice, second edition, it states:

The power to initiate taxation rests solely with the government and any legislation which seeks an increase in taxation must be preceded by a ways and means motion.

As a result of this and the reasons I will set out in greater detail shortly, Mr. Speaker, I would ask you to rule that the proceedings on the bill to date, namely its introduction and first reading, which it already had, have not respected the provisions of our Standing Orders and are therefore null and void and further that you direct that the order for second reading of Bill C-317 be discharged and the bill be withdrawn from the order paper. Those are the two orders I would be seeking from you, Mr. Speaker.

To begin, I draw attention to Speaker Milliken's ruling on November 28, 2007, at pages 1463-64 of Debates. Therein he references page 896 of Erskine May's Parliamentary Practice 23rd edition, which states quite clearly, ”

—“the repeal or reduction of existing alleviations of taxation” must be preceded by a Ways and Means motion.

It is not a discretionary call. It is a must situation.

It is clear to me and I suspect that you will agree, Mr. Speaker, that the income tax exemptions that apply to labour organizations and the reduction of taxable income as a result of writing off the dues paid by their members would easily qualify as alleviations of taxation. Further, the provisions of Bill C-317 would repeal those alleviations by terminating the labour organization's Income Tax Act exempt status.

Furthermore, while the House of Commons Procedure and Practice, second edition, at page 900, lists four limited categories of charges on the people, which would require a ways and means motion before tabling in the House, if you trace this passage back to the primary source of the reference, Mr. Speaker, you will find what seems to be much more clearly worded guidelines. I would ask you to pay particular attention because there seems to be, and I will not say a contradiction, greater clarity if we go further back in our history in this regard.

Citation 980 of Beauchesne's Parliamentary Rules & Forms sixth edition, on page 265 states that a:

Ways and Means motion is a necessary preliminary to...an extension of the incidence of a tax so as to include persons not already payers.

“Persons not already payers” is a much more specific restriction than creating a new class of taxpayers, which is the guideline set out at page 900 of the House of Commons Procedure and Practice, which I cited a moment ago. It is the difference between finding that a bill creates a new type of taxpayer and finding that a bill creates taxpayers out of those who did not pay tax before.

In the case of the 41st Parliament Bill C-317, examples are readily available to illustrate how the incidence of the federal income tax on dues-paying members of a labour organization might be extended under the proposed changes to the Income Tax Act to make federal income taxpayers out of persons who previously were not. Therefore, we are creating new taxpayers.

Consider if you will, Mr. Speaker, the hypothetical case of a dues-paying member of a labour organization who pays no federal income tax because the member's taxable income falls just short of the amount covered by the personal income tax exemption. If this person's labour organization were to lose its ITA exempt status for failing to meet the conditions set out under the provisions of Bill C-317, his or her membership dues would no longer be excluded from personal taxable income. This increase in taxable income could easily push his or her taxable income to an amount over that which is exempt, effectively creating a federal income taxpayer where there was not one before, which is the very definition of Beauchesne's description of what is not permissible in this place without a preceding ways and means motion, which only can be brought by the government of the day.

I am anticipating an argument from the government side on the private member's bill, so I reviewed a precedent on this matter. I fear there may be a temptation to use Speaker Milliken's decision of March 15, 2010, on Bill C-470 from the 40th Parliament, as a relevant precedent to the question on hand today, so I will ask you, Mr. Speaker to take extra caution when reviewing the decision. While there are some similarities between the two bills, I would submit that the many differences will lead you to rule the opposite particularly when using the much more specific delineation of the rule in question as laid out in Beauchesne's.

I am not sure it will be necessary in your deliberations, Mr. Speaker, but I would draw to your attention just one of the many important differences between the two bills, the one in the 40th Parliament and this one today, which is the stark contrast between labour organizations and charitable ones. In particular, members of labour organizations would continue to have an obligation to pay their membership dues, as they do under provincial legislation, even in the event of the organization's delisting from ITA exempt status, whereas charity donors' contributions are completely discretionary. Finally, labour organizations are selected, supported and held accountable by the very dues-paying members who make the financial contributions in the first place. Charities are not.

In conclusion, Mr. Speaker, I would again ask that you rule that the proceedings to date under Bill C-317, An Act to amend the Income Tax Act (labour organizations) standing in the name of the member for South Surrey—White Rock—Cloverdale namely, the introduction and first reading, have not respected the provisions of our Standing Orders and are therefore null and void and that you direct that the order for second reading of Bill C-317 be discharged and the bill withdrawn from the order paper.

It is quite clear that the bill should be presented, if it is going to be presented at all, by the government of the day. It would bring forth a ways and means motion and then the proper bill would flow from that. This attempt to do it through the back door by way of a private member's bill is really a serious breach of the Standing Orders of the House.

Finance

[James Rajotte, Conservative, Edmonton—Leduc, AB]

Mr. Speaker, I have the honour to present, in both official languages, the ninth report of the Standing Committee on Finance regarding Bill C-470, An Act to amend the Income Tax Act (revocation of registration).

The committee has studied the bill and has decided to report the bill back to the House with amendments.

Sustaining Canada's Economic Recovery Act

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, I am pleased to participate in the debate on Bill C-47, which is not a short bill. The printed version is 143 pages long. The bill includes about nine different sections and 199 clauses. I hope all hon. members will appreciate that when we get a bill this size, it is difficult for any speech to touch on the substantive matters.

The House will often deal with the issue of relevance in debate. I have heard people say that we are debating the budget from last March and they start talking about virtually every item in the budget. However, subsequent to that we have had one implementation bill and this is the second. These implementation bills are intended to put the technical mechanics in place so the representations in the budget are operable. I want to get into a few of those.

I want to advise those who are interested that this bill deals substantively with amendments to the Income Tax Act and related acts in part 1. Part 2 deals with amendments to the Air Travellers Security Charge Act. Part 3 deals with amendments to the Federal-Provincial Fiscal Arrangements Act, which is extremely important in terms of funding of provincially delivered programs and services. Part 4 deals with amendments to the Bank Act and the Financial Consumer Agency of Canada Act. Part 5 deals with amendments to the Canada Disability Savings Act, which we discussed substantively at committee. Part 6 deals with amendments to the Customs Act. Part 7 deals with amendments to the Federal-Provincial Fiscal Arrangements Act. Part 8 deals with amendments to the Office of the Superintendent of Financial Institutions Act. Bill C-47 is a very broad-based bill.

When we are dealing with a budget implementation bill, we are often not talking about anything in the bill in terms of specific amendments to legislation. We tend to drift back to the budget itself and some of its consequences.

The parliamentary secretary, on behalf of the government, led off the debate on the bill. He did not talk much about the budget implementation bill but rather he talked about the budget. This opened up the debate to virtually everything to do with the budget. That is why some people who are interested in the proposed changes to some of these acts have been somewhat ignored in the debate. To rectify that, I want to deal with the proposed amendments to the Income Tax Act and related acts. It is an area in which I have some experience.

The first important area has to do with benefits entitlement and shared custody. Under the Universal Child Care Benefit Act, an eligible individual is defined in subdivision a.1 of division E of part I of the Income Tax Act. If I repeat a lot of these references, people will not understand, so let me just say it is defined in the act. The act currently provides for only one eligible person for a given period.

Under the current provisions, the Canada Revenue Agency has rotated benefits for the universal child care benefit, the Canada child tax benefit and the GST-HST credit for families with shared parenting arrangements on a six month payment basis. The budget proposed to allow two eligible parents in a shared custody arrangement to receive child benefits, including the UCCB. I support that change. It makes sense. A lot of people are at a disadvantage by having just one eligible recipient where shared custody would be a more equitable situation.

The second item under the income tax amendments has to do with the rollover of RRSP proceeds to an RDSP, or registered disability savings plan.

The existing registered retirement savings plan rollover rules are extended under the bill to allow a rollover of a deceased individual's RRSP proceeds to a registered disability savings plan of a financially dependent, infirm child or grandchild. The reason that is important, and why I support it, is that on death of the holder of a registered retirement savings plan, if there is not a spouse for which the act already provides a tax-free rollover, it would then collapse and be taxable fully in the year of death.

If an RRSP collapses all in one year and has a tax liability, in many cases most of that would be taxed at the highest possible rate. It means the estate of the person involved would pay much more tax now than it would have paid had he or she not bought the RRSP in the first place. This would allow that investment in the RRSPs to rollover to a disabled person, financially dependent infirm child or grandchild. It would in fact help families. Members will know that anything that helps families will have my support.

The third area under the Income Tax Act has to do with charities and the disbursement quota form. The finance committee presently is looking at Bill C-470, which tries to put transparency through the expenditures, particularly the human resources costs and salaries of executives of charities. Concerns have been raised that some charities pay exorbitant amounts of compensation to people with the amount of the moneys actually go for charitable purposes being substantially reduced, and that is a problem.

Interestingly enough the changes made in Bill C-47, and I do not know enough about individual cases, I suspect will help some and hurt others because it deals with a disbursement quota.

First, the disbursement quota reform for registered charities, specifically the charitable expenditure rule, would be repealed. Second, the capital accumulation rule would also be modified to increase the threshold from $25,000 to $100,000 for charitable organizations. Third, the anti-avoidance rules would be extended to situations where it could be reasonably considered that the purpose of the transaction was to delay unduly or avoid the application of the disbursement quota. Finally, measures would be implemented to ensure that transferred amounts between non-arm's-length charities would be used to satisfy the disbursement quota for only one charity.

The problem I have with that section is it goes in a different direction than Bill C-470 in terms of the transparency and the concern that there be moneys. In fact, it would allow the charity to have a higher threshold of making disbursements. It would also allow certain charities to accumulate money for capital investments, for instance, if they wanted permanent facilities or core funding for certain programs.

I can understand that in terms of, for instance, hospitals, hospital foundations. I am not sure if the same rules would not have maybe unintended consequences with regard to other charities that are not in some of those key areas of universities or hospitals or organizations like the Cancer Society or the Heart & Stroke, et cetera. There are 85,000 registered charities in Canada. When we start to play around with the disbursement quota rule, somebody will fall through the cracks and there may be some unintended consequences. It will be up to us to monitor the situation.

The next area under part 1 has to do with the employee stock options. There are various methods in the Income Tax Act to deal with the treatment of employee stock options.

First, there is an amendment that would preclude double deductions of both the employee and the employer in respect of the same stock option benefit, which would make sense. The stock option agreement to a non-arm's-length person results in an employment benefit at the time of disposition, and, again, that makes some sense.

A further measure would repeal the tax deferral election. As well, the existing tax withholding requirements would be clarified to ensure that the amount in respect of tax on the value of the employment benefit associated with the issuance of the security would be required to be remitted to the Canada Revenue Agency by the employer. Again, administrative and substantively I agree with that.

Finally, the last measure introduced is a special elective and relieving tax treatment for taxpayers who elected under the tax deferral election introduced in budget 2000 to defer taxation of their stock option benefits until the disposition of the options securities. That appears to be a sound approach.

Section (e) under part 1 deals with accelerated capital cost allowance for clean energy generation. At the finance committee's prebudget hearings, which we have recently concluded, the issue of accelerated capital cost allowance came up frequently. It is an opportunity for businesses to write off, for tax purposes, desirable investments on an accelerated or quicker basis so they pay less tax, which allows them more cash flow to meet their obligations or, more important, to reinvest and continue to roll over their assets to ensure they have the assets, the machinery, the equipment and the like to be more efficient in their work.

Accelerated capital cost allowances is with us to stay. It has been used as a tool rather than a tax cut or something like that. This is effectively a tax deferral scheme. If the businesses keep doing it, it effectively represents a permanent reduction in taxes that could carry forward as long as they continue to invest in the capital, equipment and machinery. I agree with it as a tool and it is very much supported by those who are involved in equipment.

In this one, the section deals specifically with clean energy generation. With regard to our environment and addressing greenhouse gas emissions, et cetera, this is a positive development, which I support.

Section (f) is capital cost allowance for television set-top boxes. I do not know if anybody will understand that, but the capital cost rate for satellite and cable set-top boxes that are acquired after March 4 and that have neither been used nor acquired or used before March 5 will be increased to 40% to better reflect the useful life of the assets. This is effectively a correction of a rate, which is already available in the tax act. As it indicates, it is simply to reflect the fact that these assets have a very short lifespan or utility before substitutes become available and desirable by consumers. It allows them to write them off over a short period of time.

Section (g) under part 1 deals with the Canadian renewable and conservation expenses to do with principle business corporations. The definition of that will be amended to clarify that flow-through share eligibility extends to corporations the principle business of which is one or any combination of producing fuel, generating energy or distributing energy. I agree with that. It is a constructive move to make that change.

Section (h) deals with international financial reporting standards. It gets a little too technical, so I will not go to go there. Having looked at it, there is a five-year transition rule, and I think it works.

There is a sub-item on that. Amendments to the Canada pension plan and the Employment Insurance Act and the Income Tax Act will be made to provide legislative authority for Revenue Canada to issue online notices where authorized by a taxpayer. Again, this is an efficiency in terms of the process.

In addition, part 1 of the bill implements a number of other income tax measures. Employee life and health trust is new. The working income tax benefit will be amended for 2009 to $925 for single individuals with no eligible dependents and to $1,680 for individuals with at least one eligible dependent.

The amendments in this bill will ensure that the working income tax benefit amounts will continue to be indexed to inflation on an annual basis. Thank you, Mr. Minister. I think it is an important change.

There are some technical amendments to the tax-free savings account. I want to comment more fully on that, but I will move on.

Finally, there are the labour-sponsored venture capital corporation rules. Very few people will understand very much about that, but there are consequential amendments related to the tax-free savings account, which I want to address now.

First of all, I certainly support the tax-free savings account instrument, which allows Canadian residents who are 18 years of age or older to be eligible to contribute up to $5,000 annually in a tax-free savings account. The contributions are not tax deductible, but the investment income earned in a tax-free savings account will not be taxed. Since the contributions were not deductible when deposited, there will be no tax when withdrawn.

It is a good instrument to save money if one has money. This is of benefit certainly to middle and higher income Canadians who have cash that they are presently investing and paying income tax on the investment income. Now there is an instrument where they, their spouses and kids can have tax-free savings accounts. All of a sudden, formerly taxable investment income is going to be growing up in non-taxable instruments.

Eventually, I suppose, the taxes will ultimately come when that money is taken out and disbursed for consumption purposes and it works its way through the system. However, it is a leakage of tax revenue to the government, no question about it.

I raised my concern on this with the finance minister and officials last Tuesday. It has to do with the number of amendments they have to make. This is a simple program. One can put up to $5,000 a year in there, and on any income earned on eligible investments, one will not have to pay any tax ever.

We have amendments to make the income attributed to deliberate overcontributions and prohibited investments subject to existing anti-avoidance rules. We also want to make any income attributable to non-qualified investments taxable at regular tax rates. As well, we want to ensure that withdrawals of deliberate overcontributions, prohibited investments, non-qualified investments or amounts attributable to swap transactions or related investment income from a tax-free savings account would not create additional tax-free savings account contribution room. Finally, we want to effectively prohibit asset transfer transactions between tax-free savings accounts and other accounts.

It is a simple program, but the amendments that are being made say to me that the crafters of this and all the levels of care and due diligence that took place in the process somehow did not consider what would happen if people made overcontributions. The government did not consider that if people made an overcontribution, a penalty of 1% was actually a lower amount than what they could earn on those investments, so 1% was not a deterrent. People realized that they could invest at 3%, and if it cost 1% in penalties, they would still make 2% on something that is not going to be taxable anyway. It is getting around the rules.

How is it that the government could not deal with the issues of non-qualified investments? Obviously there are some. It could not deal with deliberate overcontributions, prohibited investments, non-qualified investments, or amounts attributable to swap transactions and what happens if this is done and what are the consequences.

The point I made there and I will make again today in the House is that I did not get a strong comfort level that there was rigorous due diligence and careful thought given to this particular program. With all the things that the government missed in a very simple program, in my view, if the little things are not done well, there is not a great confidence level with regard to the larger items.

Finance

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Mr. Speaker, I have the honour to present, in both official languages, the fifth report of the Standing Committee on Finance, respecting the request for an extension of 30 days to consider Bill C-470, An Act to amend the Income Tax Act (revocation of registration).

Royal Recommendation and Ways and Means Motions

[The Deputy Speaker, 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)