moved that Bill S-216, An Act to amend the Income Tax Act (use of resources of a registered charity), be read the second time and referred to a committee.
Mr. Speaker, it gives me great joy and pleasure to rise in this House to talk about a very important piece of legislation, Bill S-216.
I do, at the outset, want to talk about the budget implementation act, as well as the budget, because it claims to want to have the spirit of Bill S-216 within the budget and the eventual budget implementation act. Unfortunately, it has fallen a bit short. It is too prescriptive by nature, but as is my nature, I want to be positive. I am going to talk about Bill S-216 and the positives it has.
Perhaps members of the government are listening and they can look to amending the BIA to encourage and enlist some of the great, positive characteristics of Bill S-216, such as a focus and responsibility on accountability, transparency and support for our charitable sectors. Instead of depending on form, as the BIA currently does, why not focus on substance, as Bill S-216 does? I am an eternal optimist, and I am hoping members of the government will listen to my speech and hear some of the positive characteristics of Bill S-216, and perhaps amend the BIA to include some of those positive characteristics.
Before I get into the substance of my speech, I want to say a big thanks. This legislation, being Bill S-216, comes from the upper House, the Senate, and it is brought by Senator Ratna Omidvar. Senator Omidvar is a tremendous asset for Canada. She is working night and day, tirelessly, trying to help the people of Canada. Bill S-216 is the latest work product of her tireless efforts. I want to give a big tip of the cap to the senator for her fabulous work in helping charities and non-profits across Canada. I thank the senator for drafting this bill and allowing me to present it.
Let us get into the legislation and the context around it. Currently, the Income Tax Act is over 3,000 pages. Anyone who has heard my speeches before knows that I do believe it is due for an entire overhaul and review. In terms of the particular legislation that we are going to talk about, the Income Tax Act mentions that charities have to do their own work. It says, “carried on by the organization itself”. This, in itself, is not a bad thing. Obviously, we want to make sure that charities are accountable and responsible for their resources, because they get benefits from the Canadian taxpayer. When people write a cheque or make a deposit for a donation to a charity, and I just dated myself there by saying “cheque”, they get a receipt and the coffers of the Government of Canada are reduced.
The language of having their own activities is a challenge because it creates operational decision-making, not in the hands of a non-profit, but in a charity. Let me explain what that means. It talks about direction and control. Let us say a charity gives money to something called a non-qualified donee. No one outside of the charitable sector probably knows what a non-qualified donee means. It means anyone the charity is giving money to other than a charity itself. What this legislation says is that if, in fact, a charity wants to give resources to a non-profit organization, it has to have direction and operational control.
Let us put that into real terms. If a large charity, such as the Canadian Red Cross, wants to give proceeds to an organization, a non-profit, perhaps helping build schools in Haiti or something fabulous like that, it is subject to an incredible amount of legislation and bureaucracy, which makes it extremely difficult for those organizations to do work. This is in contrast to what happens around the world. It is actually referred to in international development circles as “the Canadian problem”. It inhibits and limits the ability of Canadian charities to do great work and to help folks around the world.
In contrast, other jurisdictions have taken a very different approach. While we want operational control in the domestic charity and are still putting form over substance, other jurisdictions look at it in a reasonable and rational way. Of course, they want those charitable dollars to go where they are supposed to go, to help people around the world or domestically, but they are focusing on substance, not just form and bureaucracy.
In the United States, for example, foundations can give grants to foreign entities, provided those foundations maintain what they call “expenditure responsibility.” In the United Kingdom, charities may transfer funds to foreign partners, provided those funds are used exclusively for the charitable purpose. Therefore, we can have pre-grant due diligence. To put this back into the example, instead of a Canadian charity basically having to take over a non-profit or an NGO around the world, meaning it has to approve the smallest of decisions, it could require a contract up front to make sure that the non-profit is legally required to stay within the charitable purpose. Then there is a certain due diligence. It is accountable, but there is no takeover.
Right now, Canadian charities are required to educate their project partners and stand in the position of telling this to their project partners. We can imagine a Canadian charity that wants to work or partner with a non-profit or an NGO around the world saying, “We want to help your organization, but to do so, you will have to be subordinate to us.” This consumes time and resources that could otherwise go directly to the charitable project. It also invites errors and increases the compliance risk to the Canadian charity. An overseas partner communicating with a charity from the granting program could create evidence for the CRA to question it as a non-qualified donee. In other words, in layman's terms, it creates more bureaucracy and paperwork, which takes away from what the charity is starting to do and what we want those charities to do, which is to help people in Canada and indeed around the world.
What does Bill S-216 do? It creates the concept of resource accountability. Once again, it is substance over form. We want to make sure that charities are partnering with non-profits and NGOs, both at home and around the world, in a transparent and accountable way, to ensure that the end-users, the recipients, are the beneficiaries of these great actions. Right now, unfortunately, way too many of those dollars are not going to vulnerable people across the world and in Canada. They are going to lawyers, accountants and professionals who are there to try to administer this, because currently our charitable structure for allowing partnerships, both internationally and at home, is way too bureaucratic. Bill S-216 has that resource accountability, rather than putting form over substance. There has to be that due diligence, that accountability and transparency, but instead of a morass of paperwork, instead of a takeover of Canadian charities and organizations, it allows a true partnership to occur.
With respect to restraints, as we can imagine, there are specific communities where this could be even more challenging. I would point to indigenous communities. We all know about the troubled history the Canadian government has had with indigenous communities. The way the Income Tax Act works right now, if a foundation or a Canadian charity wants to work with an indigenous group or a first nation, it would have to put the indigenous group in a subordinate position. Given the history we have as a country, one can more than understand the issues that indigenous communities would have with that. This legislation would help vulnerable people and those in challenging situations, economic or otherwise, specifically indigenous peoples and members of the LGBTQ and BIPOC communities, as well as Canadian overseas charities.
There is nearly unanimous support for this legislation across the charitable sectors, and stakeholders have been very outspoken in talking to us.
I would like to give a specific example, if I could, with respect to a group and how the current state of the Income Tax Act is disadvantaging charities and non-profit organizations. This group is called MakeWay. Its shared platform provides operational support, governance and charitable expertise for change-makers so they have more time to do what they do best, which is, of course, to help people.
The Income Tax Act, the way it is currently structured, requires that MakeWay undertake only projects that are its own, as evidenced by its continued direction and control. Operationally, this means that all project teams are MakeWay Charitable Society employees or contractors; that MakeWay retains all ownership of work product; that all projects adhere to MakeWay policies and procedures; that MakeWay has to be a signatory to every legally binding document, which means that leases, contracts, funding agreements and proposals are all signed by the MakeWay shared platform director; and that MakeWay approves every press release and every social media post. To understand the legal direction and control it creates, if these non-profits want to go on Twitter to talk about something, they need to get approval from the Canadian charity. This may be worse than the Liberal Party, in terms of its control. That is a little bit of humour there.
Every single contract has to be approved. As a result, MakeWay Charitable Society holds all fiduciary, governance and human resource responsibilities, at its own liability and risk. We could understand the pressure and the barriers there. That is one significant example.
There is another great example. Tanya from Black Moms Connection came into my office, and I was so thoroughly impressed. To give a little of Black Moms Connection and Tanya's story, she saw that there was an issue, that there were some Black moms out there who were struggling to get by. She started a Facebook group that grew from 400 to 4,000 people. She recognized that in this community there was a tremendous need and vulnerability.
Tanya did not just sit around or write a letter; she got right into the action. She formed a non-profit. Since then, her online village has grown to almost 30,000. It has helped hundreds of Black families across Canada, from emergency grants to buy formula, to providing emergency support for rent and mortgages, providing COVID protection and providing financial literacy programs. She is responsible for helping literally thousands in the Black community come up through society, from clinging on to that first rung of the ladder of economic success. She is doing an absolutely tremendous job, working around the clock to help members of her community. I was so thoroughly impressed.
With the challenges in the way the Income Tax Act is currently structured, she cannot receive money, because it is overly burdensome for charities. Her funding streams are greatly restricted. This story is out there a thousand different times.
We need to have sensible legislation, like Bill S-216, which puts respect back to our charitable sectors so that we could empower them to do their great work, not limit them by needless bureaucracy. Let us put substance over form. Let us put right over wrong. Let us come together as a House and pass this legislation.