Bill S-216

Effective and Accountable Charities Act

An Act to amend the Income Tax Act (use of resources of a registered charity)

This enactment amends the Income Tax Act to permit charities to provide their resources to a person who is not a qualified donee, provided that they take reasonable steps to ensure those resources are used exclusively for a charitable purpose.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

My first questions are for Mr. MacDonald, from Imagine Canada. Then, I will have questions for Mr. Rooke, from Cider Canada.

I want to begin by thanking all the witnesses for being here today. I really appreciated their opening statements, which were all very informative, especially Mr. Cochrane's.

Mr. MacDonald, we had an opportunity to meet with representatives of your organization to discuss the problems with Bill C‑19 at greater length. My understanding is that you would prefer Bill S‑216, because it does a better job of meeting the needs of the organizations you represent.

How do you think Bill C‑19 would impact equity-seeking groups wanting to work with charities?

Effective and Accountable Charities Act

[Niki Ashton, NDP, Churchill—Keewatinook Aski, MB]

Madam Speaker, it is an honour for me to rise in the House to speak to Bill S-216, an important bill supporting the good work in the charitable sector.

I will begin by expressing what we have seen over the last few years, particularly during this pandemic, and how important the work of so many has been, including the many who have gone above and beyond in the charitable sector in our communities to support people in this very difficult time. We saw during this pandemic that many were forced to turn to food banks and soup kitchens and needed help during this crisis. We know that thanks to the volunteering and contributions of many, Canadian charities across various sectors were able to step up.

I recognize the important work that has been done in northern Manitoba and across the country during this very difficult time. Many charities in our communities share values, such as the importance of community, justice and partnership, and the sense of solidarity that is critical to us moving forward during times of crisis.

I also want to talk about how the government, especially over the last two or more decades, has turned to charities to take over the work that government should be doing. The government should be foremost responsible for the social well-being of all in our country. It is clear that government must be doing its part to ensure the collective good, rather than overly relying on charities to do its work. The reality is that inequality in Canada has increased over the last number of years in significant ways. Instead of the government stepping in to address that shocking inequality and the rise in inequality, it has often turned to philanthropy and the charitable sector to try to fill in the gaps, and that is not okay.

The charitable sector cannot and should not replace the government's social mission. It should have effective tools to be able to accomplish its work. The charitable sector should not be seen as the solution to government programs, particularly government programs targeted at closing the inequality gap in our country. If social justice were fully realized through effective government policies, particularly at the national level, we would not need to rely on charities to do the critical work of feeding people, clothing people and supporting people who are on the margins. Charity is relied on by government and is not a substitute for social justice policy.

As Paul Taylor, a great activist in Toronto fighting back against food insecurity, has said, “The most effective remedy for food insecurity is also the simplest: provide people with income to purchase food”. This shows clearly that the federal government is not doing enough for people. Food banks, for example, are helping so many, not because food is unavailable in many communities, but because poverty is so high in so many places that people cannot afford to get the food they need. We must recognize that food is a right, not a privilege, and beyond food security, social well-being is also a right, not a privilege.

Because of inadequate social assistance rates provided by governments and because our social safety net has been cut and privatized, many more people in Canada in recent decades have been pushed into poverty, forced to choose between dangerous housing conditions and homelessness and between paying basic bills and the groceries they need. As we have seen during the pandemic and now with the rise in inflation and the increased cost of living, the reality is that people are suffering and families are crying out for help.

While charities help and do important work, we cannot rely on them to replace our collective responsibility in government. It is the federal government that should be stepping in to eradicate poverty in our country and close the growing inequality gap here in Canada.

The solution is clear: Give more to those who have less. I urge the government to take responsibility for helping those in greatest need and to help the most vulnerable with direct support. We saw that take place during the pandemic. I am proud of the work that we did in the NDP to push the government to invest in CERB and to expand supports to students, to seniors and to people living with disabilities. Unfortunately, those supports were only temporary. The reality is that Canadians are suffering and need direct income support now.

I want to acknowledge the important work of my colleague, the member for Winnipeg Centre, who has pushed for a guaranteed livable income, and the support of many in this regard. I also want to acknowledge the important work of many in pushing for tax fairness and recognizing that the richest among us in our country are not paying their fair share. The rich and corporations ought to be paying their fair share so that money can be reinvested in the social programs that are necessary to close the growing inequality gap in our country.

Let us turn to the charitable sector as well. It has been clear, in consultations undertaken by the government and the House of Commons, that charities are subjected to outdated, restrictive and onerous rules. Their funds come from donations that are tax-deductible. However, as the rules are now, charities can spend their charitable dollars only on activities that they undertake themselves. In short, a charity must maintain a “direction and control” role in the activities carried out on its behalf and in the use of its resources by the intermediary.

These restrictions were implemented during the 1950s to ensure that these tax deductions were not diverted to other means than the charitable ones, but it is necessary to recognize that the “own activities” requirement is inefficient and unrealistic. Canadian charities must expend significant time and money to provide their direction and control requirements when they deal with what are known as non-qualified donees.

As a result, charities do not have flexibility. They have limited resources to fulfill their missions, and they are restricted in entering partnerships with other non-profits as a result. As a consequence, charities cannot fully focus on the essential mission that they have defined for themselves.

Bill S-216 addresses these shortcomings. It is a step forward in reforming the charitable sector and it should significantly improve the legislative framework for public and social well-being. It would give charities the flexibility they need on how they can enter into partnership to accomplish their charitable purpose.

Bill S-216 would eliminate the “direction and control” requirement, which would allow charities to transfer their resources to non-qualified donees as long as required measures are taken to ensure that these resources will be used only to fulfill a charitable purpose. This includes the collection of information on the identity, experience and activities of third party recipients before providing resources.

We believe that this bill can address the challenges that the charitable sector is facing. I want to acknowledge those who have come forward to support this proactive solution.

Let us be clear: The federal government has failed to meet charitable organizations' needs with what has been proposed in Bill C-19. We believe that Bill S-216 is a step in the right direction. Let us also be clear that the government's work must remain primary, and we must catch up on the gaps we have created that are pushing so many Canadians through the cracks. It is up to the government to act to address inequality and end poverty in our country.

[Marie-Hélène Gaudreau, Bloc, Laurentides—Labelle, QC]

Madam Speaker, I rise today to speak to Bill S-216, which seeks to amend the Income Tax Act.

I will begin by saying that the Bloc Québécois is in favour of this bill, which eases the fiscal framework for non-profit organizations, or NPOs. For the benefit of those listening in today, I will say that the bill relaxes certain fiscal measures for charitable organizations. Essentially, it amends the Income Tax Act to allow charities to provide their resources to a person who is not a qualified donee, provided that they take reasonable steps to ensure those resources are used exclusively for a charitable purpose.

This will enable them to enter into fairer and more effective partnerships with non-charitable organizations while maintaining accountability and transparency. Introduced a year ago, Bill S-216 is meant to resolve certain issues charities face within the current tax framework. I sincerely hope that it will be passed to help service providers in need.

Before I was elected in 2019, I worked for several years at the Corporation de développement communautaire des Hautes-Laurentides, an umbrella organization for most non-profits in the Antoine-Laurentides RCM. Many of them called themselves charities, non-profit organizations or social economy organizations, but they all had a common goal: to improve the quality of life of the less fortunate. Unfortunately, depending on their sources of income from fundraisers, donations or grants, they were concerned about the quality of their own services because of a shortage of workers. These organizations are obviously also affected by the labour shortage.

I witnessed a situation where an NPO needed a full-time employee simply to fill out applications for assistance for various programs and to report and ensure accountability, which I think is a little counterproductive when the real needs are on the intervention and response front. These organizations are constantly required to review their services. As I mentioned earlier, we need to remember that the services provided by these NPOs are offered precisely because public services are inadequate. That makes them invaluable.

As long as poverty exists, as long as governments fail to invest enough in our more vulnerable citizens, and as long as these invaluable responders are committed to helping the most vulnerable under conditions that are far from competitive, we will need to help them.

The management of the crisis made these organizations even more vulnerable. The demand for additional services increased during the pandemic, and NPOs had a very difficult time handling the situation. Their own volunteers were impacted by the lockdowns. I am thinking in particular of people aged 70 and over who had to isolate rather than provide community services. More than 73% of organizations saw their number of volunteers drop. I was there with them every week, at crisis cell meetings on Zoom. I am very grateful for Zoom, which enabled me to watch them perform miracles with so few resources. I would like to thank them. They played a key role in raising awareness about the harmful effects of the measures put in place for certain groups people and in pointing out the blind spots in the government’s response to the crisis.

The role of these organizations, which was already essential, become even more important during the pandemic. According to the Réseau québécois de l’action communautaire autonome, or RQ-ACA, three-quarters of all community organizations in Quebec witnessed a significant increase in the need for psychological support and assistance, basic needs such as food and housing, and the need for referral to other resources.

It is difficult for me to hear from my former colleagues in the Quebec network of community development corporations that no fewer than 3,000 organizations are facing this challenge. Workers in the sector are on the verge of burnout. A vast majority of these organizations are beset by fatigue and burnout, like all of us, with the few resources they have. Three-quarters of these organizations are still having trouble retaining staff right now, while four out of five have difficulty filling vacant positions. The needs have not changed, people are still obviously vulnerable.

We can agree that non-profit organizations, or NPOs, are an extremely important component of our social safety net. Governments must support them and facilitate their work, while ensuring they are accountable. That is what I was saying earlier. I extend my sincerest gratitude to these organizations, in particular those in the riding of Laurentides—Labelle. I thank them for their kindness, their generosity and their love.

I would like to point out that, by the end of 2020, barely half of these organizations had been able to obtain public financial assistance. While several of them benefited from programs, this bill will help ease the administrative burden caused by the programs’ complexity, as I alluded to earlier.

I must mention that, fortunately, certain programs were implemented, such as the Canada emergency wage subsidy. There are also sources of funding such as emergency federal support for organizations working with the homeless and the emergency community support fund available through the United Way, the Red Cross and community foundations.

However, according to survey data from the Institut de recherche et d’informations socio-économiques, by late 2020, half of these organizations had not received any of the subsidies intended to support the economy during the first wave.

Having seen and experienced the challenges of poverty from the inside, before I became a member of Parliament, I can say that our organizations have difficulty getting funding because their mission requires their workers to fill out forms and ensure accountability. All of the motions introduced in the House to ease, better define or facilitate mutual financial assistance among organizations will be gratefully welcomed by us.

Lastly, I would like to take a moment to explain to people what Bill S-216 is. It seeks to modify the definitions of “charitable activities” and to remove the requirement that activities must be related to the charitable organization’s purpose, allowing an organization to transfer funds to other organizations not recognized as charities. This is a much more flexible framework, and we are pleased with it. In order to ensure accountability, the bill requires that a charitable organization show reasonable diligence with respect to the organizations it plans to collaborate with.

In short, the Bloc Québécois believes that this modernization of the current framework will facilitate the work of NPOs, which can then provide their services more efficiently. Ultimately, Bill S-216 could make it possible to support more people in need.

[Bruce MacDonald, President and Chief Executive Officer, Imagine Canada]

Thank you, Mr. Chair and committee members, for the opportunity to bring important considerations to your attention as you discuss the first budget implementation act.

As you are all aware, the charitable and non-profit sector is a vital part of the very fabric of our communities, improving the lives of everyday people here in Canada, and working with others around the world. In addition, this sector contributes to the nation's economic well-being. Charities and non-profit organizations employ one in 10 Canadians, and contribute 8.3% of Canada's GDP.

As a sector that is of significant importance to supporting Canadians, we were encouraged by two recent announcements in budget 2022. These are the changes to the disbursement quota and the stated intent to amend the Income Tax Act to allow a charity to provide its resources to organizations that are not qualified donees. It was stated that this would implement the spirit of Bill S-216. In combination, these measures would infuse the sector with additional financial resources and allow for more of those new resources to support vulnerable and marginalized communities, including working with organizations often serving and led by Black Canadians, indigenous people and persons of colour.

I'm here today to let you know that the proposed language in the budget implementation act has significantly missed the mark and would, in fact, make things worse for charities wanting to work with non-qualified donees. While the intent is clear, the specific language is hugely problematic.

The spirit of Bill S-216 includes a number of critical elements. It is a made-in-Canada policy solution that reflects our international commitments and integrates the latest evidence-based accountability and trust-based philanthropic principles. Unfortunately, the specific language of the BIA instead offers a rigid and ill-suited integration of U.S. tax measure into Canada's ITA.

We continue to encourage the government to support the spirit and substance of Bill S-216, and a wide collective of organizations, including Cooperation Canada, Philanthropic Foundations Canada, Imagine Canada and a group of the nation's leading charity lawyers, all of whom are offering concrete solutions to improve the legislation.

If not amended, Bill C-19 will have a number of harmful effects. Rather than removing the concept of direction and control, the BIA retains the current “own activities” regime, which requires direction and control. The language of the BIA would then codify direction and control through regulations and make it part of the fabric of the new qualifying disbursements regime.

In practice, casting existing CRA administrative guidance into legislation will result in a less flexible approach, and the CRA will require more direction and control-like conditions than before for qualifying disbursements. This will result in fewer types of collaborations, less flexibility in their design, and fewer partnerships with non-qualified donees overall.

The proposed language does not reflect the spirt of Bill S-216, which is trust-based philanthropy on equal footing, but instead perpetuates the current paternalistic regime by embedding a long and overly prescriptive code-like list of requirements that would govern the relationship between funder and grantee. By doing so, the BIA retains the colonial, parent-child nature of the relationship that we were trying to get away from.

The BIA reinforces and, in fact, enhances the administrative burden. Organizations will have to incur legal fees, hire lawyers and control actions to abide by these regulations.

In order to encompass the spirit of Bill S-216, we are pleased to offer three amendments to the language of the BIA for consideration.

In subsection 149.1(1) of the Income Tax Act, we propose to refine the definition of “qualifying disbursement”. Remove the reference to the disbursement meeting prescribed conditions, and replace it with a requirement that the charity instead take reasonable steps to ensure that the resources disbursed are used exclusively in furtherance of a charitable purpose. This would allow for more inclusive partnerships to better support non-qualified donees providing programs while retaining accountability and further charitable purpose.

In clause 21 of the bill, amend the proposed language in paragraph 168(1)(f) of the act related to directed giving. I won't read the full amendment, but will say that the amendment provides a solution to the directed giving issue in the BIA. The problem with the language isn't that charities can't grant to non-qualified donees, it's that they cannot receive gifts for the specific purpose of giving them to non-qualified donees, even if this aligns with their charitable activities.

Delete proposed regulation 3703 in its entirety. This would allow for the regulations to move back into CRA guidance documents, and not exist as codified rules in the Income Tax Act.

The language of the BIA has yet to be finalized. As members of the finance committee, as members of Parliament and as the voices of your communities, you can have an enormous on the final wording, and I urge you to use that influence and to support these amendments. By doing so, you will establish a system that is more respectful, less complex and less costly, and that can adapt to the needs of the future.

Thank you for your time. I'm happy to answer any questions.

[Kevin Lamoureux, Liberal, Parliamentary Secretary to the Leader of the Government in the House of Commons]

Madam Speaker, I appreciate the opportunity to speak to this particular issue. As I said in my question earlier, there is absolutely no doubt whatsoever in my mind of the good work done by charities. After discussions with many of my colleagues within the Liberal caucus, and I am sure this is true of MPs on all sides belonging to all political parties, I can share endless examples of the good work and the deeds of charities not only here in Canada but also around the world.

If we were to look at it, what we would find is that Canadians on a per capita basis have to be one of the most generous groups of people in the world. I really believe that. I would like to cite a couple of examples. However, before I do that, I would like to recognize Bill S-216 and thank the senator for the fine work she has done in ensuring that it comes for debate in this chamber.

What we are debating today is in good part being discussed in one of our standing committees. The Prime Minister and the government recognized a while back that we wanted to make some modifications, believing that the charitable legislation in place for Revenue Canada for income tax is a fairly comprehensive system of taxation and the need for modifications in certain areas has been well demonstrated. During the pandemic, the Prime Minister, in particular, and other members of this chamber have talked about what we can learn from the pandemic so we can continue to build a better system. One of the things that has come out of that is the need to look at ways in which we can enable more power to our charitable organizations.

Today, Bill C-19, the budget implementation bill, happens to be in a committee, which provides opposition members and all members, through House leadership teams and their colleagues, the ability to contribute to the debate on how we can make some changes to the legislation that will better enable charities going forward. An opportunity for this has been made available for us because the Deputy Prime Minister and Minister of Finance brought forward a budget document through the budget implementation legislation. I would encourage members of all political stripes to contribute. As we have seen in the past, and as we will no doubt continue to see in the future, the government is open to changes and modifications to improve legislation. In fact, I understand some charitable organizations are having that dialogue now to see if there are ways in which we can improve it.

One of the charities I want to highlight concerns Ukraine. When Russia invaded Ukraine, the reaction around the world was fairly profound in the sense that Ukrainian solidarity, if I can put it that way, went well beyond the borders of Ukraine. In fact, Canada's population of Ukrainian heritage is estimated at over 1.3 million people. It captured the imagination of people from coast to coast to coast, even those who are not of Ukrainian heritage, in what we can do as a community here in Canada to support our brothers and sisters in Ukraine, the war heroes in Ukraine. We have organizations, such as the Ukrainian Canadian Congress or Canadian Red Cross, which have charitable tax receipts.

Canadians turn to those organizations by the thousands, and they have contributed millions of dollars. Those charitable organizations are providing humanitarian aid to Ukraine. In fact, the federal government matched funds for donations to the Red Cross. I think initially the cap was $10 million for matching donations, which was quickly used up, so we increased the cap to $30 million, and I believe it hit that also.

This demonstrates a couple of things for me, personally, as I know it does for my colleagues. One is that the fine work our charitable organizations is doing, in this case, for Ukrainian people in Ukraine and the bordering countries, where Ukrainians are fleeing for a safe haven, has absolutely been astounding. Arguably, it is second to very few others. That is one of the reasons Canadians have opened their hearts, wallets and purses, and that is done through charitable organizations.

I understand what the debate is today. What about those who want to be able to contribute? Staying on the topic of Ukraine, there is a new organization recently established in Manitoba called Manitoba Operation Blue Skies. My understanding is that it is 80 volunteers who have all come to the table in the last number of weeks, saying they want to participate and help the people who are looking to relocate and possibly come to Canada, at least for the short term and possibly even the long term.

Manitoba Operation Blue Skies does not have a charitable tax number, so it goes to the Canadian Ukrainian Institute Prosvita, an organization that has been there for many years and given a great deal of support in many different ways. Through the co-operation and indirect support of that organization, and there is a high sense of accountability, Prosvita is able to support Manitoba Operation Blue Skies in some of its initiatives. I do not think there is anyone inside this chamber who would not recognize the value of that.

The idea that there are organizations out there, and I use Ukraine as an example, but it is just one example of many, shows that there are a lot of people who want to do good work, whether here in Canada or internationally. They have demonstrated that, both financially and by providing resources.

The Canadian government does have a role to play, and we recognize that role. That is why it was so important that we incorporated the idea we are talking about today in the budget implementation bill, which will pass. With support, both from opposition members and from government members, the budget implementation bill, I believe, will pass.

We will see some changes, and we are going to see changes because members on all sides of this House recognize the true value and contributions made by the charitable organizations that are rooted here in Canada. Those who want to support those organizations want to be able to continue to play a vital, critical role, not only here in Canada, but also throughout the world.

[Niki Ashton, NDP, Churchill—Keewatinook Aski, MB]

Madam Speaker, I would like to hear the thoughts of my colleague on how Bill C-19 ought to be amended to better reflect what has been put forward in Bill S-216 and how important it is to make sure that good work can be done in this sector.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

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.

[Blaine Langdon]

I would say, in terms of the proposal and what you see in Bill S-216, the aim is by and large the same, but we get there differently mechanically. You can find the prescribed conditions beginning on page 41 of the BIA in proposed section 3703.

In terms of the enforcement of those provisions, what I can say is that the legislation is obviously proposed by the Department of Finance. It's up to the Canada Revenue Agency to propose administrative guidance and look to how they would administer those. It's a bit difficult for me to speak to them.

What I can say is that what's been proposed here in terms of accountability measures and how they would compare to the existing system is that there are similarities, obviously. The proposal to require reporting back from the grantee organization and to have a written agreement are things that you will find in the existing regulations. What we have attempted to do here is to strip out the requirement for direction and control.

Two key things that I would point to would be that registered charities have expressed concerns that having to take over the activity of an organization to take ownership of the activity smacks of paternalism and colonialism, and it's inappropriate in many scenarios, so that would not be required here. Charities would be supporting the activity of the grantee, and it would remain the activity of the grantee.

As well, the direction and control that largely required the charity to be an active and controlling participant in the program has been eliminated under this proposal. Instead, we are emphasizing upfront agreements, upfront due diligence and regular reporting, but the charity wouldn't, on a day-to-day basis, be required to be involved in the activity or direct the grantee as to how these activities would be carried out.

We've tried to encapsulate the spirit of S-216, but as I said, we've approached it slightly differently and we've tried to emphasize concrete accountability measures.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much.

I wanted to come back on the question of Bill S-216. Is it fair to say that the crux of the government's modification of Bill S-216 is in the definition of a “qualifying disbursement”, specifically, proposed paragraph (b), subparagraphs (ii) and (iii), where it says, first of all, that “the charity ensures that the disbursement is exclusively applied to charitable activities in furtherance of a charitable purpose of the charity,” and that “the disbursement meets prescribed conditions”.

I guess my question is where those conditions will be prescribed and, to the extent that part of the goal of S-216 is to try to reduce the administrative burden of charities that have to work with other organizations in order to accomplish their purposes, how does the department envision enforcing this? How do you anticipate the administrative burden of these provisions comparing to the administrative burden under the existing system?

[Blaine Langdon]

Thank you for the question.

I'm not certain I understand correctly your point about a percentage or a ratio. I'll try to outline the differences between the two bills.

Bill S-216, of course, is a Senate public bill that is currently before the House of Commons. It proposes effectively to allow registered charities to make grants to non-qualified donees, provided that the charity puts in place reasonable steps to assure their resources are used for charitable activities. I'm summarizing it a little bit.

The budget proposes to do effectively the same thing, so registered charities would be allowed to make grants to non-qualified donees. It eliminates the requirement that they direct and control the activities of the partner organization.

The difference between the two would be that in the budget proposals, we've proposed specific accountability requirements. The organization would be required to have a written agreement in place, to receive periodic reporting from the organization and to receive final reports from the organization. You'll see this outlined in proposed regulation 3702.

There isn't a specific percentage associated with the amount of control that needs to be exercised. That may be something that is being confused with the budget proposals on the disbursement quota, but beyond that, there's no specific requirement for that proposed here.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you.

I think we touched on this briefly before, but I want to come back to the provisions around the direction and control of resources for charitable organizations. Of course, there's a private member's bill in the Senate, Bill S-216, that deals with the same subject matter, and I understand that many of the provisions in the BIA are similar to those in Bill S-216. My understanding is that the control of the percentages, as it were, of an organization's resources is what has been added in the BIA beyond what's in Bill S-216.

I'm just wondering if someone from the department could confirm that for us, and highlight any other differences that exist between what's contained in the BIA and Bill S-216. Then give a rationale for why that kind of ratio of expenditure was chosen as a control and what the government hopes to achieve by that.

Canada Revenue Agency

[Terry Beech, Liberal, Burnaby North—Seymour, BC]

Mr. Speaker, as I have noted, our government supports the spirit of Bill S-216. I appreciate the member's comments about reducing red tape. I also look forward to the delivery in this house of the budget implementation act and am hopeful to be able to commence that work very soon.

The changes proposed in budget 2022 reflect the spirit of this bill by removing barriers to charities working in partnership with others, while including additional concrete accountability measures that both protect the integrity of the tax system and ensure that tax-assisted donations are used to support charitable activities at home and abroad.

My thanks for the opportunity to make this crystal clear for the benefit of my friend opposite, for all Canadians and for all members of the House.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Mr. Speaker, certainly the requirement for alignment with a charitable purpose is very important. It is also important that we do more to address the red tape that charitable organizations face across the board. I was very proud of the work done by the previous Conservative government around red tape reduction for business. I think we need a similar, broad red-tape reduction initiative around charities saying what all the areas of red tape are that charitable organizations have to deal with and finding ways of achieving the same objectives and necessary oversight that is required, while minimizing red tape and removing direction and control requirements. Doing so in a full and complete way, in alignment with the spirit and the text of Bill S-216 would, I think, go a very long way. Of course, the budget states the general policy direction of the government but the rubber really hits the road when we see the budget implementation act.

I wonder if the member could just share with the House when we will see the changes that are referenced in the budget with respect to direction and control. When will we see them in a budget implementation act, what can we expect and when can we expect them?

[Terry Beech, Liberal, Parliamentary Secretary to the Deputy Prime Minister and Minister of Finance]

Mr. Speaker, I appreciate this opportunity to clarify the government's position for my opposition colleague for Sherwood Park—Fort Saskatchewan. I also heard him inquiring about Bill S-216 during the budget debate today, and I am very happy to have this opportunity to address the issue directly.

Let me begin by pointing out that budget 2022 proposes to amend the Income Tax Act to allow a charity to provide its resources to organizations that are not qualified donees, provided that the charity meets certain requirements designed to ensure accountability. I thank the member opposite for citing the page number for that reference. This is intended to implement the spirt of Bill S-216, Effective and Accountable Charities Act, which is currently being considered by Parliament. I personally have had the opportunity to meet with parliamentarians and senators over the past number of months in order to better understand the spirit and to help navigate some of the concerns that have been raised.

We have proposed changes in recognition of the fact that Canadian charities carry out a wide range of important work, including vital international development and relief activities around the world and direct support to Canadians here at home.

Our government recognizes that Canada's tax rules should support their work and minimize their administrative burdens, while still ensuring accountability for how charitable resources are used. Both the charitable sector and parliamentarians have put forward a number of proposals to achieve these goals, while allowing greater flexibility for charities to support non-profit groups that may not have the ability to pursue charitable status on their own. Our government supports these efforts and our budget proposal reflects this support. Our support for charitable donations is also reflected in the fact that Canada's tax assistance for charitable donations is recognized as being among the most generous in the world, in fact.

In 2022, tax assistance associated with the charitable donations tax credit and deduction is estimated to be over $4 billion. However, given the generosity, registered charities are required to follow the rules set out in the Income Tax Act that ensure the funds are applied to charitable purposes. We recognize the need to ensure that these rules are as up to date as possible and that they support the important work that charities do. Our budget proposal reflects this. I look forward to working with this member and all parliamentarians to implement the measure in the most appropriate way.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Mr. Speaker, the Conservatives have been advocating for a very long time on the issue of direction and control. Direction and control are regulations that severely limit the ability of the charitable sector to do its job. They require that any charitable activities be fully under the direction and control of the charitable organization. This creates problems and needless red tape for organizations that are operating in Canada. It is a particular problem for organizations that are operating internationally.

As many members know and understand, the best practice of international development is when organizations in Canada are able to empower and support those who are acting in their own countries to support development, which really recognizes that the people who are in the process of doing the developing are the heroes of their own story, and the role of international organizations is merely a supporting role for those who are doing that important work. However, direction and control regulations require effectively that those organizations operating overseas be fully under the direction and control of that Canadian organization insofar as it wishes to maintain its charitable status. Not only does this create inefficiencies, needless bureaucratic red tape and millions of dollars in lawyer fees that charitable organizations have to pay every year, it also perpetuates this kind of colonial structure of donor control and the requirement for the foreign organization to be in control of the development activity that is happening on the ground.

We have been advocating for a long time for reforms to direction and control. It was a commitment in the last Conservative platform to make these reforms. It also reflected a unanimous recommendation coming out of the foreign affairs committee in the last Parliament, which directly called out these regulations for being neocolonial in nature. I want to recognize the work of the Senator Omidvar, who put forward a Senate public bill on this, Bill S-216. That bill passed in the Senate twice and is currently being sponsored by my colleague in this House.

With that in mind, I raised the question on this issue in the House a number of weeks ago. Unfortunately, I did not get a very good answer. I was cautiously pleased to see a reference to direction and control on page 195 of budget 2022, which is the first time the government has acknowledged that direction and control regulations are a problem and need to be reformed. The section references Bill S-216 directly, and that the government intends, in its budget implementation acts, to implement the spirit of that bill.

We cannot assume that the fix will fully address the issues. We cannot assume until we have seen those proposed changes what the actual change in the nature of the regulations will be, because Bill S-216 removes the “own activities” requirement and replaces it with an accountability requirement for charitable organizations. The budget does not reference removing the “own activities” requirement. It simply references trying to facilitate mechanisms for easier transfers. It claims it will implement the spirit of Bill S-216, but it does not say it will implement the letter of the bill. As we have seen before, the devil can be in the details, so although the development sector and charitable organizations across Canada are very pleased to finally see at least a recognition of the problem, we are far from certain about whether the solution will be adequate.

Therefore, I would like to hear more from the government on this, because the reference is there in the budget, but it is lacking in clarity. When can we expect the government to implement these changes? Is the government prepared to actually implement the changes in Bill S-216, removing the “own activities” requirement and replacing it with an accountability mechanism? Is the government prepared to work with the charitable sector, including those who work in international development and members of other parties, to ensure that we get it right? It would sure be a shame to get people's hopes up and then not deliver the fix that is required.