Finance Committee on Nov. 1st, 2018

[Pierre Leblanc]

There are a few provinces and territories that have these sorts of programs. In late 2017 the Government of P.E.I. introduced what it calls the grandparents and care providers program, basically to provide short-term living arrangements for children in need of protection. It was this program, among other programs, that triggered the sorts of questions that Trevor just answered for us.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Thank you.

[The Chair, Liberal, Wayne Easter]

Is there anything else on the child benefit section?

[Trevor McGowan]

The next measure is found in clauses 12 and 35 to 38 of the bill. It relates to improving access to the new Canada workers benefit.

Budget 2018 announced the introduction of the Canada workers benefit, which replaces the former working income tax benefit. The first budget implementation bill of 2018 contained the introduction of the new CWB, as well as the enhancement of the program relative to the former working income tax benefit. It also announced that it would be available even in situations where an individual had not applied for it.

Previously, there was a requirement that to obtain the working income tax benefit, an eligible individual would have to apply for it by filling out schedule 6 on their tax returns. That, unfortunately, led to a lot of individuals who were qualified, who were eligible but just didn't know about the program and didn't fill out the correct form, simply not obtaining the tax credits to which they were entitled. This measure would ensure that even in situations where a qualifying individual does not apply for the Canada workers benefit, the Canada Revenue Agency would be able to assess the individual as qualifying for the benefit and provide it to them so that it's available for all Canadians who are eligible to receive it.

I'll just mention quickly, to fill out the clause numbering of the bill, that clauses 13, 18 and 19 contain measures relating to the mechanism of delivery for climate action incentive payments. My understanding is that those will be discussed by a separate committee, but I want to fill out those clause numbers so there are no gaps.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Can you repeat the clauses again please, Trevor?

[Trevor McGowan]

Those were clauses 13, 18 and 19 of the bill.

[The Chair, Liberal, Wayne Easter]

Mr. McGowan, I don't want to bounce back, but we'll have to.

On the Canada child tax benefit one that you explained, which would be part 1(h) in our summary, in the more extensive document, on page 3, it says this amendment will be deemed to have come into force on January 1, 2008. Is that correct?

[Trevor McGowan]

That is correct.

It ensures the measure works appropriately and, as I said, this interpretive issue is dealt with appropriately going back 10 years, which aligns with the period for being able to retroactively go back and claim credits.

[The Chair, Liberal, Wayne Easter]

As long as it's a plus, we don't mind.

Go ahead, please.

[Trevor McGowan]

The next measure is in clause 15 of the bill.

This measure builds upon a measure introduced in the first budget bill of this year, dealing with passive investment income earned by private corporations.

It ensures that in a very particular situation, where losses from a previous year are carried forward to offset taxes under part 4 of the Income Tax Act, which are fairly rare.... You usually don't use loss carried forward to offset part 4 taxes because they're refundable and you get them back when you pay dividends, but if you do and if the offsetting of the part 4 tax would have an impact on both your new ineligible refundable dividend tax-on-hand pool, as well as your more flexible and valuable eligible refundable dividend tax-on-hand pool, then this would ensure that the optimal result for taxpayers is achieved by first reducing the amount of the ineligible refundable dividend tax-on-hand account balance. It's the less favourable one for taxpayers before starting to touch the more favourable eligible account.

This clarifies some uncertainty in the application of the rules for a fairly limited number of circumstances, but it does provide the optimal result for taxpayers.

The next measure can be found in clauses 17 and 20 of the bill. It relates to charities and their political activities. The measure would allow charities to carry on political activities without regard to specific limits, provided those activities are ancillary to and incidental to the fulfillment of its charitable purposes.

The next measure is—

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Mr. Chair, I'd like to read this through, please, before we move on.

[Trevor McGowan]

Charities and political activities were in clauses 17—that's the main clause—and clause 20 of the bill. Clause 20 is a consequential amendment.

[The Chair, Liberal, Wayne Easter]

Mr. Deltell, go ahead, sir.

[Gérard Deltell, Louis-Saint-Laurent, CPC]

Thank you, Mr. Chair. I will speak in French because it's very technical.

First, I'd like to know if we're in fact talking about the part concerning charities and political activities?

[Trevor McGowan]

Yes, that's correct.

[Gérard Deltell]

Okay. I have some comments about that.

It's very hard to define what a partisan or non-partisan political activity is. First, what specific criteria does the government intend to use to define what constitutes a charity—we can understand what that is—that allocates 10% of its resources to non-partisan political activities.

How can you clearly define, first, the 10% rate and, second, the non-partisan political activity?

I can tell you from experience that it's impossible, but I can't wait to hear what you have to say.

[Trevor McGowan]

Thank you for your question.

As with you, the....

Sorry. Go ahead.

[Blaine Langdon, Chief, Charities, Personal Income Tax Division, Tax Policy Branch, Department of Finance]

May I answer you in English?

[Gérard Deltell]

Yes, of course.

[Blaine Langdon]

I just want to clarify what these amendments actually do.

Currently, the requirements of the Income Tax Act are that a charitable organization or foundation must spend at least 90% of their resources on charitable activities and can devote, by virtue of that, up to 10% of their resources towards political activities. What these amendments actually do is in fact remove that restriction and allow charities to spend as much as they would like on political activities, provided that they are in furtherance of their charitable purposes. I just want to make it clear that this is the effect of these amendments, so there will no longer be a 10% limitation placed on charities under the Income Tax Act.

In terms of the defining of what constitutes a charitable activity and a political activity, and in particular what constitutes non-partisan versus partisan, I think over the next couple months we'll be working with the CRA to provide some guidance for the sector and for professionals as to what exactly that means. There is pre-existing guidance on what constitutes a political activity and a non-partisan political activity. It will have to be revisited in light of these amendments, but that's our task for the next couple months.

[The Chair, Liberal, Wayne Easter]

We'll have Mr. Deltell, and then we'll go to Mr. Julian and then Mr. Sorbara.

[Gérard Deltell]

Thank you, Mr. Chair.

If I correctly understand you, you're saying that we're going to adopt this but that we're going to rewrite the guidance to ensure that everyone agrees on the words; and from now until it's rewritten and the specific definition of non-partisan political activities is clearly established, the regulations will nevertheless apply, despite the lack of clarity with regard to non-partisan political activities.

[Trevor McGowan]

I would like to clarify one thing, again, by setting up precisely what this bill does. Currently there's a limit on how much political spending or activities a charity can do that the 10% limit.... It's actually expressed in the legislation as “all” or “substantially all” of your activities can't be political. The general rule of thumb for that is that it's commonly interpreted as 90% or 10%, so that's where that number comes from. You won't actually see 10% in the bill.

There is currently a prohibition, even within that rule, that allows for up to 10% of the activities of a charity to be political in nature. It says that those activities cannot be partisan in nature. That's a currently existing rule in the Income Tax Act and that's not going to be changed.

What is being changed is essentially the 10% limit. Previously you could spend up to 10% of your resources on what you might call political activities, but they couldn't be partisan political activities. Now that 10% limit is lifted, but the requirement that they be non-partisan is maintained and is currently found in the law, so that's not something new that's being introduced by this bill.

[Gérard Deltell]

I want to make a final comment on that. As far as I'm concerned, based on my particular experience, a non-partisan political activity does not exist. Every time you do something, you're partisan. I will give you one example.

For the last three years, I've had the privilege of being a member of Parliament. After three years, I know exactly which organizations are working, and as everybody knows, we can give publicity to some organizations. That year, a specific event had no publicity. They asked a member of Parliament—not me—to give some money from their budget. I was surprised. They said that because I was a Conservative, they didn't want my money. I said, “Hell, I'm not a Conservative. I'm your member of Parliament. This is your money. I want to help you.” They said to me, “No. You're a Tory. We don't want your money”. It was supposed to be a very friendly, harmonious activity, but for them it was a political event.

I can tell you, based on my experience—and I've been in politics for the last 10 years—it's impossible to describe whether a political activity is partisan or not.

[The Chair, Liberal, Wayne Easter]

Mr. Julian.