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.