Mr. Chair and members of the finance committee, thank you for the opportunity to appear before you today concerning Bill C-19, the budget implementation act, and specifics related to charities.
I've spent 30 years working in the charitable sector. Back in August 2019, Samaritan's Purse studied the Senate report on the charitable sector, specifically the pages concerning CRA direction and control. We decided to pursue changes to ITA legislation to correct problems we and many other charities in Canada have been experiencing. Samaritan's Purse then joined Cooperation Canada, where I am co-chair of the direction and control working group.
I don't know the precise history, but about 70 years ago the Government of Canada enacted legislation in the ITA that enabled charities to function but required that they only pursue their “own activities”. Subsequent to this, the CRA policy was developed around this idea.
I need to mention that the idea of “own activities” is unique to Canada. No other country uses this concept and every other country has found ways to hold non-profits accountable without using the idea of “own activities”. It is the cause of the problems we are dealing with today and the issues within the budget implementation act.
Cooperation Canada, Imagine Canada and Philanthropic Foundations Canada, together with a group of Canada's leading charity lawyers and Senator Omidvar, worked together for the last two years bringing forward Bill S-216. Bill S-216 would have eliminated “own activities” requirements, but in the last days, and after two years of advocating for changes to the Income Tax Act, this year's budget announcement indicated that the charitable sector's concerns had been heard. We were grateful for this and considered it a great success.
However, our initial euphoria turned to concern when the details of the BIA emerged. The BIA proposes changes to the Income Tax Act that would add new rules allowing charities to make “qualifying disbursements” or grants to non-qualified donees. The qualifying disbursement mechanism is a workaround to the problem of “own activities”. The BIA claims this would provide the needed funding mechanism for charities to work with non-charities and that this was in the spirit of Bill S-216, but what the BIA proposes is not in the spirit of Bill S-216. Instead, it would add 800 words of tightly defined, inflexible and prescriptive terms and conditions to the ITA.
The BIA's proposed qualifying disbursement mechanism will not work and will not be used by charities. Charities need to work with non-charities. This happens in Canada and around the world. The ways these partnerships and arrangements take shape are complicated and are determined by contextual realities, current events, cultures and a myriad of other factors.
I'll give some examples. In the last month, Samaritan's Purse, my organization, and many other organizations have responded to the Ukraine crisis. We are currently working with 17 local partners across Europe that are providing assistance to Ukrainian refugees. Another aspect of international work is that many charities are affiliated parts of larger networks. When they come together to respond to events like Ukraine, they need to be able to easily combine or pool their resources in a common response. This increases effectiveness and efficiency. Other charities are engaged in long-term development projects involving multiple partners, complex programs, funders and local governments. Lastly, within our own country, the government provides funding to charities, expecting them to work with community groups, marginalized, racialized and indigenous groups, and other non-charities.
I need to make it clear that the BIA's proposed inflexible terms and conditions don't work in any of these contexts. The qualifying disbursement mechanism would provide a one-size-fits-all regulatory straitjacket. The qualifying disbursement mechanism doesn't fit the real world. With this approach, we appear to be taking the problems of “own activities” and making them worse. Charities will avoid using this mechanism and its codified rules in the ITA because any failure to perfectly comply would result in a loss of charitable status.
If the BIA proceeds as is, we would see a combination of ITA regulations, CRA policy and a regulatory hierarchy that would be complicated and confusing. This should not be allowed to happen.
If we're going to work around the problem of “own activities”, we need to make amendments to the BIA to connect a qualifying disbursement mechanism to the practical realities and operations of charities. We all acknowledge the need for accountability. The CRA needs to monitor and enforce policy when tax-protected dollars are involved. The charities themselves are concerned about integrity and the public trust that they must preserve with their donors.
Nobody is asking for relaxed or reduced accountability. We need appropriate accountability for practical, workable mechanisms for engagement with non-qualified donees. The BIA as is will not provide this. The committee already heard earlier this week from Bruce MacDonald of Imagine Canada and has received a detailed briefing note from the three organizations, Imagine Canada, Cooperation Canada and Philanthropic Foundations Canada, which was signed by 66 significant Canadian charities.
If I have time, I'd like to restate the three specific amendments we are seeking: to refine—