1. Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. M I L L E R T H O M S O N LLP Introduction to Charity Law Session 1 – General and Provincial Law Robert B. Hayhoe rhayhoe@millerthomson.ca 416.595.8174 Canadian Council of Christian Charities Annual Conference 2002 (Calgary) September 26, 2002

2. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 2 Outline Session 1 General and Provincial Law Session 2 Establishing a Charity / Tax Compliance

3. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 3 Authority Religious Authority Secular Authority –Provincial and federal –Specific and general

4. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 4 Religious Authority Overriding duty to obey religious authority Implied or specific religious duty to obey secular authority

5. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 5 Purposes Profit purpose Non-profit purpose Charitable purpose

6. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 6 Income Tax Categories Taxable entities Non-profit organizations –Defined as non-charitable Registered charities –Unregistered charities are taxable

7. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 7 Charitable Purpose 1601 Statute of Elizabeth Commissioners of Inland Revenue v. Pemsel (1891) decision of English House of Lords

8. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 8 1601 Statute of Elizabeth Preamble (modernised): the relief of aged, impotent and poor people; the maintenance of sick and maimed soldiers and mariners, schools of learning and free schools and scholars of universities; the repair of bridges, ports, havens, causeways, churches, sea banks and highways; the education and preferment of orphans; the relief, stock or maintenance of houses of correction; marriages of poor maids; supportation, aid and help of young tradesmen, handicraftsmen and persons decayed; the relief or redemption of prisoners or captives; the aid or ease of any poor inhabitants concerning payment of fifteens; setting out of soldiers and other taxes.

9. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 9 Lord Pemsel’s Case Charitable nature of Moravian missions "Charity" in its legal sense comprises four principal divisions: –Trusts for the relief of poverty; –Trusts for the advancement of education; –Trusts for the advancement of religion; and –Trusts for other purposes beneficial to the community, not falling under any of the preceding heads.

10. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 10 Public Benefit “Heads” are only charitable if for the public benefit Law assumes that religion has a public benefit –absent proof to the contrary Contemplative religious orders Secular society

11. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 11 Canadian Constitutional Considerations Constitution Act, 1867: 92. In each Province the Legislature may exclusively make Laws in relation to Matters coming within the Classes of Subjects next hereinafter enumerated; that is to say,... 7. The Establishment, Maintenance, and Management of Hospitals, Asylums, Charities, and Eleemosynary Institutions in and for the Province, other than Marine Hospitals.

12. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 12 Provincial Authority General Charities Regulation –Attorney General’s duty to protect charitable property Ontario Public Guardian & Trustee (http://www.attorneygeneral.jus.gov. on.ca/html/PGT/pgthome.htm) –Supervisory jurisdiction of Superior Courts

13. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 13 Fiduciary Duty Duty of utmost good faith –Duty to prefer interest of beneficiary to own –Good neighbour principle Applies to a charity and to its directors and officers

14. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 14 Duties of Directors/Officers 1of KNOWLEDGE 2of CARE 3of SKILL & PRUDENCE 4of DILIGENCE 5to MANAGE 6FIDUCIARY 7AVOID CONFLICT of INTEREST 8ACT IN SCOPE of AUTHORITY Resources: –Books –Training Governance consultants Legal counsel governance seminars

15. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 15 Human Rights Religious or moral discrimination in hiring/firing –Prohibited for religious organizations unless: Individual bona fide occupational qualification

16. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 16 Fundraising Legislation Charities Act (Prince Edward Island) –Registration requirement Charitable Fund-raising Act (Alberta) –Registration requirement Charities Endorsement Act (Manitoba) –Registration requirement

17. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 17 PRIVACY Federal Personal Information Protection and Electronic Documents Act –Applies January 1, 2004 to selling or trading fund raising lists unless equivalent provincial law requires consent to use of personal information requires information security Draft Ontario Privacy of Personal Information Act, 2002 –Applies specifically to charities operating (including fundraising) in Ontario requires informed consent to use of personal information requires information security

18. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 18 Other General Law Health & Safety Labour/Employment Property Tax Regulation of Specific Activities –social services Intellectual Property –trade-marks –official marks

19. Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. M I L L E R T H O M S O N LLP Introduction to Charity Law Session 2 – Establishing a Charity/ Tax Compliance Robert B. Hayhoe rhayhoe@millerthomson.ca 416.595.8174 Canadian Council of Christian Charities Annual Conference 2002 (Calgary) September 26, 2002

20. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 20 Outline Session 1 General and Provincial Law Session 2 Establishing a Charity / Tax Compliance

21. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 21 Formation Trust (governed by trustees) –Flexible –Moderately clear law –Trustee liability –Used for foundations

22. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 22 Formation Unincorporated Association (governed by members / directors) –Flexible –Unclear law –Director liability –Possible member liability –Often used by churches Cheap to establish Vagueness permits Spirit-driven decision-making

23. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 23 Formation Corporation (governed by members / directors) –Separate legal person –Clear law –Limited liability –Choice of federal or provincial

24. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 24 Application for Charitable Registration T2050 Form submitted to CCRA –Charitable activities –Expected financial data –Governing documents CCRA Guide T4063 Registering a Charity for Income Tax Purposes

25. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 25 Application for Charitable Registration T2050 assigned to CCRA officer –Poorly trained –Bias against registration –Excessive workload Discussions / correspondence with CCRA Registration decision letter –FCA appeal if not granted

26. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 26 Charitable organization –Not private foundation –Performs own charitable activities Public foundation –Not private foundation –Funds other charities Categories of Registered Charity

27. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 27 Categories (cont’d) Private foundation –Non-arm’s length board, or –One primary funding source Private foundations subject to more restrictive donation rules

28. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 28 CCRA Sanctions Only penalty for most tax rule violations (even poor records) is deregistration –Results in a tax on the charity equal to 100% of assets Capital punishment Intermediate sanctions proposed by VSI Joint Regulatory Table

29. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 29 Record Keeping Minute book Duplicate receipts with back-up 10 year gift documents Proof of charitable purpose of all activities

30. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 30 Annual Return T3010 –Filing deadline of 6 months after year end –Failure to file is most common reason for revocation of registration Reregistration is possible but not guranteed CCRA Guide T4033 Completing the Registered Charity Information Return

31. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 31 CCRA Audits Designed to ensure tax compliance Contact CCCC or professional advisors immediately Cooperate with the auditor Provide only requested information (after advice on propriety of request) CCRA Guide T4118 Auditing Charities

32. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 32 Receipts Gift –“Voluntary transfer of property without consideration” Any hint of benefit to anyone - get advice No receipt for services CCRA IT-110R3 Gifts and Official Donation Receipts

33. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 33 Receipt Contents Regulation 3501 –Name / address, registration number of charity –Receipt serial number –Place receipt issued –Date of donation and of receipt –Description of property donated and appraisal information (non-cash gifts) –Name / address of donor –Amount of gift –Signature

34. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 34 Foreign Activities Registered charities can minister anywhere Registered charities can only grant to other registered charities Registered charities can contract with foreign charities

35. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 35 Working with Foreign Charities CCRA Guide 4106 Registered charities Operating Outside Canada –Agency agreements –Joint ministry agreements Court just denied de-registration appeals by two prominent Jewish charities

36. M I L L E R T H O M S O N LLP Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. 36 More Information Professional Advice CCCC www.ccra-adrc.gc.ca/tax/charities Miller Thomson Charities and Not- for-Profit Newsletter –www.millerthomson.com or charitieseditor@millerthomson.ca

37. Toronto Vancouver Calgary Edmonton Markham Waterloo Region Whitehorse Washington, D.C. M I L L E R T H O M S O N LLP Introduction to Charity Law Robert B. Hayhoe rhayhoe@millerthomson.ca 416.595.8174 Canadian Council of Christian Charities Annual Conference 2002 (Calgary) September 26, 2002