Charities Directorate Plans for 2011
By: Arthur B. C Drache C.M. Q.C.

    In earlier years of producing this newsletter, we often in our January issue did a piece about the coming year in which we tried to predict key events which our readers might look out for. In particular we tended to make predictions about the federal budget which were often breathtakingly wrong and which persuaded us (with so much egg on our face) that predicting is a mug's game.

    For example, we believe that the next federal budget will be something of a slash and burn document vis a vis spending which one which will not offer much in the way of tax relief or tax incentives. None of that can be positive for the sector. But who knows whether some specific charity oriented proposal might grab the Minister's fancy and become an important aspect of the Budget.though if that were to happen we can bet it won't be a change which is "costly" to the fisc and might simply be another measure which has a negative aspect in charity operations.

    That having been said, we were pleasantly surprised to read the November issue of the Charity Directorate's "Charities Connection."[1] This newsletter for, we think, the first time, has given us a preview of what the Directorate intends accomplishing in 2011.

    The more mundane "promise" is that in January 2011, because of the statutory changes to the Income Tax Act it will mail a package to charities that have a fiscal year ending in December. The package will include:

·         Form T3010-1, Registered Charity Information Return

·         Form TF725, Registered Charity Basic Information Sheet

·         Form T1235 (09), Directors / Trustees and Like Officials Worksheet

·         Form T1236 (10), Qualified Donees Worksheet / Amounts Provided to Other Organizations

·         Private foundations will also receive Form T2081, Excess Corporate Holdings Worksheet for Private Foundations.

    In January 2011, an updated Guide T4033-1, Completing the Registered Charity Information Return, will be available online.

    All that was to be expected.

    From our perspective, the most interesting and surprising announcement was that the directorate said that it will be publishing four new consultation documents.

·         Guidance on arts Organizations and Charitable Registration

·         Promotion of Animal Welfare and Charitable Registration

·         Charitable Purposes and Activities for Protecting the Environment

·         Complementary and Alternative Health Services

    We cannot remember when there was such a public announcement which amounts to an undertaking to actually produce such documents which take a notoriously long time to finalize even in the form of consultation documents. We also find of some interest the topic chosen. While clarity and guidance on all would be welcome, the only one which we perceive as being a topic which is pressing (and has been for many years) is the one dealing with the environment.

    The process, as most readers are aware is that the document is published and the public has a fixed period of time to comment. After the comment period, the bureaucrats go back to the drawing board and produce what is usually a finished and format document. This can take many, many months and sometimes years. (As we write this, we are still awaiting the final document on the promotion of religion even though it was circulated to a select group for further comment in September.

    We have to say that we were pleasantly surprised with the announcement which even in advance of the publication of the discussion draft will give interested parties a "heads up" on what is supposedly coming in 2011 and gives them an opportunity to think about what they would like to see in the guidances.

    In addition to these new guidances, the Charity Directorate made the following announcement which we believe may be of huge importance to hundreds of organizations.

    "Many organizations in Canada conduct activities abroad for a variety of purposes. Released in July 2010, this guidance document provides clear explanations on the "own activities" test, working with intermediaries, and keeping direction and control of resources.

    We will soon publish Using an Intermediary to Carry out a Charity's Activities within Canada." (Our emphasis.)

    While the vast majority of organizations which carry on work outside Canada use intermediaries and have become familiar with the huge constraints the Directorate puts on them, it is possible to use intermediaries (agents, joint ventures and the like) within Canada but there has been little official guidance on the subject. Presumably the rules in a domestic setting will be somewhat easier to comply with and we will be watching with interest what the Directorate comes up with.

    But as we are all aware, it is one thing to make promises but it is another thing to deliver on those promises. We will be waiting with anticipation to see whether the Directorate promises can be fulfilled and then, of course and more importantly, whether the guidances are reasonable in the context of how charities actually operate or whether they will create new barriers for charity compliance.