Registered charities in Ontario should take
note of a time-limited opportunity to obtain a rebate on property taxes paid in
the previous year.
Pursuant to provincial legislation, a
registered charity that occupies property in Ontario classified in the
commercial or industrial property tax classes may be eligible to claim a rebate
of at least 40% of the property taxes that they pay in respect thereof. Ontario law provides that 40% is the minimum
tax rebate that municipalities must offer; however, municipalities are
permitted to exceed this minimum and may provide a rebate of up to 100% of property
taxes paid. They may also offer rebates
on other classes of property. Charities
should therefore consult the websites of their municipality to determine the
availability of and requirements for the rebate in that municipality.
The classes of property in respect of which
taxes are paid are set out on the property assessment notice which the charity
receives from the Municipal Property Assessment Corporation (MPAC). Where the class of property is commercial or
industrial, charities should consider seeking a rebate.
Applications for the rebate must be made to
the municipality in which the property is located. Applications for rebates in respect of the
2011 taxation year must be filed by February
29, 2012. A valid charitable
registration number issued by the Canada Revenue Agency is necessary to
Miller Thomson’s property tax specialists
can advise and assist in applying for this rebate.
As we have reported previously in this
Newsletter, corporations that are currently incorporated federally under the Canada Corporations Act (CCA) must
continue under the Canada Not-For-Profit
Corporations Act (CNCA) by October 17, 2014.
Non-share capital corporations not yet
continued under the CNCA can still operate under the CCA, the corporation’s
current letters patent, supplementary letters patent and bylaws. Such corporations may still make by-law
changes and may apply for supplementary letters patent under the CCA. Thus, a non-share corporation that wishes to
make changes to its structure still has the power to do so before continuing
into the CNCA. For example, a
corporation may wish to change the structure of its membership classes before
non-voting members have rights to vote or to avoid separate class votes under
the CNCA, as discussed in our January 2010 Newsletter
If a corporation needs changes to its
governing documents because its objects or by-laws are outdated, then
transitioning sooner under the CNCA may make sense. If the corporation wants a more modern and
prescriptive legislation, then the change can be made sooner. For example, the CNCA allows corporations to
amalgamate or to continue out of the federal legislation to another
jurisdiction. The CNCA also provides
directors with an objective standard of care, rather than the subjective
standard the directors have under the CCA.
These changes will be welcomed by some corporations.
However, if the corporation likes its
current governance model and is not in need of change or does not want to
change, then the corporation can remain under the CCA for a few years.
Regardless of when the corporation plans to
file its continuance, it is a good idea for all corporations to begin preparing
for continuance. Directors should
review the corporation’s governing documents and consider whether changes are
needed or desired because of operations or the CNCA. The corporation should ensure the list of
its members and directors is up to date.
The corporation needs to prepare articles of continuance. If the corporation is a charity it should
ensure its objects are charitable and consider including the provisions
recommended by CRA, here. The corporation must then have the articles
approved by the members and directors before they are filed with the
The corporation must also prepare and file
by-laws with the government within 12 months of continuing. The by-laws of the corporation will have many
changes because of the many differences in the CNCA. Corporations that have a lengthy by-law may
find that the new by-law is shorter because the CNCA covers many of the issues
that used to be included in the CCA by-law.
The lawyers in Miller Thomson LLP’s Charities
and Not-For-Profit Group can assist corporations continuing into the CNCA by
providing advice about the new legislation and by preparing the necessary
documents to effect the continuance.
technical interpretation released by the CRA on June 27, 2011, the CRA was
asked to consider whether a pastor in charge of a children’s ministry qualified
for the clergy residence deduction.
Youth pastors often fail to qualify for the deduction because they fail the
status test - one of the two tests required to be met to qualify for the
deduction. A brief review of the status
and function tests is warranted here.
status test requires that the individual claiming the deduction be a member of
the clergy, a member of a religious order, or a regular minister of a religious
denomination. The taxpayer in this
technical interpretation sought to be recognized as regular minister. In Interpretation Bulletin IT-141R, the CRA
confirms that a regular minister is an individual who:
authorized or empowered to perform spiritual duties, conduct religious
services, administer sacraments and carry out similar religious functions.
Religious functions may include participation in the conduct of religious
services, the administration of some of the rituals, ordinances or sacraments,
and pastoral responsibilities to specific segments of the religious
appointed or recognized by a body or person with the legitimate authority to
appoint or ordain ministers on behalf of or within the religious denomination;
in a position or appointment of some permanence.
technical interpretation, the individual did not qualify as a regular minister
because his job description provided that an individual filling the Children’s
Pastor position may not be able to perform most of the duties of a regular
minister of the church in question. This
is where many youth pastors fail to qualify for the deduction. Youth pastors are typically young people who
are in training to become full pastors themselves. As such, their ability to perform spiritual
duties, conduct full services and administer sacraments is often limited. To the extent that an individual is permitted
to carry out these functions, and these functions are not reflected in his or her job
description, the problem can be easily rectified by updating the job
description. This is an important reminder
to ensure that job descriptions are accurate, up to date, and drafted with the
individual filling the role in mind.
However, the CRA
concluded that the individual in question did meet the status test by virtue of
being a “member of the clergy”. A member
of the clergy is an individual who has been set apart from the other members of
the church or religious denomination as a spiritual leader. The CRA confirms in IT-141R that it is not
necessary that the process of appointment be referred to as ordination or that
the appointment be by someone higher up in the ecclesiastical hierarchy - it
can be done by the congregation itself. It is sufficient that there be a formal
or legitimate act of recognition, and it requires a serious and long-term
commitment to the ministry.
that a youth pastor meets the status test, the function test is not usually an
issue. To meet the function test, an
individual must be:
charge of, or ministering to, a diocese, parish or congregation; or
exclusively in full-time administrative service by appointment of a religious
order or religious denomination.
in a youth pastor role will typically qualify as “ministering to a
congregation”. The CRA and the courts
consider “ministering” to be a very broad concept of serving or attending to
the needs of a congregation, diocese or parish, or its individual members.
particular technical interpretation, the CRA found that the taxpayer was
ministering to a congregation because as part of his role as children’s
minister, the individual was required to:
oversight to, and be responsible for all aspects of ministry to children and
overall direction and leadership to all staff and volunteers involved in the
equip and train teams for the ministry; and
and mentor team leaders.
The term “congregation” is a broad concept
and can include the youth members of a church.
In IT-141R the
CRA recognizes specialized ministries such as the youth pastor function and
states the following:
who meet the status test performing specialized ministering may satisfy the
function test depending on the significance of the ministry in the particular
religious denomination. Recognized forms of specialized ministry may include
chaplaincies, religious education within a congregation, congregational
pastoral responsibilities for music or youth, ethnic focus ministries,
ministries with overseas or domestic missions, and ministries to the
disadvantaged or disabled…
Based on this, the CRA found that the
individual was ministering to a congregation and thus met the function test as
Individuals who think they may be eligible
for the clergy residence deduction, or charities employing individuals whom
they think may qualify, should feel free to contact us to assist them with
making this determination.
A “qualified donee,” for the purposes of the
Income Tax Act, is a organization to
which a gift may be made by a donor, and in respect of which an official
donation tax receipt may be issued for the purposes of allowing the donor to
claim a deduction or a tax credit. While
all registered Canadian charities are “qualified donees,” so too are, among
others, registered Canadian amateur athletic associations, municipalities,
certain prescribed universities outside of Canada and a list of charitable
organizations outside of Canada that have received a gift from the federal
By consolidating this information on its
website, the Charities Directorate has made it easier for prospective donors to
determine whether they stand to receive a charitable tax receipt prior to
making a donation to an organization. It
should be noted that the list of prescribed colleges and universities outside
of Canada is lengthy and includes a large number of institutions located across
the United States and the United Kingdom.
A more limited list of prescribed colleges and universities is provided
for other countries. Similarly, there is
a limited list of charities to which the federal Crown has made a
donation. These include, amongst others,
the Aga Khan Foundation in Switzerland, the Foundation for Canadian Studies in
the United Kingdom, the William J. Clinton Foundation in the United States and
the British Rhodes Trust Public Purposes Fund.
It is highly recommended that, before
deciding to give to a foreign academic institution or other qualified donee,
donors carefully consult the list of “other qualified donees” to determine
whether they will be able to claim a deduction or charitable tax credit in
respect of the donation that they have made.
Donation Credit Calculator
Individuals who make donations to qualified
donees are entitled to charitable tax credits in respect of the eligible amount
of their donations. The new “donation
credit calculator” permits donors to determine the amount of credit that they
stand to receive, depending on the total value of the gift that they intend to
or have made to a qualified donee and their province of residence. Donors will receive an overall tax credit
that is the sum of the federal and provincial tax credits applicable to each
donation that they make to a qualified donee.
For example, an Ontario resident who made a gift of $1,000.00 to a
registered Canadian charity during the 2011 taxation year will receive a
federal tax credit of $262.00 and an Ontario tax credit of $99.38, for a
combined total tax credit of $361.38, assuming that the donor retains no benefit
or advantage whatsoever in respect of the gift.
Given its usefulness to prospective donors,
charities may want to consider including a link to the new “donation credit
calculator” on their websites.
In the November
issue of this Newsletter, we reported on the draft Guidance issued by the Charities
Directorate concerning the registration of arts organizations. Arts organizations should be aware that, in
addition to the option of applying for registration as a charity using the
normal application procedure, another option exists by which an arts
organization can obtain status as a qualified donee under the Income Tax Act, which would make it tax exempt and
capable of issuing donation receipts.
Tax Act provides that organizations that are registered under the Act as
“national arts service organizations” (NASO) are treated as registered
charities that are designated as charitable organizations. In order to be so registered, organizations
must proceed through a two step process.
First, the organization must apply to the
Ministry of Canadian Heritage for designation as a NASO. In order to be eligible for this designation,
it must meet three criteria:
It must be a non-profit
It must have as its purpose the
promotion of the arts on a nation-wide basis through activities such as
sponsoring arts exhibitions or performances, conducting workshops and
development programs relating to the arts, or organizing and sponsoring
conferences, competitions and special arts events.
It must demonstrate that its
membership represents, in one or both official languages of Canada, the
community of artists in one or more recognized sectors of the arts (including
theatre, dance, opera, music, painting, sculpture, drawing, crafts, design,
photography, literary arts, film, sound recording).
The applicant must also meet the other
criteria applicable to registered charities designated as charitable
organizations. Specifically, more than
50% of the directors, trustees and officers of the organization must be at
arm’s length with each other, and not more than 50% of the property of the
organization can have been contributed by one person or members of a related
If the Minister of Heritage determines that
the organization qualifies as a NASO, the organization must then apply to the
Canada Revenue Agency for registration.
As a practical matter, the Ministry of Heritage will forward the
necessary documentation to CRA for consideration upon determining that the organization
qualifies. CRA will review the
application to determine whether it meets certain additional requirements under
the Income Tax Act. In addition to being designated as a NASO by
the Minister of Heritage, the organization must meet the following
It must be resident in Canada and formed in
The activities of the
organization must be confined to one or more of a list of activities that
includes the following:
promoting or conducting
research into one or more art forms;
sponsoring arts exhibitions or
representing the interests of
the arts community or a sector thereof (but not of individuals) before
government, judicial, quasi-judicial or other public bodies;
conducting workshops, seminars,
training programs, etc., relating to the arts for members of the organization;
educating the public about the
arts community or the sector represented by the organization;
organizing and sponsoring
conventions, conferences, competitions, and special events related to the arts
conducting arts studies and
survey of interest to members of the organization relating to the arts
acting as an information centre
or maintaining a resource databases relating to the arts community.
an organization is registered as a NASO by CRA, it is treated for income tax
purposes as a registered charitable organization. This means that it is exempt from income tax,
it can issue donation receipts to donors allowing them to claim donation tax
credits or deductions, and it is eligible to receive gifts from other
A link to the Ministry of Canadian Heritage
website which contains information on the application process, as well as the
necessary application forms, is available here.
Arts organizations should consider whether
registration as a NASO, or registration through the normal charitable
registration process, may be right for them.
Miller Thomson’s Charities and Not-for-Profit lawyers can advise on and
assist with either of these registration processes.
Lazier wrote "Ontario
Government Website on the New Corporate Act” in Charitable Thoughts, a publication of the Ontario Bar Association
Newsletter, Charity and Not-for-Profit Law Section, in January 2012.
Stacey wrote "What
Happened Over the Summer – An Update on Recent CRA Publications and Cases for
the Charities and Not-for-Profit Law Practitioner” inCharitable
Thoughts, a publication of the Ontario Bar Association Newsletter, Charity
and Not-for-Profit Law Section, in January 2012.
wrote "Recent Case Highlights Importance of Proper Receipting” in Charitable Thoughts, a publication of
the Ontario Bar Association Newsletter, Charity and Not-for-Profit Law Section,
in January 2012.
Iain Benson gave a closing public
presentation on "Religion and Creed
in the Public Square” to a Policy dialogue on “Creed Freedom of Religion
and Human Rights” sponsored by the Ontario Human Rights Commission and The
University of Toronto Religion in the Public Sphere Initiative on January 13,
This publication is provided as an information service and may include items reported from other sources. We do not warrant its accuracy. This information is not meant as legal opinion or advice.
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