Every year the federal government asks Canadians what its priorities should be in the next budget.
This year the CBA’s Charities and Not-for-Profit Law Section has essentially replied: “Let our people make money.”
The Section says creating a regulatory environment that allows organizations to work efficiently is consistent with the government’s commitment to modernizing the regime for charities and not-for-profits, and with its support for social enterprise and social finance activities.
“We urge the federal government to amend the Income Tax Act to clarify that charities and not-for-profit organizations must be able to innovate, carry on business activities and earn tax-exempt profits, as long as those profits are used for the purposes of the organization and not for the undue benefit of any party or the personal benefit of any director, shareholder or member, directly or indirectly,” the Section writes in its submission to the Finance Committee. “We also urge the federal government to remove barriers that inhibit charities from working with not-for-profits or non-registered charities, allowing them to maximize their success.”
The Section notes that the charitable and not-for-profit sector accounts for more than 8.1 per cent of Canada’s GDP, roughly $135 billion in income, employs two million people and benefits from the volunteer resources of another 13 million, the equivalent of another million full-time jobs.
Organizations participating in the government’s Social Innovation and Social Finance Strategy and its associated Steering Group have recognized the need to rationalize tax regulatory issues that keep the charitable and not-for-profit sector from generating revenue. Registered charities, the Section notes, are limited by rules on related business activities, and not-for-profits are limited in their ability to earn a profit.
“As registered charities and not-for-profits struggle to innovate and be sustainable, these separate and often contradictory rules are often overlooked or misunderstood, causing compliance problems for the organizations. CRA administrative policies are often dated and inadequately address the current context of social innovation and social enterprise.”