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A Roadmap to a Stronger Charitable Sector

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A Roadmap to a Stronger Charitable Sector For more information please contact us: By email: [email protected] By mail: The Senate Special Committee on the Charitable Sector Senate, Ottawa, Ontario, Canada, K1A 0A4 This report can be downloaded at: www.sencanada.ca/en/committees/CSSB/42-1 Twitter: @SenateCA (follow the committee using the hashtag #CSSB) Ce rapport est également offert en français 2 Catalyst for Change: A Roadmap to a Stronger Charitable Sector Table of Contents Table of Contents .................................................................................. 3 Members ................................................................................................ 7 Order of Reference ................................................................................ 9 Executive Summary ............................................................................. 11 Recommendations ............................................................................... 14 Foreword ............................................................................................. 23 Part 1: Strengthening the Sector ......................................................... 25 Section 1: People in the sector ......................................................... 26 Volunteering ....................................................................................... 27 Recruitment and retention ................................................................. 27 Recognition and Compensation ........................................................... 31 Staffing .............................................................................................. 33 Governing ........................................................................................... 38 Section 2: Funding the sector ........................................................... 40 Tax Treatment of charitable and non-profit organizations .......................... 40 Grants and contributions ...................................................................... 44 The “real” costs ................................................................................ 45 Duration of agreements ..................................................................... 45 Application and reporting requirements ................................................ 47 Earned income, social enterprise and social finance, and procurement ..... 49 Section 3: Supporting the sector ....................................................... 54 Data .................................................................................................. 54 Capacity ............................................................................................. 56 Capacity to meet demand for services ................................................. 56 Technological capacity ....................................................................... 57 Capacity to innovate .......................................................................... 57 The relationship with the federal government .......................................... 59 Canada Revenue Agency .................................................................... 59 Advisory Committee on the Charitable Sector ....................................... 60 3 Catalyst for Change: A Roadmap to a Stronger Charitable Sector A “home” for the sector ..................................................................... 61 Part 2: Modernizing the Legal and Regulatory Framework Governing Charities and Non-Profit Organization ................................................. 63 Overview ............................................................................................ 64 Jurisdiction ....................................................................................... 64 Definitions ........................................................................................ 65 Section 1: Modernizing the Legal Definition of Charity ...................... 68 Statute versus common law .................................................................. 68 Challenges identified by witnesses ......................................................... 69 Overview ......................................................................................... 69 Why do these challenges arise and why do they matter? ........................ 71 Possible solutions ................................................................................. 73 Enacting a statutory definition ............................................................ 73 Tax Court of Canada .......................................................................... 74 Qualified donees and other tax preferred entities ..................................... 78 Section 2: Regulating Charitable Endeavours .................................... 81 Categories of registered charity ............................................................. 82 Challenges identified by witnesses ....................................................... 83 Proposed solutions ............................................................................ 83 Political activities ................................................................................. 84 Reaction to the reforms ..................................................................... 86 Business activities ................................................................................ 88 Challenges identified by witnesses ....................................................... 88 Proposed solutions ............................................................................ 89 Direction and control/Own activities ....................................................... 92 Challenges identified by witnesses ....................................................... 93 Possible solutions .............................................................................. 95 The no gifts to non-qualified donees rule ................................................ 97 Challenges identified by witnesses ....................................................... 98 Proposed solutions ............................................................................ 99 Review of Income Tax Act provisions relating to charities .......................... 99 Section 3: Invincentivizing the Donation of Real Estate and Private Company Shares ............................................................................. 101 4 Catalyst for Change: A Roadmap to a Stronger Charitable Sector Potential advantages and disadvantages of eliminating the capital gains on tax charitable donations of private company shares and real estate ......... 102 Practical challenges related to eliminating the capital gains tax on donations charitable of private company shares and real estate ............................. 105 Section 4: Donor Advised Funds...................................................... 109 Advantages of donor-advised funds ...................................................... 109 Challenges associated with donor-advised funds .................................... 110 Potential solutions .............................................................................. 112 Section 5: Non-Profit Organizations ................................................ 114 Treatment of Surpluses Held by Nonprofit Organizations ......................... 115 Challenges identified by witnesses .................................................... 116 Proposed solutions .......................................................................... 117 Member-Benefit Versus Public-Benefit Nonprofit Organizations ................ 118 Canada Not-for-profit Corporations Act ................................................. 119 Transparency .................................................................................... 119 Review of Income Tax Act provisions relating to non-profit organizations .. 120 Section 6: Regulating Charitable Endeavours ................................. 122 Canada’s anti-spam legislation ............................................................ 122 Director Eligibility .............................................................................. 123 Conclusion ......................................................................................... 126 Appendix A: Electronic Consultation Findings .................................... 128 Introduction ...................................................................................... 128 Methodology ..................................................................................... 128 Highlights ......................................................................................... 128 Analysis ............................................................................................ 129 Biographical questions (Questions 1–7) ................................................ 129 Identifying Information (Questions 1 and 2) ....................................... 129 Geographical Data (Questions 3 and 4) .............................................. 129 Organization Size and Employment Type (Question 5) ......................... 130 Diversity (Question 6) ..................................................................... 133 Area of Activity (Question 7) ............................................................ 135 Attitudinal questions (Questions 8–17) ................................................. 136 Overarching Challenges (Question 8) ................................................. 136 5 Catalyst for Change: A Roadmap to a Stronger Charitable Sector
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