Briefing Note on Bill S-216 – The Effective & Accountable Charities Act
Imagine Canada has prepared a briefing note on Senator Omidvar’s Bill S-216, the Effective & Accountable Charities Act. Read an excerpt of the briefing note:
Our ask to you today:
We need your support! We’re asking that provisions from Bill S-216, The Effective and Accountable Charities Act, be passed into law.
Introduced into the Senate by Senator Ratna Omidvar in November 2021, the Bill would amend the Income Tax Act to enable charities to establish more efficient collaborations with non-charities while still ensuring accountability and transparency. The Bill passed quickly in the Senate and now has been introduced into the House of Commons by MP Philip Lawrence (Northumberland-Peterborough South) and seconded by MP Heather McPherson (Edmonton Strathcona).
The Issue
Simply put, the rules in Canada governing how charities can build meaningful, authentic and respectful working relationships with non-charities are out of date.
Current rules prevent charities from providing funds to non-charities unless they enter into an agreement under which they exercise “direction and control” over the activities of their non-charity partner. This creates unequal power dynamics between the funder and the fundee – often larger, more established charities and smaller, grassroots organizations.
Without getting into the details of the Bill, what the Bill does is propose changes to the technical language of the Income Tax Act to remove the requirement which resulted in the ‘direction and control’ requirements. The intention is that the new legislation will lead to the issuance of a new CRA guidance that will focus on how to ensure the resources contributed to these working relationships will be used to further the charity’s charitable objective. In other words, the new administrative policy will eliminate the need for the funding charity to take on ‘direction and control’ while still requiring the funding charity to diligently enter into these relationships.
The Bill places the focus where it should always have been – ensuring that charitable funds are used for their intended charitable purpose – while removing artificial and antiquated requirements that do nothing to further this objective but impose significant inefficiencies and costs on the charitable sector and the
beneficiaries they serve.
Why direction and control reform matters
Domestically, the current rules result in fewer charitable dollars flowing to certain communities. For various reasons, organizations from equity-seeking communities, such as Black and Indigenous-led organizations, are disproportionately less likely to have charitable status despite doing incredibly impactful work. This means charitable foundations funding this work often partner with a non-charity to further their purposes. The rules also create a significant administrative burden for the charity providing the funds, leading to a hesitancy to partner with non-charities.
Internationally, Canada is known for its development and aid work. However, because the local partners that Canadian charities work with on the ground often don’t have charitable status in Canada, the current direction and control rules require unnecessarily paternalistic forms of control rather than facilitating a collaborative way of achieving the charitable purpose.
The changes proposed in Bill S-216 would allow both domestic and international development charities to embody Canadian values (like those espoused in Canada’s official international development policy) by creating more respectful and enabling relationships with local organizations in Canada and around the globe.
Click here to read the full briefing note.