Legal Mechanisms to Encourage Development Partnerships

Country Reports: North America

The International Journal
of Not-for-Profit Law

Volume 1, Issue 1, September 1998

Canada; United States


Recent Events in Canada
By Arthur B. C. Drache, Q.C.

1998 has, so far, been one of the busiest years in Canada for charities and non-profit organizations insofar as legal developments and research are concerned.

In February, The Supreme Court of Canada heard its first case in more than 25 years dealing with the definition of what is “charitable.” The case involved the appeal of The Vancouver Society of Immigrant & Visible Minority Women which was refused registration as a charity under the common law rules. The core of the issue is what is meant by “educational activities.” The Society did not sponsor structured courses but rather offered advice on how such women could deal with government agencies and get employment through informal seminars and conferences. As this is written (in late August), the court has not rendered its decision which will have huge implications for the definition of the term “charity” in Canada.

There have been two studies of significance which are being discussed.

The Panel on Accountability and Governance in the Voluntary Sector (PAGVS) was established in October 1997 by the Voluntary Sector Roundtable. Its mandate is to review current accountability practices within the voluntary sector, develop proposed guidelines and practices to promote accountability within the sector, and lead a broad consultation on these proposals.

The public consultation phase of the Panel’s work commenced in the spring of 1998 and a major discussion paper was issued in May, dealing with all aspects of non-profit governance, the definition of charity and the possibility of setting up a Canadian version of a Charity Commission. The Panel (known as the Broadbent group after its Chair) is now taking comments on the discussion paper and a final report is due at the end of the year. The discussion paper can be found at

The final report will be found at its web site at which offers much background information as well as the opportunity for comment.

In January, after a delay of several years, the Ontario Law reform Commission published a two volume report “On The Law of Charities.” This is a massive paper which critically reviews of the law and in our view will take its place with the English Goodman and Nathan reports as a definitive study of the common law of charities.

That’s the good news. The bad news is that in the name of cost savings, the Law Reform Commission was abolished a year or so ago and only a comparative handful of the study was published in paper.. However, the full report (almost 700 pages) is available at the web site of the Attorney General of Ontario. The “address” is

“Revenue Canada” charity division has also issued three discussion papers which may be of interest. These may be found at the division’s web site at

The above noted items represent only the tip of the iceberg on Canada insofar as the third sector is concerned. There are an unprecedented number of cases heading for court of charity-related issues. And there is growing concern in the community that Canada is being left behind on many issues such as related business activity (a growing funding area), definition, political activity and advocacy to name just a few. We shall report to readers as various of these matters develop.

Arthur B. C .Drache, Q.C.
Ottawa, Ontario, Canada

For a complete listing of the Documents ICNL has in its documentation center on Canada, Click Here!



1. Framework Legislation

The State of Pennsylvania enacted legislation in 1997 that overturns court decisions limiting the real property tax exemption for charitable not-for-profit organizations. A useful article on the “Institutions of Purely Public Charity Act” of 1997 can be found in the magazine Responsive Philanthropy, Summer 1998 issue. The article is entitled: Pennsylvania Law Curtails Attacks on Charitable Exemptions, and is found on page 5. Subscription information is available by contacting

2. Tax Legislation:

A. There are several initiatives in Congress to try to increase the availability of the charitable contribution deduction as a means of encouraging civic involvement in the provision of social services. There are bills pending in both the House and Senate that would make the deduction available to nonitemizers. In addition, the report of the Commission on Civic Renewal calls for an expansion of existing tax benefits.

B. On July 30, 1998 the Internal Revenue Service released the proposed regulations on the “intermediate sanctions” provision of the Code, Section 4958. These comprehensive proposed regulations deal with the definition of “excess benefit” transactions, including the payment of excessive compensation, by “public charities.” An enlightening analysis of the proposed regulations has been prepared by Patterson, Belknap, Webb & Tyler. This can be obtained through their website at

3. Tax Statistics

In its Statistics of Income Bulletin of 1994, the Internal Revenue Service has reported that tax collections from tax-exempt not-for-profit organizations have increased over the previous year. Although such organizations are exempt from income taxes on their receipts from exempt activities, they are subject to tax on income from “unrelated” business activities. The report discloses that the number of such organizations paying tax has increased by 23% while the total of tax collections from the organizations has increased by 7.6%.

ICNL has in its library and documentation center and library numerous books, articles, conference proceedings, laws, self-regulatory guides, regulations etc. For further information on what is available on United States law, please contact ICNL.