CRA recently released a letter which discusses whether amendments to the method of appointing the Board of Directors for an existing municipal/public body performing a function of government would change a previous ruling of the CRA that the Authority would qualify as a municipal or public body performing a function of government for purposes of 149(1)(c) of the Income Tax Act (Canada) and the definition of a qualified donee in subsection 149.1(1).
CRA had the following comments:
There is no definition of a “municipal or public body performing a function of government in Canada” in the Act. Therefore, whether any organization is a municipal or public body performing a function of government must be determined on a case-by-case basis.
The term “public body” is also not defined in the Act. A public body is typically a body that acquires both its existence and its authority from a statute enacted by a legislature, and whose functions and transactions are for the benefit of, and affect the whole community of, persons to whom its authority extends. Generally, a public body has a governance purpose and is accountable to those governed, regulated or represented by it.
In our view, if a public body is incorporated, the federal government or a provincial or territorial government or the “public” that the corporation is serving or representing should have some specific control over the actions and operation of the corporation and the corporation should be accountable to that government and that public.
In our view, the Authority continues to be a public body; it was constituted by a statute, the XXXXXXXXXX. The XXXXXXXXXX is also where it derives its authority. The services it provides with respect to XXXXXXXXXX benefits and affects the entire region. Although the manner in which the Board of Directors is appointed has changed, the Authority remains accountable to the residents of the region over which it has jurisdiction. The board of directors is comprised of XXXXXXXXXX as well as up to XXXXXXXXXX directors appointed by the Minister and XXXXXXXXXX other qualified individuals appointed as directors by the XXXXXXXXXX Council from a candidate list presented by a screening panel.
The term “function of government” is also not defined in the Act and reference must be made to the ordinary usage of this term. Historically, we have required that to be performing a function of government an entity must have the ability and powers to govern, tax, pass by-laws and/or provide municipal- or provincial-type services to its members or citizens.
We have accepted that providing a range of municipal-type services or providing a key service traditionally offered by the provinces or territories such as social services, oversight of the environment, health services, and education is generally considered to constitute performing a function of government. The Authority has demonstrated that it is performing a function of government. The Authority has the ability to tax, expropriate land and pass by-laws. It also has the ability to enforce those by-laws. The Authority XXXXXXXXXX as a strategic whole. It is responsible for the XXXXXXXXXX. Based on the criteria discussed above, it remains our view that the Authority is a municipal or public body performing a function of government in Canada for the purposes of paragraph 149(1)(c) of the Act and the definition of a “qualified donee” in subsection 149.1(1) of the Act.
Here is a copy of the full CRA letter.
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Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.