School boards can be registered charities. But school boards can also fit into another category of qualified donee that provides the ability to issue receipts with far less compliance obligations. CRA recently released a letter discussing whether school boards are public bodies that perform a function of government.
Here is the text of the letter:
2013-0500321I7 -- School boards—149(1)(c)
Date: August 6, 2014
SUMMARY: School boards—149(1)(c)—ITA-149(1)(c)—Whether school boards are public bodies that perform a function of government.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
PRINCIPAL ISSUES: Are school boards public bodies performing a function of government
REASONS: School boards are governed by elected school board trustees. They have been delegated authority by the provincial/territorial governments to provide educational services in a school district. They are accountable to the citizens that elected them and to the provincial/territorial governments.
August 6, 2014
Ann Rénoüs HEADQUARTERS
Policy, Planning and Legislation Income Tax Rulings Directorate
Division Ann Townsend
Charities Directorate (905) 721-5096
Place de Ville, Tower A
320 Queen St, 7th Floor,
Ottawa, ON K1A 0L5
School Boards—Public Body Performing a Function of Government
This is in response to your e-mail asking for our comments on whether school boards are considered to be “public bodies performing a function of government in Canada” for the purposes of paragraph 149(1)(c), of the Income Tax Act (“Act”). Your question has arisen as a result of recent amendments to the Act that require municipal and public bodies performing a function of government in Canada to apply for registration with the Canada Revenue Agency (CRA) in order to issue official donation receipts as a “qualified donee”. Consequently, you have received requests from various school boards from across Canada for registration.
In general, under the Canadian Constitution the provinces have the responsibility for all levels of education in Canada and have delegated some of this responsibility to school boards. Each province and territory has its own legislation governing school boards resulting in both similarities and differences, which are usually the result of the geography, history, language, and culture. School boards are incorporated under provincial or territorial legislation and are responsible for providing education to students within geographic school districts. School boards are made up of School Board Trustees that are elected by the citizens of the school districts during municipal elections.
The term “public body” is not defined in the Act. The CRA considers a public body to be 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 which its authority extends. Generally, a public body has a governance purpose and is accountable to those governed, regulated or represented by it. We are of the opinion that school boards are public bodies since they are created by a provincial or territorial statute, their functions benefit the whole community, and they are accountable to the citizens who elect them and to the provincial or territorial governments.
In addition to being a public body, an entity must also be performing a “function of government” in Canada in order to qualify for the exemption from tax provided by paragraph 149(1)(c) of the Act. Again, the term “function of government” is not defined in the Act and reference must be made to the ordinary usage of this term. The CRA generally requires 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/citizens within a geographical region.
We are of the opinion that providing public education is a function of government. However, school boards have increasingly become subject to greater control by the provinces and territories. During the past two decades the provincial governments have restructured the governance model of education and the changes have resulted in centralization of powers and increased decision-making at the provincial level. Several functions that were performed by the school boards are now performed by the provinces or territories such as: negotiating contracts with teachers' unions, development of curriculum, and standardized assessments for students. Since school boards are subject to this considerable control, it could appear the provincial or territorial governments are actually performing the function of government.
In addition, historically school boards have had the power to tax. However, many provincial governments have reformed the way they fund education, which has resulted in a reduction or elimination in the school boards' taxation powers in most provinces. Since the power to tax is one of the main criteria used by the CRA in determining if an entity is performing a function of government, a school board without taxing power may not be considered to be performing a function of government.
Despite the limitations mentioned above regarding the changes to the powers of school boards, they are governed by elected school board trustees and have been delegated authority by a provincial or territorial government to provide educational services in a school district. They are accountable to the citizens and the provincial or territorial governments. Therefore, it is our opinion that the better view is that school boards qualify as municipal bodies performing a function of government for the purposes of paragraph 149(1)(c).
Roger Filion, CPA, CA
Non-Profit Organizations and Aboriginal Issues Section
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
Do you require legal advice with respect to Canadian or Ontario non-profits or charities?
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.