Finance committee reviews C-470 and amends to remove salary cap, increase salary disclosure for 100G

December 17, 2010 | By: .(JavaScript must be enabled to view this email address) Mark Blumberg
Topics: News, Canadian Charity Law

[Amended] The Finance Committee has reviewed C-470.  The Finance Committee has amended the private members bill and it will be sent for Third reading in the House.  The $250,000 compensation cap has been removed which is important as it could have resulted in many hospitals, universities, research institutions having to terminate employment contracts that paid over 250,000 or possibly be revoked.  If the bill is passed in its current form, there would be a requirement for the Minister to disclose any employee or executive earning above the $100,000 for years beginning in 2012 “unless otherwise justified”.  The amendments made it mandatory for the disclosure to be made, except that in some cases an organization – for example a women’s shelter, may able to justify that information not being disclosed.  It would be effective as of 2012 rather than 2011 as originally proposed to give CRA time to make changes.

Although not discussed at the Finance Committee meetings it now appears that in the revisions to the private members bill located at http://www2.parl.gc.ca/HousePublications/Publication.aspx?DocId=4873932&Language=e&Mode=1 that the salary disclosure will NOT be for “ii) the name, job title and annual compensation of the five executives or employees with the highest compensation;” as provided in the first reading of the private members bill and in discussions at the committee but instead for ALL employees or executives of any registered charity (irrespective of whether they issue receipts or receive government funding) earning total compensation over $100,000 (indexed) - this is a substantial expansion of the scope of the bill from top five to all employees or executives without discussion of this change at the committee hearings on the subject and could cover disclosure of people earning as little as 80,000 salary plus benefits.  Some other problematic amendments were not passed.  There should be some real thought and action in the charitable sector as to how there could be better transparency in the sector and the sector has a little bit of time to prepare for this.  Otherwise we will have salary-focused decision making with little context. 

The amended bill defines compensation as:

“compensation” includes salaries, wages, commissions, bonuses, fees and honoraria, plus the value of taxable and non-taxable benefits;

The amended bill requires:

“(b) the Minister shall, unless otherwise justified, make available to the public in such manner as the Minister deems appropriate an annual listing of all registered or previously registered charities indicating for each
...  (ii) the name, job title and annual compensation of any executive or employee who is paid aggregate compensation in respect of a taxation year of the executive or employee exceeding $100,000 (which amount of $100,000 is to be indexed, in respect of the 2012 and following taxation years as if it were referred to in subsection 117.1(1));

The amended bill requires:

“(3) Section 149.1 of the Act is amended by adding the following after subsection (15):
   
Aggregate compensation — disclosure

  (15.1) Every registered charity that pays aggregate compensation to any executive or employee in respect of a particular taxation year of the executive or employee exceeding $100,000 shall, in addition to the public information return required to be filed under subsection (14) for the taxation year of the charity in which the particular taxation year ends, file with the Minister as an attachment to that return, the information described in subparagraph (15)(b)(ii).”

I find it very interesting that the private members bill now tells CRA how it is to collect the information/design the form - it cannot be in the T3010 form as other information is collected but must be “an attachment to that return”.  Why the distinction? 

Here was my original blog posting on March 16, 2010 after the Globe and Mail wrote about this private members bill entitled “Private members bill on Canadian registered charity salary disclosure and salary cap not helpful”
http://www.globalphilanthropy.ca/index.php/blog/comments/private_members_bill_on_salary_disclosure_not_helpful/

The House of Commons Standing Committee on Finance asked a number of organizations and individuals to submit one-page submissions on Bill C-470.  Here is the
Blumberg Segal LLP Submission to Finance on C-470
https://www.globalphilanthropy.ca/images/uploads/Submission_to_Finance_on_C-470_by_Mark_Blumberg_of_Blumberg_Segal.pdf

If you want to listen to the committee discussing the issue you can do so here:
http://parlvu.parl.gc.ca/ParlVu/ContentEntityDetailView.aspx?ContentEntityId=7038

Here is a copy of the Finance Committee report just posted:
http://www2.parl.gc.ca/HousePublications/Publication.aspx?DocId=4864821&Language=e&Mode=1&Parl=40&Ses=3

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Charity Lawyer Mark Blumberg

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.

mark@blumbergs.ca
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