August 25, 2015
Is life about to get a whole lot more complicated for the Kiwanis Club and the Royal Canadian Legion? These “clubs” are the latest micro-group to be offered up goodies by Stephen Harper’s Conservatives during this election period. Harper announced on Sunday that, if re-elected, his government would amend the tax code to permit club members to claim up to 29% of membership costs as a charitable tax credit.
The new law would grant the service clubs a subsidy from taxpayers at a cost to the public purse of $30 million a year. Lots of organizations already receive public funding in the form of tax benefits, including corporations, churches, professional associations, charities, and unions. In exchange for this public funding, the Income Tax Act imposes various public reporting obligations.
However, how much an organization is required to disclose varies widely and is, increasingly, a function of
If Tories Extend Tax Benefits to Social Clubs Like Kiwanis, Would Disclosure Law Applied to Unions Also be Extended?
government ideology. Corporations, which likely receive the most public funding in terms of taxable deductions, special loopholes, and public grants, are required to disclose to the public very little. As a taxpayer, I cannot look at a website to learn how much I am subsidizing a corporation’s retreat at a five star Caribbean resort, or its executives’ first class travel, or the corporate box at Maple Leafs’ games. Nor is there any way for me to learn how much time corporate employees spend lobbying governments or engaging in politically-related activities.
Likewise, the public reporting obligations for charities, religious organizations, and professional associations are minimal. For example, charities must publish their financial statements, but the information contained in these forms is vague, similar in form and content to a bland income statement. I went through the Fraser Institute’s charitable return in an exchange I had with Senator Eaton on this blog.
However, one type of association is singled out for special treatment by the current Conservative government: unions. Under a recently enacted law (Bill C-377), only unions are required to produce and publicly disclose some 20 detailed statements that list, in addition to the usual financial statements required of charities, a list of all payments of $5000 or more with the name of the “payer and payee and setting out for each of those transactions and disbursements its purpose and description” and a long list of other details, as well as a list of the “percentage of time dedicated” by union employees “to political activities, lobbying activities and other non-labour relations activities”. The list of detailed information that must be compiled and publicly disclosed by unions runs on for some two statutory pages.
Bill C-377 took a long time to receive Royal Assent. The fact that the Bill was so obviously a partisan attack on a Conservative political foe, and that it would divert resources and millions of taxpayer dollars away from enforcement and collection of unpaid taxes to police reams of mostly useless information about how much unions spend on office supplies and rent, led to an unusual Senate rebellion that stopped the Bill in its tracks. However, unrelenting, the Conservatives pushed forward with the law despite wide spread concerns by opposition politicians, provinces, and professional law associations, and it finally passed on the eve of the election call.
The government’s justification for the union disclosure law was that since unions receive “public funding”, in the form of tax-related benefits, they must account to the public for how they spend their money and their time.
Tories Enacted Special Reporting Rule for Unions Only on Eve of Election
Applying this logic, the Kiwanis and Royal Legions would be subject to the extensive reporting requirements in Bill C-377 once the new tax subsidy kicks in. Since these organizations would be receiving public funding in the form of tax subsidies, like unions, the logic of the reporting law would apply equally to both types of associations.
Of course, if the Conservatives actually believed that all organizations that receive taxpayer benefits should fully account to the public, then there would already be one set of public reporting obligations applicable to unions, businesses, professional associations, charities—and “social clubs” like the Kiwanis if the new law is enacted. All receive public funding and tax subsidies of some sort. As a taxpayer, I subsidize all of them. If I am entitled to know how one type of organization spends “my” taxpayer money, then I am equally entitled to know how they all do. To help the government ensure equality of treatment of all organizations that receive taxpayer benefits in the form of tax subsidies and credits, I redrafted Bill C-377 some time ago to extend its reporting obligations to businesses, professional associations, and charities. If it would help, I could just add in “social clubs”.
Yet, does anyone believe that the Conservatives would require the Kiwanis to annually prepare some 20 detailed statements accounting for the expenses and how they spend their time, under the threat of a $1000 per day fine for any errors made? It’s laughable to imagine a Conservative government extending the reporting obligations imposed on unions to businesses, the Kiwanis, or even charities. Bill C-377 is the nanny state on steroids, intended to drown unions in paper work. I bet the Kiwanis would decline the new tax benefit if it came attached to Bill C-377 reporting obligations.
The fact that we just chuckle at the idea of the Conservatives extending the reporting obligations it imposed on unions to other organizations that similarly receive tax subsidies demonstrates the extreme partisan nature of Bill C-377. The Bill was always about making life difficult for one type of organization that tends not to support the Conservatives. It was never about so-called “public accountability” by publicly subsidized organizations. The Kiwanis (and businesses, professional associations, and charities) are probably safe and will not be required to comply with the extensive Bill C-377 reporting requirements imposed on unions. That is, unless they make the mistake of speaking out against Conservative policies.