Private Members’ Business / Financial Limitation

Business of ways and means: motion not required

March 15, 2010

Debates, pp. 419-20

On December 1, 2009, Tom Lukiwski (Parliamentary Secretary to the Leader of the Government in the House of Commons) rose on a point of order to argue that Bill C-470, An Act to amend the Income Tax Act (revocation of registration), standing in the name of Albina Guarnieri (Mississauga East–Cooksville), should be preceded by a ways and means motion since it had the effect of imposing a tax or other charge on the taxpayer. Mr. Lukiwski declared that since Bill C-470 provided for the “revocation of the registration of a charitable organization, public foundation or private foundation offering compensation in excess of $250,000 to its personnel”, it would have the effect of extending a tax burden to those organizations. He maintained that in the absence of a ways and means motion, the Order for second reading of Bill C-470 should be discharged and the Bill withdrawn from the Order paper. After hearing from other Members, the Deputy Speaker (Andrew Scheer) reserved his decision.^[1]

On March 15, 2010, the Deputy Speaker delivered his ruling. He stated that Bill C-470 did not propose a new tax, continue an expiring tax, or increase the rate of an existing tax. He added that those charitable organizations that would be affected by the Bill, namely those which pay to a single executive or employee annual compensation that exceeds $250,000, were not a “class of taxpayer” for the purpose of the requirement of a ways and means motion. He concluded that the Bill did not therefore need to be preceded by a ways and means motion.

Decision of the Chair

The Deputy Speaker: I am now prepared to rule on the point of order raised by the hon. Parliamentary Secretary to the Leader of the Government in the House of Commons, concerning the requirement for a ways and means motion for Bill C-470, An Act to amend the Income Tax Act (revocation of registration), standing in the name of the hon. Member for Mississauga East–Cooksville.

I would like to thank the hon. Parliamentary Secretary for having raised this matter, as well as the hon. Member for Mississauga East–Cooksville, the hon. Member for Mississauga South, the hon. Member for Scarborough–Rouge River, the hon. Parliamentary Secretary to the Minister of International Cooperation, the hon. Member for Algoma–Manitoulin–Kapuskasing, the hon. Member for Eglinton–Lawrence, and the hon. Member for Brampton West for their comments.

The Parliamentary Secretary pointed out in his remarks that the purpose of Bill C-470 is to allow for the revocation of the registration of a charitable organization, public foundation or private foundation, if it provides annual compensation in excess of $250,000 to any of its executives or employees. On this point, he and the Member for Mississauga East–Cooksville agreed.

Beyond that, however, the Parliamentary Secretary contended that such a revocation would extend the incidence of a tax to organizations which are not currently subject to it. Specifically, he noted that such organizations, on losing their registration, would be subject to the revocation tax imposed by subsection 188(1.1) of the Income Tax Act, since the revocation tax is a tax imposed on a charitable organization which loses its official registration under the Act.

He further characterized the effect of the Bill as follows in the House of Commons Debates of December 1, 2009, at pages 7410 and 7411:

Upon deregistration of an entity in the circumstances proposed by Bill C-470, that entity loses its tax exempt status as a registered charity and, assuming it remains a charity, it will not be able to benefit from the other exemptions from tax provided for in subsection 149.1.

In other words, Bill C-470 would result in an extension of the incidence of a tax by including entities that are not already paying the revocation tax, or potentially, a tax on their income.

Finally, the Parliamentary Secretary noted that the issue of ways and means is one which the Chair takes very seriously. He referred to a November 28, 2007, Speaker’s ruling regarding the case of Bill C-418, An Act to amend the Income Tax Act (deductibility of remuneration), introduced in the Second Session of the Thirty-Ninth Parliament. That Bill had the effect of removing an existing deduction, and hence of increasing the amount of tax payable by certain corporations. It was clear that the Bill, in removing a tax exemption, effectively increased the tax payable and therefore required that it be preceded by a notice of ways and means.

In her submission, the Member for Mississauga East–Cooksville, in Debates of December 1, 2009, page 7458, contended that the purpose of Bill C-470 is simply to add another reason that would allow the Minister to revoke the registration of a charitable organization.

Bills involving provisions of the Income Tax Act can be complex and confusing. However, after careful examination of Bill C-470, as well as the authorities cited and the provisions of the Income Tax Act referred to by the Parliamentary Secretary, I have found the following reference from House of Commons Procedure and Practice, Second Edition, page 900, particularly relevant. It states:

The House must first adopt a ways and means motion before a bill which imposes a tax or other charge on the taxpayer can be introduced. Charges on the people, in this context, refer to new taxes, the continuation of an expiring tax, an increase in the rate of an existing tax, or an extension of a tax to a new class of taxpayers.

It seems clear to the Chair that Bill C-470 does not propose a new tax, nor does it seek the continuation of an expiring tax, nor does it attempt to increase the rate of an existing tax.

The question which remains to be asked is the following: Does the Bill extend a tax to a new class of taxpayer?

A close examination of the provisions of Bill C-470 indicates that the Bill targets all registered charitable organizations, public foundations and private foundations, and seeks to introduce consequences for those within that class which pay to a single executive or employee annual compensation that exceeds $250,000.

I have difficulty in regarding organizations finding themselves in that situation as constituting unto themselves a “class of taxpayer”.

In the Chair’s view, class of taxpayer refers in this case to registered charitable organizations, public foundations and private foundations, and Bill C-470 does not seek to alter that class.

It seems to me that the Bill instead seeks to provide a new criterion that would allow the Minister to determine into which existing class of taxpayer an organization falls. The existing tax regimes and the existing tax rates are not affected.

Accordingly, I rule that Bill C-470 does not extend the incidence of a tax to a new class of taxpayer and therefore need not be preceded by a ways and means motion.

I thank the House for its attention.