Private Members’ Business / Financial Limitation

Business of Ways and Means: motion required for bill seeking to prevent the alleviation of taxation

November 4, 2011

Debates, pp. 2984–6

On October 18, 2011, Joe Comartin (Windsor—Tecumseh) rose on a point of order with respect to Bill C-317, An Act to amend the Income Tax Act (labour organizations), standing in the name of Russ Hiebert (South Surrey—White Rock—Cloverdale). Mr. Comartin argued that the Bill should have been preceded by a ways and means motion because its application could lead to the termination of the tax-exempt status of certain labour organizations. He claimed that, as members of a labour organization are required to pay dues regardless of its tax-exempt status, the Bill could have the effect of removing an existing alleviation of taxation and potentially creating a new class of taxpayers, which is a prerogative of the Crown. He therefore requested that the Speaker find that the Bill was improperly before the House and declare all proceedings null and void. Another Member made a comment and the Speaker took the matter under advisement.^[1] At subsequent sittings of the House, Mr. Hiebert and Mr. Comartin made additional submissions.^[2]

Resolution

On November 4, 2011, the Speaker delivered his ruling, agreeing that Bill C-317 would have the effect of creating a new class of taxpayer who would be subject to the removal of an alleviation of taxation. Consequently, the Speaker ruled that Bill C-317 should have been preceded by a ways and means motion and that the proceedings on the Bill to date was null and void, that the order for second reading of the Bill be discharged, and that the Bill be withdrawn from the Order Paper. The Speaker concluded that, as that would likely be the only opportunity in the Forty-First Parliament for the Member to have an item in the Order of Precedence, he would use the powers granted to him by Standing Order 94(1)^[3] and permit Mr. Hiebert to substitute another item onto the Order of Precedence within 20 calendar days^[4] or, if not, have his name dropped from the Order Paper.

Decision of the Chair

The Speaker: I am now prepared to rule on the point of order raised by the hon. Member for Windsor—Tecumseh concerning ways and means proceedings on Bill C-317, An Act to amend the Income Tax Act (labour organizations) standing in the name of the hon. Member for South Surrey—White Rock—Cloverdale.

I would like to thank the hon. Member for Windsor—Tecumseh for having raised this matter, as well as the Bill’s sponsor, the hon. Member for South Surrey—White Rock—Cloverdale, for their interventions and the hon. Member for Kitchener—Conestoga for his comments.

The hon. Member for Windsor—Tecumseh pointed out in his remarks that the purpose of Bill C-317 is to require that labour organizations provide specific financial information to the Minister for public disclosure. The Member also pointed out that failure of a labour organization to comply with this new requirement could result in a labour organization losing its tax-exempt status, noting, as well, the subsequent impact this would have on dues-paying members of that organization.

He characterized the effect of Bill C-317 in the Debates, on October 18, 2011, page 2171, as follows:

 … the income tax exemptions that apply to labour organizations and the reduction of taxable income as a result of writing off the dues paid by their members would easily qualify as alleviations of taxation. Further, the provisions of Bill C-317 would repeal those alleviations by terminating the labour organization’s Income Tax Act exempt status.

The Member for Windsor—Tecumseh explained that any labour organization not in compliance with the financial disclosure requirements outlined in the Bill would no longer enjoy the tax-exempt status as provided for in section 149(1)(k) of the Income Tax Act. He argued that this would have the effect of taxing a person, or in this case an organization, that was not already a taxpayer. He concluded therefore that Bill C-317 should have been preceded by the adoption of a ways and means motion.

In his submission, the hon. Member for South Surrey—White Rock—Cloverdale in the Debates, on October 25, 2011, page 2438, contended that the purpose of Bill C-317 was limited simply to providing a mechanism for the public disclosure of union finances and only augmented the existing types of information that the Canada Revenue Agency was already empowered by its mandate to compel organizations or taxpayers to provide.

He also referred to a ruling from the Fortieth Parliament on Bill C-470, An Act to amend the Income Tax Act (revocation of registration).^[5] He found a parallel between Bill C-317 and Bill C-470. Where it had been argued that charitable donations were discretionary so that Bill C-470 did not affect any existing alleviation of tax, the hon. Member argued that in the case of Bill C-317, payers of union dues could exercise their discretion by opting to join a union or labour organization that adhered to the financial disclosure provisions of Bill C 317 and, thus, maintain the tax-exempt status of their dues.

Before analyzing the arguments presented, it is important to take into consideration the context of this discussion as it is worth noting that the financial procedures of the House are based on long-established and strictly observed rules of procedure, procedures that are based on the concept of the financial initiative of the Crown. This concept is clearly presented in Erskine May’s Parliamentary Practice, Twenty-Third Edition, at page 848:

 … it is for the Commons, acting on the sole initiative of Ministers, first to authorize the relevant expenditure (or “Supply”) and, second, to provide through taxes and other sources of public revenue the “Ways and Means” deemed necessary to meet the Supply so granted.

The role of the Speaker in the present situation is to determine if Bill C-317 is a legislative initiative which imposes a tax or other charge on the taxpayer and therefore would have required the prior adoption of a ways and means motion by the House.

In order to respond to that question, it may be useful to examine more closely the different precedents cited by the Members who intervened on the present case.

During his initial point of order, the Member for Windsor—Tecumseh referred the Chair to the ruling of November 28, 2007, on Bill C-418, An Act to amend the Income Tax Act (deductibility of remuneration). In that ruling, at pages 1463 and 1464 of the Debates, the Chair made reference to Erskine May’s Parliamentary Practice, Twenty-Third Edition at page 896, where it explains, “the repeal or reduction of existing alleviations of taxation” must be preceded by a ways and means motion.

The Chair concluded that Bill C-418 removed an existing tax exemption which then resulted in an increase in the tax payable by certain corporations. In the Chair’s view, this constituted a reduction of an alleviation of taxation and therefore required that it be preceded by a ways and means motion. I would ask hon. Members to retain the phrase, “alleviation of taxation”, as I will return to that concept shortly.

First, let me address the differing interpretations of how an individual union member’s rights are affected by Bill C-317. The Member for Windsor—Tecumseh argued that union members do not have the automatic individual right to stop paying dues to an organization that no longer enjoys a tax-exempt status. The Member for South Surrey—White Rock—Cloverdale countered that, in his estimation, union members would have the ability to select a labour organization that complies with the provisions of Bill C-317 to ensure that they maintain their tax exemption. While this is more a question of labour law than procedure, the Chair is aware that members of a labour organization cannot easily change which union they belong to nor can they simply withhold paying their union dues except in extremely limited situations provided for in the law. As pointed out by the Member for Windsor—Tecumseh, this is in stark contrast to donors to a charity who may choose whether they wish to contribute, the organization they wish to contribute to and the timing of any such contribution.

The Chair must agree with the hon. Member for Windsor—Tecumseh that the non-compliance of the labour organization would also remove a current income tax deduction for the dues-paying members of the union. For the Chair, there can be no doubt that this also can be characterized as the removal of an existing alleviation. For this reason alone, Bill C-317 would need to be preceded by a ways and means motion.

Let us return to the larger context. The Chair appreciates the point made by the Member for South Surrey—White Rock—Cloverdale that the Canada Revenue Agency already enjoys the authority to compel the financial disclosure of certain financial information. However, it is not the power of the CRA to require the disclosure of certain information that is at issue.

It is true, as the Member for South Surrey—White Rock—Cloverdale claims, that Bill C-317 changes the reporting requirements for labour organizations. However, contrary to what the Member asserted, that is not all it does. In stating that non-compliance with these new requirements makes a labour organization ineligible for tax deductions available to labour organizations, Bill C-317 potentially removes an alleviation of taxation and in so doing, the Bill potentially creates a new statutory authority that removes what is currently an unqualified exemption.

Perhaps the distinction can be better understood by looking again at the example offered by Bill C-470 in the Third Session of the Fortieth Parliament. That Bill changed the definition of a class of taxpayers, specifically registered charities, but the alleviation of tax for registered charities as a class of taxpayer remained unchanged. By contrast, Bill C-317 does not change the definition of a labour organization. It demands disclosure of certain types of information, failing which disclosure, the Bill provides that the tax alleviation in place for labour organizations will no longer apply to non-complying labour organizations.

This is a subtle difference, but it is a crucial distinction for the Chair.

The ruling on Bill C-470 determined that the Bill altered the conditions and requirements for an organization to be classified by the Minister as a registered charity but did not alter the class of taxpayer. In more basic terms, Bill C-470 proposed to alter the definition of what constituted a registered charity but did not change the tax exemptions for registered charities. In the ruling on C-470, delivered on March 15, 2010, and found on pages 419 and 420 of the Debates, I stated:

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.

However, unlike Bill C-470, Bill C-317 does not attempt to alter the conditions or requirements for an organization to be classified as a labour organization.

According to the provisions of Bill C-317, under the Income Tax Act, a labour organization would remain a labour organization, whether it complied with the proposed disclosure requirements or not. If enacted, Bill C-317 would thus create a situation whereby labour organizations can be differentiated into two distinct categories, those that comply with the financial reporting mechanism and those that do not.

In the Chair’s opinion, this new category of labour organization would constitute a class of taxpayer that does not currently exist. Labour organizations in the newly created class, that is, those that do not meet the financial reporting requirements outlined in the Bill, would see the removal of their current tax-exempt status. Put simply, Bill C-470 did not alter the tax-exempt status of registered charities, whereas, in contrast, Bill C-317 proposes to alter the current tax-exempt status of labour organizations.

As a result of this determination, I find that Bill C-317, by distinguishing between certain labour organizations, creates a new class of taxpayer and that this new class of taxpayer would then be subject to a removal of an alleviation of taxation.

For the reasons stated, I must, therefore, rule that Bill C-317 should have been preceded by a ways and means motion. Consequently, I also rule that all proceedings on the Bill to date, namely introduction and first reading, have not respected the provisions of our Standing Orders and are, therefore, null and void. Accordingly, the Chair directs that the order for second reading of the Bill be discharged and the Bill be withdrawn from the Order Paper.

However, I am reluctant to deny the Member what is likely his only opportunity in this Parliament to have an item on the order of precedence.

As Members are well aware, Standing Order 94(1)^[6] provides the Speaker with the authority to “make all arrangements necessary to ensure the orderly conduct of Private Members’ Business”.

In light of the unique nature of this particular situation, the Member for South Surrey—White Rock—Cloverdale will be permitted to substitute another item onto the Order of Precedence. The substitution shall be done pursuant to the spirit of Standing Order 92.1,^[7] which allows a Member 20 sitting days to substitute another item of Private Members’ Business for the item that has been discharged and withdrawn. Should the Member choose not to replace the item within the next 20 sitting days, his name will then be dropped from the Order Paper.

I thank the House for its attention.

Editor’s Note

See a statement concerning Bill C-317.

Postscript

On November 14, 2011, the Speaker made a statement to provide clarification on his ruling delivered on November 4, 2011. He indicated that when linking the time provided to the Member to substitute his item to Standing Order 92.1,^[8] he had inadvertently stated that Mr. Hiebert would have 20 sitting days. He explained that it was an error, as this Standing Order provides for 20 calendar days. He consequently gave Mr. Hiebert until December 9, 2011 to substitute his item.^[9]

On December 5, 2011, Mr. Hiebert introduced Bill C-377, An Act to amend the Income Tax Act (requirements for labour organizations), which was added to the Order of Precedence.^[10]