When the federal government announced its budget on June 6, one of the measures within it made Registered Canadian Amateur Athletic Associations (RCAAAs) sit up and take notice.

On June 10, Cathy Hawara, the Canada Revenue Agency‘s Charities Directorate executive director, issued the following statement on her organization’s website regarding the Regulatory Regime Enhancements for RCAAAs:

“[T]he budget proposes to apply many of the existing registered charity rules to RCAAAs. It also proposes new eligibility requirements for individuals who are directors or who control or manage registered charities and RCAAAs. In addition, certain other qualified donees will be subject to new record-keeping requirements, and there are rule changes affecting particular types of gifts. Finally, the Department of Finance Canada has also announced that it will be consulting on a budget proposal to change the definition of an RCAAA.”

So what does this mean for these associations going forward?

Good news and bad news

In Toronto, Mark Blumberg, a charity law expert, told CharityVillage® that while there is much in the budget that RCAAA’s can consider benign, there are indeed some issues that directors of these organizations will want to look into.

Blumberg said that while some of the proposals “are minor and non-controversial” — for example, authorizing CRA to compile a list of RCAAAs in order to assist Canadian donors and foundations to know whether an organization can issue tax receipts — other rule changes include: requirements to maintain adequate books and records as registered charities do; ensuring RCAAAs don’t provide undue benefits to any person such as excessive compensation to staff, individuals or business; and authorization of CRA to disclose some limited information about RCAAAs similar to how information is provided on all other registered charities.

“These rules are similar to the ones that apply to registered charities and to the extent that people were surprised by these provisions, it was more that such provisions did not already apply to RCAAAs,” he explained.

One change that could have more serious implications for RCAAAs and their operations, said Blumberg, is a change to the actual definition of such an organization.

Under current laws, RCAAAs only had to demonstrate the promotion of amateur athletics in Canada “on a nation-wide basis as their primary purpose and primary function,” he said [Blumberg’s emphasis]. “The [new] budget changes this definition to replace the word ‘primary’ with ‘exclusive’.”

This may limit the scope of operational activities for some RCAAAs, he added.

In the budget, the government noted the following clarifications on its proposed changes: namely, that RCAAAs will not be prevented from staging or engaging in international events and competitions — “as such activities would normally be consistent with the promotion of amateur athletics in Canada, given the participation of Canadian teams and athletes in such events” — RCAAAs will be allowed to conduct business activities related to their missions, “such as selling merchandise related to their sport, and to engage in limited non-partisan political activities.”

Some athletic organizations are still figuring out what it all means.

Alan Trivett, executive director of Triathlon Canada, said his organization still didn’t have enough information to comment on what the rule changes might mean.

“We don’t foresee this changing how we use our RCAAA status. However we do understand that additional compliance measures will be required by Triathlon Canada to CRA,” he said.

Also under the proposed changes, RCAAAs will be subject to “the same regulatory sanctions as registered charities for breach of these requirements, namely a monetary penalty, the suspension of qualified donee status or the revocation of registration.”

Why now?

According to Blumberg, the government did not disclose reasons for the change in the definition of RCAAA. Part of the decision may have been prompted by recent abuses by RCAAAs in what CRA terms abusive charity gifting tax shelters, he said.

“A number of RCAAAs have been revoked for issuance of inappropriate receipts including Biathlon Canada ($25.9 million), Canada Lacrosse Association ($60.7 million) and Little League Baseball ($82 million),” Blumberg offered. “Perhaps another reason is that local amateur sport, while very beneficial, is not considered charitable and that some RCAAAs may have acted as conduits providing receipts for funds that ultimately went to local amateur athletic organizations instead of promotion of elite amateur athletics on a nation-wide basis.”

Public feedback

The Department of Finance announced it will have a consultation on the budget proposal to change the definition of an RCAAA, and interested parties can provide feedback to the Department of Finance until August 31, 2011. However, the CRA cautions that the new rules applying to RCAAAs will likely come into effect on Jan. 1, 2012, assuming Royal Assent is given to the budget prior to the New Year.

Until then, these associations can continue to operate under the existing regulations.

Andy Levy-Ajzenkopf is president of WordLaunch professional writing services in Toronto. He can be reached at andy@wordlaunch.com.

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