On June 30, 2015, Bill C-377, a private member's bill that
is intended to mandate disclosure of union financial activities,
received Royal Assent (S.C. 2015 c.41). Subject to certain
exceptions, this controversial bill adds a provision to the Income Tax Act (Canada) which will
require "labour organizations" and "labour
trusts" to provide extensive disclosure regarding their
financial activities to the Canada Revenue Agency. According
to the legislation, the Canada Revenue
Agency will make this disclosure available to the
public, including by way of "publication on the departmental
Internet site in searchable format". These reporting
requirements will apply to fiscal periods beginning after December
This legislation is of potential concern to the investment fund
industry principally because of the breadth of the definition of a
labour trust which reads as follows:
"labour trust" means a
trust or fund in which a labour organization has a legal,
beneficial or financial interest or that is established or
maintained in whole or in part for the benefit of a labour
organization, its members or the person it represents.
Based on a literal interpretation of the "labour
trust" definition, any investment fund in which a labour
organization has made a financial investment could be subject to
these rules. Similarly, the "labour trust"
definition could also capture any investment fund in which a member
of a labour organization holds an interest. While it is unlikely
that the definition of labour trust (and by extension, the
legislation as whole) was intended to apply so broadly, the wording
of the definition makes it difficult to interpret the legislation
in a more circumspect manner. The Investment Funds Institute
of Canada (IFIC), among other organizations, submitted
comments on the bill which passed without any
amendment to address this issue. The breadth of the definitions of
"labour trust" and "labour organization" also
raises the possibility of their applying to non-residents. To our
knowledge, neither the Department of Finance nor the Canada Revenue
Agency has commented officially on the potential scope of this
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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