P 04 951 (2016-11-21)

Determining Eligibility of Contributors Supplement to:  P 04 941 Guidelines issued by the Supervisor of Political Financing  P 04 943 Electoral Advertising Information and Guidelines  P 04 401 Leadership Contestants and Nomination Contestants

Table of Contents 1 2

Purpose of this document..................................................................................................................... 1 Contributions made by business enterprises and other organizations ................................................ 1 2.1 Determining eligibility to contribute............................................................................................. 2 2.1.1 Corporations ......................................................................................................................... 2 2.1.2 Guidelines to determine corporate status of contributors .................................................. 4 2.2 Identifying associated corporations exceeding $6,000 contribution limit ................................... 6 2.2.1 Indicators of association between corporations .................................................................. 7 2.2.2 Guidelines to determine association between corporations ............................................... 7 3 Contributions made by trade unions .................................................................................................... 8 3.1 Determining eligibility to contribute............................................................................................. 8 3.1.1 Requirements of the PPFA .................................................................................................... 8 3.1.2 Application of legislative provisions.................................................................................... 11 3.1.3 Guidelines for determining eligibility to contribute ........................................................... 11 3.2 Determining compliance with banking requirements ................................................................ 13 3.2.1 Requirements of the PPFA .................................................................................................. 13 3.2.2 Guidelines to determine compliance with banking requirements ..................................... 14

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1 Purpose of this document Political Process Financing Act, s. 14, ss. 27(2) This document establishes guidelines, issued by the Supervisor of Political Financing, for determining the eligibility of various forms of business enterprises, organizations, and trade unions to make political contributions in New Brunswick. These guidelines are issued pursuant to the following provisions of the Political Process Financing Act (the “PPFA" or the Act): 14 The Supervisor shall administer this Act and he shall in particular […] (b) with respect to informing the public: (i) provide, on request, to any person, advice or guidelines regarding the application and interpretation of this Act, […] As required by the Act, the Advisory Committee on the financing of the political process was consulted before issuing these guidelines. This document is intended to be used by official representatives of registered political parties, registered district associations, registered independent candidates, registered leadership contestants, and registered nomination contestants. It is also intended to be used by chief financial officers of registered third parties. It should be read as a supplement to the following documents:

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P 04 941 Guidelines issued by the Supervisor of Political Financing, section 3.6.19;

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P 04 943 Electoral Advertising Information and Guidelines, section 6.2; and

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P 04 401 Leadership Contestants and Nomination Contestants, section 4.2.14.

2 Contributions made by business enterprises and other organizations When a contribution – either of money or of property and services – is received by a registered political entity from a business enterprise or other organization, the official representative or chief financial officer must follow reasonable procedures to determine whether the contributor is, in fact, eligible to make a contribution to the political entity. When two or more corporations may possibly be “associated” with each other and they have together contributed more than $6,000 in a calendar year, the official representative or chief financial officer must follow reasonable procedures to determine whether they are, in fact, “associated corporations” as defined under the Act. These two issues are discussed in detail below.

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Determining eligibility to contribute

2.1

PPFA, ss. 39(4), 47(1), and 88(1) As stated above, the official representative or chief financial officer of a registered political entity must follow reasonable procedures to determine whether the contributor is, in fact, eligible to make a contribution to the political entity: 

When a contribution is received from a business enterprise, the legal structure of the business may be unclear from the details provided on the contributor’s cheque or, in the case of some registered political parties, from an interim receipt prepared by a registered district association. The legal structure of the business may be a corporation, a proprietorship, or one of various forms of partnerships. As discussed below, the legal structure will determine whether the contributor is eligible to make such a contribution.

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When a contribution is received from a municipality, not-for-profit organization, or other association, the legal structure of the entity will determine whether the contributor is eligible to make such a contribution.

The Act provides that no registered political entity, and no person on its behalf, shall knowingly accept any contribution made in contravention of the Act. Further, it is an offence of category H to do so1. Accordingly, for all contributions, the legal structure of the contributor must be determined. If a registered political entity receives a benefit of a contribution made contrary to the Act, the entity shall return or remit an amount equal to the value of that contribution (a) to the contributor, if the identity of the contributor is known, or (b) to the Supervisor, if the identity of the contributor is not known. 2.1.1 Corporations PPFA, ss. 1(1) and 37(1); Business Corporations Act, s. 194 The Act provides that only individuals, corporations and trade unions may make a contribution to a registered political entity in New Brunswick. The Act defines a corporation as follows: “corporation” means, except for the purpose of section 88, any corporation incorporated under the laws of the Province and any corporation having its head or other office or doing business or any part thereof in the Province.

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Provincial Offences Procedure Act, consolidated to September 1, 2014: 56(8) Where an Act makes an offence punishable as a category H offence, a judge shall impose a fine of not less than $500 and not more than $20,500.

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Several types of corporations typically make contributions to registered political entities in New Brunswick: 

New Brunswick-based business enterprises are usually incorporated under the province’s Business Corporations Act. They are automatically registered in Service New Brunswick’s corporate registry. Based on the definition noted above, such corporations would be eligible to make contributions to registered political entities.

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With the exception of corporations incorporated in Nova Scotia, other business enterprises incorporated outside of New Brunswick but operating within the Province are required to register with Service New Brunswick.2 If registered, the corporation would be eligible to make contributions to registered political entities. If not registered, we are able to look to the Business Corporations Act for a list of criteria that will help determine if the business is “doing business or any part thereof in the Province”: 194(1) For the purposes of this Part, an extra-provincial corporation carries on business in New Brunswick if (a) its name, or any name under which it carries on business, appears or is announced in any advertisement in which an address in New Brunswick is given for the extra-provincial corporation; (b) it has a resident agent or representative or a warehouse, office or place of business in New Brunswick; (c) it solicits business in New Brunswick; (d) it is the owner of any estate or interest in land in New Brunswick; (e) it is licensed or registered or required to be licensed or registered under any Act of New Brunswick entitling it to do business; (f) it is the holder of a certificate of registration under the Motor Vehicle Act; (g) it is the holder of a licence issued under the Motor Carrier Act; or (h) it otherwise carries on business in New Brunswick. 194(2) Where an extra-provincial corporation has its name or any name under which it carries on business listed in a telephone directory for any part of New Brunswick, that corporation shall be deemed, in the absence of evidence to the contrary, to be carrying on business in New Brunswick. 194(2.1) An extra-provincial corporation is not carrying on business in New Brunswick by reason only that it is a general or limited partner in a limited partnership or an extra-

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Effective April 1, 1994, New Brunswick Regulation 81-147, the General Regulation – Business Corporations Act, exempts an extra-provincial corporation incorporated under the laws of the Province of Nova Scotia from the registration and other requirements of the Business Corporations Act, Part XVII, Extra-Provincial Corporations.

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provincial limited partnership that has filed a declaration under the Limited Partnership Act. Based on these criteria, many extra-provincial corporations are eligible, under the PPFA, to make political contributions. 

Most New Brunswick municipalities are incorporated under the Municipalities Act or other provincial statute. Since the communities are incorporated, they are a corporation for purposes of the Political Process Financing Act and are, accordingly, eligible to make political contributions.

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Other entities, such as not-for-profit organizations and other associations, may well be incorporated under the provincial Companies Act or other relevant legislation. If incorporated, these organizations meet the definition of a corporation under the PPFA and are eligible make political contributions. Unincorporated organizations, however, would not be eligible to make political contributions.

2.1.2 Guidelines to determine corporate status of contributors The following procedures constitute guidelines that must be followed for each contribution received from a business enterprise or other organization to determine if it meets the definition of a corporation under the Act: 1) Scrutinize the name of the entity printed on the cheque, money order, or electronic transfer confirmation. If the name has an identifying suffix – Ltd., Ltée, or Inc. – that indicates it is an incorporated entity and if the address provided is in New Brunswick, the entity meets the definition of a corporation. 2) If the name of the business or organization indicates that it is incorporated but the address is outside of New Brunswick, the following steps should be taken to determine whether the entity meets the other elements within the definition of a corporation: a. Research the corporate registries maintained by the following agencies to determine where the entity is incorporated3: 

Service New Brunswick (https://www.pxw1.snb.ca/snb7001/e/2000/2500e.asp);

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Access Nova Scotia (http://novascotia.ca/sns/access/business/registry-joint-stock-companies.asp);

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Industry Canada (https://www.ic.gc.ca/app/scr/cc/CorporationsCanada/fdrlCrpSrch.html); or

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Regulations under the Business Corporations Act, the Limited Partnership Act, and the Partnerships and Business Names Registration Act exempt Nova Scotia-based corporations, partnerships, limited partnerships, and business names from the registration requirements under these Acts.

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Other Provinces

and b. Research the entity on the internet, or contact it directly, to determine if it meets the criteria of the Business Corporations Act for doing business in the Province.

3) If the name of the entity does not include a suffix identifying it as an incorporated entity, then the steps above must be followed to determine its legal form.

There are several possible outcomes from performing the research described above: 1) Pursuant to the Business Corporations Act, the Companies Act, or other provincial legislation, the contributor is registered in the corporate registry maintained by Service New Brunswick. As a registered incorporated entity, it meets the definition of a corporation as defined by the Political Process Financing Act and is eligible to make political contributions in New Brunswick. The contribution should be deposited, recorded, and reported accordingly. 2) The contributor is an unregistered extra-provincial corporation. If the corporation meets the definition of a corporation by doing business or any part thereof in the Province, it is eligible to make political contributions in New Brunswick. The contribution should be deposited, recorded, and reported accordingly. 3) The contributor is incorporated, but does not meet the definition of a corporation as defined by the PPFA because it does not actually do business or any part thereof in New Brunswick. In this rare situation, the corporation is not eligible to make political contributions in New Brunswick. If not already deposited, the contribution should be returned to the contributor. If already deposited, the contribution should be recorded in the accounting records as a liability and payment made immediately to refund the contributor. 4) The contributor is a partnership, of which there are several types: a. Partnerships, such as law firms and accounting firms, may or may not be registered with Service New Brunswick pursuant to the Partnerships and Business Names Registration Act; b. Limited Liability Partnerships (LLP): New Brunswick limited liability partnerships and extra-provincial limited liability partnerships may be designated as such and registered with Service New Brunswick pursuant to the Partnerships and Business Names Registration Act; and c. Limited Partnerships (LP): Many large national businesses, such as telecommunications companies and breweries, are legally organized as limited partnerships, are designated Page 5

as such, and are registered with Service New Brunswick pursuant to the Limited Partnership Act. No partnership is eligible to make political contributions in New Brunswick. If not already deposited, the contribution should be returned to the contributor. If already deposited, the contribution should be recorded in the accounting records as a liability and payment made immediately to refund the contributor. 5) The contributor is a “registered business name”; i.e. registered with Service New Brunswick pursuant to the Partnerships and Business Names Registration Act. A registered business name is merely registered, not incorporated. One must examine the record in the corporate registry to identify the registrant of the registered business name. It is the eligibility of the registrant that determines whether a political contribution may be made under the registered business name. There are three possibilities: a. The registrant is an individual. In this case, the contributor operates in the form of a proprietorship. The cheque in the registered business name may be accepted as a contribution from an individual. It must be recorded and reported, however, in the following manner: “Name of Individual (Registered Business Name)” Example: Smith, John (John’s Barber Shop) b. The registrant is a corporation. The cheque in the registered business name may be accepted as a contribution but must be recorded and reported in the following manner: “Name of Corporation (Registered Business Name)” Example: 123456 N.B. Ltd. (John’s Barber Shop) c. The registrant is a partnership. As described previously, a contribution from a partnership may not be accepted as a contribution and must be returned immediately to the contributor.

2.2

Identifying associated corporations exceeding $6,000 contribution limit

PPFA, ss. 1(3), s.16, s. 39; Income Tax Act (Canada), s. 256. As part of the process of preparing and submitting financial returns semi-annually, registered political parties must review all contributions identified as being received from corporations. When two or more corporations may possibly be “associated” with each other and they have together contributed more than $6,000 in the calendar year, the official representative must follow reasonable procedures to determine if they are, in fact, “associated corporations” as described under the Political Process Financing Act. The Act provides for the following:

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1(3) Corporations that are associated with one another under section 256 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, shall be considered as a single corporation for the purposes of this Act. Under section 256 of the federal Income Tax Act, the essential test in determining whether a corporation is associated with another relies on the control of the corporation that is exercised “directly or indirectly in any manner whatever”. Association is a question of fact in each case, determined by various elements of control of and by the corporations and their owners. It is usually the work of professional tax accountants to determine whether or not corporations are associated. 2.2.1 Indicators of association between corporations Some indicators of association between corporations would include:

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Similar names;

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Similar mailing or civic addresses;

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Common directors registered in the applicable corporate registry; or

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Common knowledge of ownership structures and corporate interrelationships in the business community.

2.2.2 Guidelines to determine association between corporations The following procedures constitute guidelines that must be followed when there are indicators of corporate association and where the combined total contributions from the corporations for the calendar year exceed the annual limit of $6,000: 1) The official representative shall request copies of the following information from each corporation: 

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T2 Corporation Income Tax Return, pages 1 and 2, and Schedule 9, Related and Associated Corporations, if so indicated on page 2.

This information should be requested for the taxation year or years of the corporation covering the full calendar year in question. 2) Based on the documentation provided by the corporations: a. If the corporations are associated, adjust the financial accounts of the political party by recording the excess over $6,000 as a liability (rather than a contribution) and immediately return the excess to one of the associated corporations. b. If not associated, no adjustment of the contributions is necessary. 3) Retain the documentation for review by the party’s auditor. 4) Submit the documentation to Elections New Brunswick along with the financial return of the party. Page 7

5) If the requested information is not provided by the corporations: a. Consider returning the excess of contributions over $6,000 to avoid any perception by members of the public of a possible contravention of the Act; or b. If the decision is made to keep all of the contributions, forward to Elections New Brunswick all of the relevant information, including the indicators of association and the written request for information to be supplied. The Supervisor may decide to hold an inquiry to obtain the requested information from the corporations. Following the inquiry, the Supervisor will advise the official representative of the status of association among the corporations and whether any action will be required with respect to the contributions.

3 Contributions made by trade unions When a contribution – either of money or of property and services – is received from a trade union, the official representative or chief financial officer must follow reasonable procedures to determine whether the trade union is, in fact, eligible to make such a contribution to the political entity. As required by the Political Process Financing Act (the “Act”), he or she must also ensure that the contribution is made from funds drawn on a bank account in the name of the contributor. These two points are discussed in this section.

3.1

Determining eligibility to contribute

PPFA, ss. 1(1), s. 14 and ss. 37(1) The requirements of the Act regarding the eligibility of trade unions to make political contributions, the application of those legislative provisions, and guidelines issued by the Supervisor for determining the eligibility of contributors, are discussed below. 3.1.1 Requirements of the PPFA The Act provides that only individuals, corporations and trade unions may make a contribution to a registered political entity in New Brunswick. The Act defines a trade union as follows: “trade union” means, except for the purposes of section 88, a trade union as defined by the Industrial Relations Act and the Canada Labour Code, chapter L-1 of the Revised Statutes of Canada, 1970, that holds bargaining rights for employees in the Province to whom those Acts apply.

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There are three requirements within this definition, all of which must be satisfied by a trade union in order to be eligible to make a political contribution in New Brunswick: 

Meeting the definition of trade union found in either the provincial Industrial Relations Act or the federal Canada Labour Code;

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Holding bargaining rights for employees in the Province; and

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Having the Industrial Relations Act or the Canada Labour Code apply to those employees.

Each of these requirements is discussed below: 1. The first requirement is to meet the definition of a “trade union” either under the provincial Industrial Relations Act or the federal Canada Labour Code. The Industrial Relations Act, subsection 1(1), defines “trade union” as follows: “trade union” includes any organization of employees formed for purposes that include the regulation of relations between employers and employees that has a written constitution, rules or by-laws setting forth its objects and purposes and defining the conditions under which persons may be admitted as members thereof and continued in such membership and includes a provincial, national, or international trade union and a certified council of trade unions but does not include an employer dominated organization.4 The Canada Labour Code, subsection 3(1), defines “trade union” as follows: “trade union” means any organization of employees, or any branch or local thereof, the purposes of which include the regulation of relations between employers and employees. Based on these definitions and legal precedence, it is our position that any of the employee organizations contemplated by the legislation above – a provincial, national or international trade union; a local thereof; or a certified council of trade unions – may each be considered a trade union.

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The Industrial Relations Act also includes a separate set of provisions under the heading Bargaining Rights in the Construction Industry. The definition of “trade union” in these provisions is the following: 38 In this section and in sections 39 to 51.9 and in section 82 […] “trade union” means a trade union that according to established trade union practice pertains to the construction industry.

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Note that a council of trade unions must become a certified council of trade unions before it is considered a trade union under these definitions. Subject to provisions of its constitution to the contrary, each local of a trade union is generally considered to be a distinct legal entity from the parent union with which it is affiliated. 2. The second requirement is to hold bargaining rights for employees in the Province. Under labour legislation, the right to represent a bargaining unit of employees in negotiating a collective agreement is generally referred to as “holding bargaining rights”. There are two ways in which bargaining rights may be acquired by a trade union: 

A Labour Board may issue a certification order declaring a trade union or a certified council of trade unions to be the exclusive bargaining agent for a given bargaining unit of employees; or

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An employer may recognize a trade union or a certified council of trade unions as the bargaining agent for its employees by executing a collective agreement or by signing a written voluntary recognition agreement.

Determining the legal entity (or entities) which holds bargaining rights is a question of fact as documented in the relevant certification order, collective agreement, or voluntary recognition agreement. Our review of various certification orders issued by the New Brunswick Labour and Employment Board and by the Canadian Industrial Relations Board showed that certification as bargaining agent may be awarded in the name of a parent trade union, in the name of an affiliated local of that trade union, in the name of both a parent and a local, or in the name of a certified council of trade unions. Similarly, our research found that some collective agreements recognize the parent or local only, some recognize the local as well as the parent union, and some recognize a certified council of trade unions. If the certification process for a council of trade unions redefined the bargaining units such that the original locals no longer were recognized and were no longer named in the collective agreement, then the bargaining rights are held by the certified council and not by the original local unions. Conversely, a collective agreement may also recognize a non-certified council of trade unions as the bargaining agent for a group of trade unions. In this case, the council itself is not considered to be a trade union because it is not certified. As a result, the bargaining rights continue to be held by the locals named in the agreement. Finally, a “district council”, “provincial council”, or “regional council” may, in substance, only be an administrative arm of a provincial, national, or international trade union without being recognized as a bargaining agent in its own name. In these situations, the council does not hold bargaining rights. (It may well be part of a parent union that meets the definition of a trade

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union, however, and so the council may make contributions within the contribution limit of its applicable parent union.) Regardless of the situation, the recognized trade union is documented in the relevant certification order, collective agreement, or voluntary recognition agreement. 3. The third requirement is for the Industrial Relations Act or the Canada Labour Code to apply to the employees for whom the bargaining rights are held. Only trade unions with bargaining rights granted or recognized under these laws are eligible to make political contributions in New Brunswick. In contrast, trade unions representing employees to whom either the provincial Public Service Labour Relations Act applies or to whom the federal Public Service Labour Relations Act applies do not fulfill this requirement and, accordingly, are not eligible to make political contributions in New Brunswick. In summary, an employee organization must satisfy all three requirements of the definition of a trade union under the Political Process Financing Act in order to make contributions to registered political entities in New Brunswick. 3.1.2 Application of legislative provisions The legislative provisions described above may be applied as follows: 1. Each trade union – international, national, provincial, local, or certified council of trade unions – meeting the three requirements of the definition of “trade union” under the Political Process Financing Act may each contribute up to the annual limit of $6,000 to each registered political party or one registered independent candidate. 2. In contrast, a district council, provincial council, or regional council of trade unions may only be an administrative arm of a provincial, national, or international trade union without being recognized as a bargaining agent in its own name. In these situations, the council does not meet the Political Process Financing Act’s definition of a trade union in its own right because it does not hold bargaining rights. If, however, it is part of a parent union that meets the definition, the council may make contributions within the contribution limit of the applicable parent union. 3.1.3 Guidelines for determining eligibility to contribute The following procedures constitute guidelines that must be followed for each contribution received from a trade union to determine if the trade union meets the definition under the Political Process Financing Act and thus is eligible to make political contributions in New Brunswick: 1) Scrutinize the name of the contributor on the cheque, money order, or electronic transfer. 2) If not already on file as a qualified contributor, request documentation from the contributor in the form of a certification order, an executed collective agreement, or a written voluntary recognition agreement that recognizes this contributor as an entity which is a party to or bound by the order or agreement.

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3) If the requested documentation is not provided by the contributor, attempt to obtain the documentation by accessing the following sources of information: (a) New Brunswick Labour and Employment Board: Certification orders are available upon request from the office of the Chief Executive Officer; tel. 506-453-2881. (b) Government of New Brunswick, Department of Post-secondary Education, Training and Labour, Industrial Relations Branch: Copies of collective agreements filed with the branch may be obtained from:

(i) Collective Agreement Retrieval System (CARS), a database available online at http://142.139.25.88/cars/; or

(ii) Industrial Relations Officer; tel. 506-453-8666. (c) Canada Industrial Relations Board: Certification orders issued pursuant to the Canada Labour Code are available upon request by telephone at 1-800-575-9696 or online at www.cirb-ccri.gc.ca. (d) Department of Employment, Workforce Development and Labour (Canada): Copies of federally-certified collective agreements filed with this federal department may be obtained from the Negotech web application: http://negotech.labour.gc.ca/cgi-bin/search/negotech/search.aspx (e) Public Service Labour Relations Board: Certification orders issued pursuant to the Public Service Labour Relations Act are available upon request; tel. 1-866-931-3454. 4) After reviewing the information at hand, document in writing why the contributor is qualified to make the contribution; i.e. it must meet the three requirements of the definition of a trade union under the Political Process Financing Act: o o o

It meets the definition of a trade union under the Industrial Relations Act or the Canada Labour Code; It holds bargaining rights for employees in New Brunswick; and The Industrial Relations Act or the Canada Labour Code (and not the provincial or federal Public Service Labour Relations Act) applies to those employees.

5) Retain all relevant documentation for review by a political party’s auditor or by Elections New Brunswick and as evidence to justify accepting contributions in future years.

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6) If the contributor is not eligible to make the contribution and if not already deposited, the contribution should be returned to the contributor. If already deposited, the contribution should be recorded in the accounting records as a liability and payment made immediately to refund the contribution.

3.2

Determining compliance with banking requirements

PPFA, s. 38; s. 43.1; ss. 44(1) The requirements of the Act regarding the source of funds used by trade unions to make political contributions, and guidelines issued by the Supervisor for determining compliance with these banking requirements, are discussed below. 3.2.1 Requirements of the PPFA The Act requires that contributions be made only from funds owned by the contributor and that they be drawn upon a bank account in the name of the contributor: 38(1) An individual, corporation or trade union may make a contribution only out of his or its own property. 38(2) No individual, corporation or trade union shall solicit or accept services, money or other property from any source (a) as consideration or reward for having made a contribution, or (b) on the condition, agreement or understanding, express or implied, that he or it will, as a result, make a contribution. 43.1 Subject to subsection 44(1), contributions of money may be made by cash or by cheque, credit card, debit card or other order of payment drawn by the contributor on a chartered bank, trust company or credit union on an account in the name of the contributor. 44(1) Every contribution of money of more than one hundred dollars shall be made by cheque, credit card, debit card or other order of payment drawn by the contributor on a chartered bank, trust company or credit union on an account in the name of the contributor. Since funds frequently flow between the various locals, branches, councils, and head office of a trade union, it is important to determine that the contributions are actually coming from the property of the contributor. This requirement is demonstrated in the following example: With an internal fund such as a LEAP account (Legislative Education Action Program), such a fund is a pool of money administered by a regional council or national office of a union. While the money is usually provided by local unions, the money is placed in a separate bank account in the name of the regional council or national union so that it is no longer the legal property of the locals. Accordingly, the money in such a fund may not be used to make contributions in the name of, or on behalf of, any of the respective locals.

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The money may, however, be used to make contributions in the name of the parent union, assuming that it meets the definition of a trade union under the Act. 3.2.2 Guidelines to determine compliance with banking requirements The following procedures constitute guidelines that must be followed for each contribution received from a trade union to determine if the banking requirements under the Act are met: 1) Compare the name on the cheque, money order, or electronic transfer with any additional information supplied that would indicate the contribution was being made in the name of, or on behalf of, a different entity; e.g. by a regional council on behalf of a local. If the names agree, the contribution should be deposited, recorded, and reported accordingly. If the names do not agree, the contribution must be returned to the contributor. If not already deposited, the cheque should be returned to the contributor. If already deposited, the contribution should be recorded in the accounting records as a liability and payment made immediately to refund the contributor.

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