Blog

July 15, 2016

Markou v. The Queen - deals with a Canadian tax shelter scheme - a little cash gets a big receipt!

Markou v. The Queen, 2016 TCC 137 is a super boring case dealing with the jurisdiction of the Tax Court of Canada and whether such court can make a determination as to whether certain proceeds are part of a Quistclose trust.  Beyond whether there are or are not enough legal gymnastics in this decision there is lots of interesting background on a complicated tax scheme from 2001 that probably few have heard of.  The leveraged donation scheme known as "The Donation Program for Medical Science and Technology" was implemented by Trinity Capital Corporation from 2001 - 2003.  An example of one donor is that he put in $3,520,000 and received a tax receipt for $11 million which would save him about $3.2 million in Federal taxes and $1.9m in Ontario taxes.    

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July 13, 2016

Deluca Case - CRA not responsible for your unsuccessful investment in a charity tax shelter

Deluca v Canada, 2016 ONSC 3865, is an Ontario Court of Justice claim by Mr. Deluca against the CRA.  Mr. Deluca had invested over $100,000 in a tax shelter involving a barter network and 'donations' to a registered charity.  When CRA denied his donation claims Mr. Deluca sued the CRA because he argued they owed him a duty and they were slow in revoking the status of a registered charity.  The courts quite harshly dismissed Mr. Deluca's claim.  I guess you can summarize the case as -all because a business and a registered charity encourages you to get involved in a questionable donation scheme and CRA does not accept the validity of the donation you cannot use CRA as an 'insurance policy' to cover your losses by suing CRA.

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July 11, 2016

Canada Revenue Agency revokes the registration of the ACTLAP Children’s Foundation (A.C.F.)

The Canada Revenue Agency ('CRA') recently revoked the charitable registration of the ACTLAP Children's Foundation (A.C.F.).  CRA revoked the charitable status on the basis that the organization had operated primarily for the non-charitable purpose of furthering a tax shelter donation arrangement, the Pharma Gifts International Inc. program. The charity agreed to accept alleged gifts of property from participants in this scheme and act as a receipting agent.  Over $64 million dollars in charitable receipts were improperly issued for donations of cash and pharmaceuticals. 

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June 30, 2016

New York Times front page article highlights Syrian refugee resettlement in Canada

The New York Times in an article by Jodi Kantor and Catrin Einhorn discusses the experiences of Syrian refugees in Canada. It also has some pictures by Pulitzer prize winning photographer Damon Winter.  The article is entitled "Refugees Encounter a Foreign Word: Welcome:How Canadian hockey moms, poker buddies and neighbors are adopting Syrians, a family at a time."  My family is very fortunate to be helping one of the three families that are featured in the NYT article.  

Topics: News

June 30, 2016

Ontario Court of Appeal upholds lower court decision not to accredit TWU law school

The Ontario Court of Appeal has upheld a lower court decision which endorsed the Law Society of Upper Canada's decision to not accredit Trinity Western University's law school because of their "community covenant". 

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June 29, 2016

Canadian registered charities no longer required to register as a charity in Quebec

As a result of the 2016 Quebec Budget, Canadian registered charities are no longer required to complete a separate charitable registration in Quebec in order to be able to issue tax receipts to donors in Quebec.

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June 28, 2016

Department of Finance will review of Federal Tax Expenditures

The Department of Finance has established an advisory committee to review tax expenditures.  This will be part of an initiative to reduce "poorly targeted and inefficient programs, wasteful spending, and ineffective and obsolete Government initiatives."  What are tax expenditures?  Finance notes "The tax system can be used to achieve public policy objectives through the application of special measures such as low tax rates, exemptions, deductions, deferrals and credits. The Department of Finance Canada publishes cost estimates and projections for these measures annually in the Tax Expenditures and Evaluations publication. The tax measures presented in the Tax Expenditures and Evaluations publication are the responsibility of the Minister of Finance."  

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June 28, 2016

New FATF Recommendations on non-profits avoiding terrorism and money laundering

The Financial Action Task Force (FATF) has updated The FATF Recommendations International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation.  The FATF is "an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. The FATF Recommendations are recognised as the global anti-money laundering and counter-terrorist financing standard."  There were concerns about the non-profit recommendations and especially that Non-profit organisations are "particularly" vulnerable to abuse for the financing of terrorism. The phrase "particularly" has been removed.  The FATF changes that will probably be positively greeted by non-profit sector around the world. 

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June 24, 2016

Lack of transparency continues when the Canadian government makes a gift to a foreign charity

On the CRA website there is a list of foreign charities that received a gift from the Canadian government.  CRA has just released a new Guidance CG - 023 Qualified donee: Foreign charities that have received a gift from Her Majesty in right of Canada which discusses how foreign charities are placed on the list.

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June 19, 2016

Pre-budget consultation process submissions for the Federal 2017 Budget is due by August 5, 2016

The Finance Committee of the House of Commons has requested pre-budget submission be provided by August 5, 2016.  If you have ideas that could help Canada be a better country you might want to make a submission.

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June 18, 2016

CBC “Charity tax fraud to cost brothers their freedom”

The CBC in an article entitled "Charity tax fraud to cost brothers their freedom" how two brothers were each sentenced to over 4 years for being involved in charity fraud over nearly $5 million. It shows how the CRA is increasingly using criminal convictions instead of just revocations.  The judge described the fraud as "industrial scale".   The article notes "The total number of false claims over the life of the scheme was more than 1,700 for a purported $11.4 million of alleged donations." Keep in mind that this was only issuing $5 million in fraudulent receipts which is a tiny tiny amount compared to some other schemes out there.

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June 18, 2016

“Donald Trump Accused of Using His Charity as a Political Slush Fund” - The Daily Beast

The Daily Beast has a rather extensive article on Donald Trump's use of the Trump Foundation entitled Donald Trump Accused of Using His Charity as a Political Slush Fund.  It is well worth reading.  I have criticized the Clinton Foundation for some lapses when it came to transparency and especially the lame excuses they gave in response to questions.  Nothing that the Clinton's have done with their foundation seems to be even close to the seriousness of the allegations leveled against the Trump Foundation.

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Topics: News

June 17, 2016

CRA releases new online registered charity information request forms that will increase transparency

CRA recently released two new online registered charity information request forms which have been created to simplify the process when requesting certain types of information from CRA.  Previously this information was typically requested by sending a letter/fax to CRA.  Now it can be done online.  This is a giant step forward in making it easier for Canadians to be able to access public information from the CRA's Charities Directorate on Canadian registered charities. 

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June 15, 2016

Copy of CRA’s Non-Profit Organization Risk Identification Project - Draft Final Report - July 2013

The NPORIP was a major initiative of the Federal government to look at the approximately 80,000 - 100,000 organizations that are non-profits but not registered charities and the extent to which there are compliance issues.  In July 2013 the CRA prepared a draft "final" 76 page report (the "July 2013 Report") which we have attached.  It is 18 MB so it may take a minute to load.

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June 13, 2016

Stewards of the Public Trust: Long-Range Planning for the Future of the IRS and the Exempt Community

The IRS recently released a report entitled "Stewards of the Public Trust: Long-Range Planning for the Future of the IRS and the Exempt Community".   The Report was prepared by the Advisory Committee on Tax Exempt and Government Entities (ACT), which is an advisory body of the IRS.  I was one of the people interviewed for the report in September 2015 and  I am glad to see the report finally come out.   

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Topics: News

June 10, 2016

Bill C-239, a private members bill on tax incentives for donations, is defeated on second reading

It appears that Bill C-239, Ted Falk's private members bill to increase tax incentives for donations, has been defeated on second reading.   Both the Liberals and NDP expressed reservations about the private members bill and its potentially high cost.  In May I wrote a blog criticizing the bill.  A recent report from the PBO confirmed that the cost could be far higher than the projections provided by Mr. Falk.   

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June 04, 2016

The terribly high cost of Bill C-239 dealt with in Parliamentary Budget Officer report

The PBO has recently released a report entitled Cost Estimate of Bill C-239: An Act to amend the Income Tax Act (Charitable Gifts).  Bill C-239 is a private members bill by MP Ted Falk to increase donation tax incentives to match the tax rates given for political donations to charitable donations, but with none of the limits that apply to the amount that you can donate to political parties.  The report is well worth reading.  It describes the very high cost of passing this private members bill even if more funds are not donated to charity.

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May 28, 2016

Recent Changes to the Regulation of Charitable Activities in China

Blumbergs and the OCIC will be hosting a program on June 21, 2016 entitled "Recent Changes to the Regulation of Charitable Activities in China that will affect Chinese and Canadian charities".  You can register here.  It will feature Prof. Mark Sidel, Consultant for Asia at the International Center for Not-for-Profit Law (ICNL) and Doyle-Bascom Professor of Law and Public Affairs at the University of Wisconsin-Madison.  Mark Sidel has worked on nonprofit and philanthropic regulatory developments in China for nearly thirty years, and has worked in China for more than four decades. He will outline these recent developments, discuss their implications, and answer questions.

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May 27, 2016

AFP Toronto Fundraising Day:  The Time is Now: Government Relations for Canadian Charities

I am pleased to be on a panel for AFP GTA Fundraising Day with Caroline Riseboro, Bruce MacDonald, Hilary Pearson, and Stewart Wong.  The topic of the panel will be "The Time is Now: Government Relations for Canadian Charities".

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May 26, 2016

CRA letter on donation of capital property and donation receipt

CRA recently released a letter which discusses whether an official receipt issued for property donated in kind can include an amount less than the fair market value of the property.  CRA cited section 3501 of the Income Tax Act (Canada) Regulations to confirm that an official donation receipt should include the amount of the fair market value or the deemed fair market value of the property, in certain circumstances.  

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May 25, 2016

Total revenue received from all sources outside Canada by Canadian Registered Charities in 2014

Here is our article "Total revenue received from all sources outside Canada by Canadian Registered Charities in 2014".  It provides a list of Canadian charities that received foreign income in their 2014 fiscal year.  Foreign income for Canadian charities has risen to $1.8 billion - making it an important and growing source of revenue for Canadian charities.  

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May 25, 2016

Fundamentals of Employment Law for Charities and Non-Profits 2016

Blumbergs will be holding a half-day seminar on Tuesday June 21, 2016, Fundamentals of Employment Law for Charities and Non-Profits from 1PM-4PM.  You can register here

May 22, 2016

Industry Canada sends out thousands of final notices of pending dissolution to Federal CCA NPOs

Industry Canada has sent out notices to thousands of Canada Corporations Act (CCA) corporations warning them of their pending dissolution as they have failed to transition to the Canada Not-for-profit Corporations Act (“CNCA”). Industry Canada wants to wind down the CCA and in order to do so they need to remove all remaining corporations under the CCA.  It appears that up to 2000 of such corporations may be registered charities.  Industry Canada had generally held off sending the notices to registered charities but the transition deadline of October 2014 is now over 1.5 years old.  

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May 22, 2016

Another poorly thought through Canadian private members bill that affects the charity sector

A Canadian private members bill, introduced by MP Ted Falk, would change the tax credit for donations to charities.  It is called the Fairness in Charitable Gifts Act- Bill C-239.  Malcolm Burrows recently wrote a very useful critique of this poorly thought through piece of legislation. Essentially the idea behind the proposal is to match the incentive for charitable donations to those offered for political donations.  However, unlike political donations which have very low caps and therefore the tax benefits are very limited, there will be no limit on the tax benefits that donors to charities receive under this bill. 

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May 18, 2016

CRA information on assisting people and charities impacted by the wildfires in Alberta

The Canada Revenue Agency ('CRA') recently published a Question and Answer piece on its website which provides information on providing assistance to people impacted by the wildfires in Alberta and information for registered charities that may have been impacted by the wildfires or would like to provide assistance.  Here is the CRA link: http://www.cra-arc.gc.ca/chrts-gvng/chrts/whtsnw/frtmcmrry-qstns-nswrs-eng.html?utm_source=charities&utm_medium=eml

Do you require legal advice with respect to Canadian or Ontario non-profits or charities?

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Charity Lawyer Mark Blumberg

Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.

mark@blumbergs.ca
416.361.1982
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