Reporter David Baines of the Vancouver Sun has written another article on Blake Bromley entitled “Vancouver ‘expert’ in charity law says CRA is targeting his clients”.
For the full article see:
Vancouver ‘expert’ in charity law says CRA is targeting his clients
By David Baines, Vancouver Sun May 7, 2011
I am going to comment on a few items in the article.
1) The Vancouver Sun article notes “As a result of his adversarial posture, Bromley believes CRA is targeting charities he is involved in. “At this time, CRA does not seem to care about any problems that it cannot link to Benefic -even if the only link is that the charity originally was registered by us or uses Benefic as its registered office or involves single transactions that are five years old.”
It appears to me that each year about 30 charities lose their registered charitable status for cause. That is 30 out of 85,000 charities. If it is only about 2 out of the 30 that are related to Mr. Bromley then that still leaves CRA spending the vast majority of their efforts revoking charities for cause that were not involved with Blake Bromley. Or perhaps I am misreading the situation and he is involved with more of the non-compliance than it appears to me. As well, if you read the views that he expresses as are quoted in an earlier Vancouver Sun article entitled “Charitable donation expert says he heeds law, not CRA ‘technical rulings’” it is not surprising that the charities the he is involved with are receiving greater scrutiny from the regulator. Furthermore, if the courts agree with the regulator the charity will obviously have an unsuccessful result in court.
2) There are rules for Canadian charities operating abroad - you can look at the Income Tax Act and read the cases directly or you can see Canadian Registered Charities Carrying Out Activities Outside Canada which provides CRA’s review of the case law. http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cgd/tsd-cnd-eng.html The article discusses one charity that Blake was a director of and here is a quote from the article:
“The money was sent to Give2Asia in San Francisco, which the Vancouver charity listed as a “qualified donee” in its financial return.” In 2008, the Vancouver charity received a very large amount -just over $1.1 million -for which it issued tax receipts. Once again, the donors were not disclosed. But unlike previous returns, the 2008 financial return did not indicate where this money went. In July 2009, CRA revoked Give2Asia’s registration because it “operated solely for the non-charitable purpose of gifting funds to a non-qualified donee, Give2Asia, a U.S. non-profit organization.” “Furthermore, the charity has served as a conduit, allowing the U.S. nonprofit to flow funds from Canadian donors through the charity to the U.S. non-profit, without appropriately controlling and regulating the application of the funds once relinquished,” CRA stated. “Consequently, it is our position the charity issued official donation receipts for funds that were directed by donors to a non-qualified donee, which is a contravention of the [Income Tax] Act.” With respect to the $1.1 million in tax-receipted gifts that the charity received in 2008, Bromley said this money also went to Give2Asia in San Francisco, but it wasn’t reported in the financial return because by that time, CRA had decided that the San Francisco charity was not a qualified donee.
Give2Asia in the US is not a qualified donee and a Canadian charity cannot make a gift or donation to a non-qualified donee. A Canadian charity can transfer funds to support a program outside of Canada as long as it has direction and control over the use of its resources. If you want to understand how to conduct foreign activities in a way that the courts and CRA will not question take a look at the court cases dealing with the subject (such as the Canadian Committee for the Tel Aviv Foundation, Canadian Magen David Adom for Israel or Bayit Lepletot) or see CRA’s Guidance Canadian Registered Charities Carrying Out Activities Outside Canada which discusses direction and control of a charity’s resources http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cgd/tsd-cnd-eng.html There are also a great deal of free resources including agreements, webinars, articles on foreign activities at http://www.globalphilanthropy.ca
If a change is sought to the rules for foreign activities Finance can be approached. They are the only ones who can change the Income Tax Act.
Personally, I think that Canadian charities are heavily subsidized by the tax system and the rules are quite fair in that context. It is often difficult to fundraise for international development, unless it is a well publicized disaster. I think that it is appropriate when large amounts of money that belong to a Canadian charity and subsidized by taxpayers leave Canada there should be accountability and transparency. Not having good transparency and accountability only serves to undermine the public’s confidence in international development charities and makes it even harder to fundraise. More details are provided in CRA’s letters to Give2Asia Canada.
3) The Vancouver Sun notes: “He further argues that, if such donations do not qualify under the Income Tax Act, they do under the Canada-U.S. Tax Treaty, which in his view should take precedence “CRA doesn’t like that interpretation, because it allows money to flow south . The fact is, there are hundreds of millions of dollars flowing north from U.S. charities into Canada, and they fund a lot of environmental and other groups.”
I believe CRA does not have a problem with foreign activities. It appears that CRA has a problem with Canadian registered charities that do not follow the rules on foreign activities as set out in the Income Tax Act or common law. Hundreds of millions of dollars are transferred from the US to Canada and vice versa. As long as the rules are followed there is nothing wrong with international philanthropy from Canada. Canadian charities spend about $2.5 billion dollars outside of Canada every year. In fact, we have over 4000 Canadian charities doing international philanthropy and many make the argument, including myself, that it is some of the most important work of the Canadian charitable sector.
4)The Vancouver Sun article states Bromley says that, in his opinion, the Vancouver charity has legal grounds to appeal, but such an appeal would cost tens of thousands of dollars, and if history repeats itself, the charity would lose. “There has never been a case in the Federal Court of Appeal where a taxpayer has won a revocation or annulment case, so why spend the money going there?”
If there are doubts about the validity of the revocation then he should have appealed and he would have had an opportunity to further test the argument that that organization was a qualified donee.
Do you require legal advice with respect to Canadian or Ontario non-profits or charities?
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.