Avoiding 'Charity' Scams

March 22, 2017

2017 Canadian Federal Budget and its impact on non-profits and charities

The 2017 Canadian Federal Budget was released today.  Here is our article 2017 Canadian Federal Budget - How will it affect the Canadian charitable sector? 

March 19, 2017

“Charity finances: trustee essentials” - great information on financial management of a charity

The Charity Commission has recently updated  their guidance "Charity finances: trustee essentials".  It provides helpful information on finances that Canadian directors and trustees, as well as staff, should be aware of.  Keep in mind that on certain points the law in Canada is different than in England and Wales.  Unfortunately the CRA provides far less guidance on financial management and governance to the charity sector than I would like.  

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March 16, 2017

FTC & NASCO Conference on Consumer Protection Issues and Charitable Solicitations - online/free

The Federal Trade Commission (FTC) and National Association of State Charities Officials (NASCO) are organizing a conference called "Give & Take: Consumers, Contributions, and Charity" on Tuesday March 21, 2017.   It will be in Washington but it will be live streamed for free for those who are interested.  The live link will be available on the day of the conference.  

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March 07, 2017

Government of Canada to combine all Federal government websites into Canada.ca

The consolidation of all Government of Canada websites into one domain at www.canada.ca has started.  In theory this is an opportunity to have a more streamlined, secure government website.  I have two concerns about how this will affect charities. 

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February 24, 2017

CRA has updated the T2050 form - Application to Register a Charity

The Canada Revenue Agency ('CRA') recently updated the T2050 form used by organizations when applying for charitable status with the Charities Directorate of the CRA. 

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December 21, 2016

Did charitable giving in Canada really hit a 10-year low?

I recently read a press release from a Canadian think tank that said “Charitable giving in Canada hits 10-year low”. They proposed “In total, Canadians claimed $9 billion in charitable donations in 2014. But had Canadians donated in 2014 at the same rate as in 2006, Canada's charities would have received an additional $3.6 billion, for a potential total of $12.6 billion."  They also noted that Americans gave 1.42 per cent of their income to charity in 2014 -- more than two-and-a-half times what Canadians gave.” I guess their main points were that Canadians are becoming less generous and Canadians are not as generous as Americans.  I have issues with the arguments and the methodology.

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November 03, 2016

CRA releases new educational video series on ‘Gifting and Receipting’

CRA recently released its first video as part of a new educational video series on 'Gifting and Receipting'.  This series is meant to educate the public, donors, and those involved in the charitable sector on the type of donations that are tax-receiptable and the different CRA rules regarding receipting.  

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September 20, 2016

Some simple and free steps to increase your Canadian registered charity’s transparency

The work that charities do is extremely important to our society, so it is vital that various stakeholders, such as the public, the media, the government, donors, employees, boards, donors and others. have access to key information on what the charity is doing and how it is doing it. In general transparency will ultimately increase public trust and confidence in the sector by making the public more informed about the work of charities and making it more difficult for people to misuse charities. However, from a legal perspective registered charities have few requirements in terms of transparency.  Registered charities must file a T3010 Registered Charity Information Return with a financial statement and various schedules with the CRA every year.

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September 12, 2016

CRA media response on Canadian charities and funding or supporting terrorism

Here is a CRA document provided under access to information rules which includes their media response on Canadian charities and funding or supporting terrorism.  Not surprisingly because of the very limited scope for CRA to divulge information under the confidentiality provisions of the Income Tax Act (Canada) there is little information divulged.  

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September 07, 2016

Cost of charitable tax incentives in Canada approximately $4 billion per year

In the notes section of a CRA presentation "Regulation of Charities - Overview" the CRA notes that in 2012 the amount of receipts issued was $14.28 Billion and that "the federal assistance for charitable donations in 2012 exceeded $2.9 ... Individuals also claimed over $1 billion in provincial and territorial tax credits billion".  Therefore the cost of having a tax subsidy just for donations to registered charities is almost $4 Billion. 

September 06, 2016

Canada Without Poverty charter challenge to political activity rules of Canadian charities

A Canadian charity has launched a charter challenge against the restrictions on registered charities in carrying out political activities. They argue that it violates freedom of speech and assembly amongst other things.  The CBC covered it in an article entitled "Anti-poverty group launches challenge of political-activity limits".

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August 17, 2016

GLGI cost decision results in huge award in favour of CRA

In a 44 page cost decision Pizzitelli J. discusses how much costs should be given to CRA (the Respondent) with respect to the abusive charity gifting tax scheme, GLGI, that he had previously provided a judgment in.   The hearings on the case were over 25 days - certainly quite a thorough vetting of the issues.  You can read the full GLGI cost decision here.  Pizzitelli J. notes:

"While I appreciate the Promoter may bear the direct responsibility for the sham it has perpetrated on the Appellants and the Canadian public at large and benefited to the extent of millions of dollars in cash contributions, the Appellants and Bound Appellants did blindly or willingly jump on the Program train in expectation of receiving a net cash advantage from their donation. As I indicated in paragraph 88 of my Reasons in this matter: ..When otherwise good people turn a blind eye to the obvious reality surrounding them, they cannot lay blame on others for the consequences that follow from the fraud or sham of others. They certainly should not expect the Canadian public to fund their losses. Accordingly, I am not prepared to limit liability for costs solely to the Promoter as requested by the Appellants and Bound Appellants."

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August 12, 2016

Draft Guidance from the Charity Commission on “Grant funding an organisation that isn’t a charity”

The Charity Commission of England and Wales has recently released a draft guidance on the types of controls English charities should be using when providing grants to non-English charities. 

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July 22, 2016

Mariano v. The Queen - massive cost award against GLGI of close of $500,000

In a recent decision Mariano v. The Queen, the Tax Court of Canada (TCC) awarded a very large cost award in favour of CRA (who was the respondent in the matter) and against GLGI, the promoter, and some of its investors.  The Court ordered costs of $491,136.95 minus the costs of two expert witnesses which will have to be determined.  The TCC also noted with respect to CRA "The Respondent was totally successful in the trials of the above matters involving a charitable donation scheme which spanned over 25 days of hearings including one week of oral argument supplemented by detailed written argument given by both sides."  Please note they did not say largely successful - they said "totally" successful.   It is quite clear that the TCC after many many years is getting impatient with listening to arguments in favour of what the CRA used to call "abusive charity gifting tax schemes".   

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 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 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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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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April 25, 2016

High Court rules Cup Trust Gift Aid claim can be withdrawn

In the Cup Trust case there was an abusive scheme run by a charity and controlled by a trustee, Mountstar.  The Mountstar trustee was replaced by an interim manager appointed to take over the affairs of the charity.  The interim manager decided that they did not want to pursue litigation relating to a Gift Aid claim.  The organizers of the scheme (Mountstar) wanted the charity to continue litigation and were prepared to pay for its costs.  The High Court in the UK decided that charities should not be involved in speculative litigation and that it was acceptable for the interim manager to withdraw the Gift Aid claim.  

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February 29, 2016

Spotlight wins Academy Award, but real investigative reporting does not deserve any awards

It was nice to see the movie Spotlight winning an Academy Award as best picture.  The movie focused on a team of Boston Globe investigative reporters who uncovered extensive abuse by priests.  The Chronicle of Philanthropy had a very good opinion piece by Pablo Eisenberg entitled "Philanthropy Needs More Reporters Like Those in ‘Spotlight’"

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February 28, 2016

National Post article highlights how charities can unwittingly be used to support terrorism

In a recent and lengthy article in the National Post entitled "Who is Awso Peshdary? The case against an alleged Ottawa extremist who police say recruited for ISIL" the article describes the way Mr. Peshdary allegedly recruited for ISIS in Ottawa. What is interesting to see is the number of charities that have some sort of unwitting involvement with Mr. Peshdary and that he used their programs or services to further his efforts.  This article is helpful in challenging misconceptions about charities and terrorism. The biggest misconception that people have about charities and terrorism is that a charity would only be useful for fundraising for a terrorist enterprise. There are so many ways that terrorists can misuse charities that I will discuss below.  The second biggest misconception about charities and terrorism is that those who control the charity' are knowingly involved in supporting the terrorism.   All that a charity needs to be is unaware of the activities for them to take place.   

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February 03, 2016

R. v. Raza, -using criminal courts to crackdown on charity fraud

There was recent case of R. v. Raza, 2015 BCSC 2512 (CanLII).  The three accused were tax preparers who were charged with fraud for allegedly being involved with the issuance of false donation receipts. 

January 21, 2016

Canada v. Scheuer, - CRA not responsible for bad shelters that have tax shelter numbers

In the recent case of Canada v. Scheuer, 2016 FCA 7 the Federal Court of Appeal sided with CRA.  A number of people who had invested in abusive tax shelter arrangements sued CRA because CRA had issued a tax shelter number.  The FCA concluded that CRA had no alternative but to issue the tax shelter number and such number does not mean that the tax shelter works. CRA does not have a duty to warn "investors" that a scheme like GLGI is suspect.  Although I might add that CRA does warn people not to invest in these schemes. Also the FCA suggested "the plaintiffs acknowledge that they received independent legal opinions, opinions from accountants and valuation appraisals in respect of the tax shelter. The issuers of such opinions, who benefited financially from the provision of their professional advice, are better placed to indemnify the plaintiffs in the event of negligence in the exercise of their professional responsibilities."   In other words the FCA is encouraging those who invested in these schemes to sue the lawyers, accountants and valuators who provided opinions and appraisals if they were negligent. 

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January 21, 2016

Liberals announce winding down of the political activities audit program for charities

Diane Lebouthillier, the new Minister of National Revenue has announced that the 2012 Conservative government initiative to audit more registered charities on the issue of political activities will be wound down.  There is a lot in the release and I will be writing more about it shortly.  

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January 19, 2016

Charity Village webinar “Top 20 Compliance Issues for Canadian Charities”

I will be presenting a webinar for Charity Village on January 28, 2016 on Top 20 Compliance Issues for Canadian Charities.

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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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