Ethics and Canadian Charities
September 27, 2016
The CRA today launched its political activity consultation. It reinforces the importance of charities being engaged in the political process. The CRA is looking for feedback on the rules and CRA's guidance. People or organizations have until November 25, 2016 to provide comments. We have provided a large amount of documents and analysis on the issue of charities and political activities in our political activities and Canadian charities directory.
September 26, 2016
The CRA has issued a media advisory that the "Honourable Diane Lebouthillier, Minister of National Revenue, will launch public consultations to clarify the rules regarding the involvement of registered charities in political activities." She will make the announcement tomorrow, Tuesday, September 27, 2016 in Ottawa. This consultation will give the public an opportunity to express their views on charities and political activities.
We have provided a large amount of documents and analysis on the issue of charities and political activities in our political activity directory. We will be helping various organizations with their discussions and submissions on this important topic.
September 20, 2016
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.
September 15, 2016
The Liberal Government has made some noises about modernizing charity law. Who could be opposed to modernization? As there is no idea as to what "modernization" means, it has opened up all sorts of calls for changes to charity law in Canada - many of the ideas would be expensive, counterproductive, stifling, or ultimately destroy the positive reputation of the charity sector. Wikipedia defines a Pandora's box as "a process that generates many complicated problems as the result of unwise interference in something." Although only time will tell, it appears that "modernizing charity law" has a small upside and a very large downside.
September 07, 2016
Here is a copy of a CRA Powerpoint presentation slide deck on the Regulation of Charities - Overview - September 2014. It provides some useful information including the CRA's audit plan. For example, the audit plan shows that CRA planned on auditing in 2014/15 32 registered Canadian amateur athletic associations (RCAAAs). That is a pretty large number as there are only 119 RCAAAs in total. Political activity audits in that same period only accounted for 2% of CRA audits. Only 4% of charities audited resulted in CRA issuing an notice of intention to revoke.
September 07, 2016
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.
August 12, 2016
The CBC recently wrote an article entitled “Iris Kirby House fundraising foundation refiles public charity disclosure documents to fix errors”. The article covered a registered charity and the mistakes in its T3010 Registered Charity Information Return filings. It is not often that such a lengthy article is written on a charity and inaccurate financial statements/T3010 filings that I thought I should blog about it. I am only focusing here on the T3010 problems and the response of the charity to the T3010 problems, and not any of the other substantive allegations by supporters or detractors of the charity.
August 12, 2016
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.
July 27, 2016
Blumbergs has just released a new website with over 10 years T3010 information for each Canadian registered charity. The site is a beta being tested but if you are interested you can visit the website at www.charitydata.ca It is free and hopefully useful. If you have any feedback just let us know.
July 22, 2016
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 succesful - they said "totally" succesful. 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, 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.
July 13, 2016
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.
July 11, 2016
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.
June 30, 2016
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".
June 18, 2016
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.
May 22, 2016
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.
April 25, 2016
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.
March 15, 2016
I look forward to the AFP GTA Fundraising Day 2016 which will be held on June 9, 2016. There will be various speakers and panels. I will be on a panel with Bruce MacDonald (Imagine Canada), Hilary Pearson (PFC), Caroline Riseboro (Plan International), Stewart Wong (Holland Bloorview Kids Rehabilitation Hospital) dealing with the importance of government relations.
February 29, 2016
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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