Ethics and Canadian Charities
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’"
February 28, 2016
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.
February 03, 2016
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
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.
January 21, 2016
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.
December 18, 2015
The Charity Commission of England and Wales just released a report entitled Campaigning and political issues arising in the run-up to the 2015 General Election. When they put it out they probably did not think that it is such a special report. It explained that in the 2015 UK election there were complaints about UK charities, the Charity Commission investigated and what the result was. Nothing that exciting, except in Canada if the CRA was to prepare a similar report and provide it to either MPs or the public then people at CRA would go to jail.
December 08, 2015
In R. v. Kueviakoe, 2015 ONCJ 681 (CanLII) Ekue Kueviakoe was charged with numerous offences contrary to the Income Tax Act (Canada) because he prepared many false income tax returns. He was fined at a rate of 100% of the tax avoided on all those income tax returns and sentenced to a one year conditional sentence ie. house arrest. He will have to pay over $70,000 in fines. The Judge took into account a myriad of factors in determining the sentence including sick members of his family, his loss of a stable job resulting from the fraud etc. The Judge noted that in terms of the taxpayers "The Canada Revenue Agency reassessed each of those people such that they are responsible for paying their portion of those taxes. The Canada Revenue Agency has therefore already been reimbursed. The individual taxpayers might also have been assessed administrative penalties for their part in this."
December 04, 2015
Today the Canada Revenue Agency announced the revocation of the registration of of the Canadian registered charity Le Refuge des Rescapes for issuing over $2 million in official donation receipts connected with an abusive charity gifting tax scheme.
November 25, 2015
It is interesting to see that CRA used to refer to "abusive charity gifting tax schemes" and they appear to be lumping them in with fraud. "Meet Mary & William. Mary and William are a married couple with kids. They have fallen victim to a donation tax shelter scheme. Find out more about Mary and William’s story and how you can protect yourself against fraud."
November 25, 2015
The Tax Court of Canada recently released a decision where they dismissed the appeals of former spouses relating to reassessments under the Income Tax Act with respect to their alleged charitable donations made in 2003, 2004 and 2005.
November 02, 2015
We have previously blogged about the decision of the Tax Court of Canada in David, R. et al. v. the Queen (TCC) (here and here). In this decision, the court allowed the appeals of the respondents relating to tax credits that had been previously disallowed by the Minister of National Revenue for gifts the respondents had made to CanAfrica International (CanAfrica), a registered charity, in 2006 (each of the respondents was issued an inflated tax receipt by CanAfrica).
October 26, 2015
In the case Mariano v. The Queen 2015 TCC 244 the Honourable Justice F.J. Pizzitelli reviewed in great detail the Global Learning Trust (2004) and the Global Learning Gift Initiative (GLGI) program. These programs are what CRA calls abusive charity gifting tax schemes. For those interested in the regulation of charities and the definition of gift this is a must read case. It discusses gifts and donative intent, fair market value and valuation reports. Mr. Justice F.J. Pizzitelli goes into great detail and analyzes the various positions, their expert witnesses and the conduct of the promoter's advisors.
October 08, 2015
Here are the CRA letters from a number of recent Canadian registered charity revocations, annulments and penalties. These letters from CRA cover many different grounds for de-registration or the imposition of penalties.
October 08, 2015
We are compiling a list of Canadian cases dealing with charities, gifting and related issues. Let us know if you have any other suggestions:
September 14, 2015
Mark Blumberg will be team teaching, with Valerie Campbell and Sharilyn Hale, the Humber Fundraising Management Course "Ethical and Legal Issues". It was previously taught by Ken Wyman so we will have big shoes to fill.
August 22, 2015
The CRA has posted an "Advisory on partisan political activities" as a reminder to Canadian registered charities that they must avoid all partisan political activities, although they are allowed to conduct certain political activities related to their objects and within in certain resource limitations.
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