News

May 28, 2015

CRA letter on tax exempt status of affordable housing provider

CRA recently released a letter that discusses the tax implications of an affordable housing provider (an entity described in paragraph 149(1)(l) of the Income Tax Act (the “Act”)) that wanted to provide long-term leasing of its parking spots to a business owned by one of its board members. The housing provider intended to lease excess parking spots and charge the same rate that it charged to its tenants.   The housing provider did not anticipate receiving a significant amount of rental income from leasing the parking spots.  

CRA had the following comments: 

The courts have recognized that an organization claiming a paragraph 149(1)(l) exemption can earn a profit, as long as the profit is incidental and arises from activities directly connected to its not-for-profit objectives. For example, maintaining reasonable operating reserves or bank accounts required for ordinary operations will generally be considered to be an activity undertaken to meet the not-for-profit objectives of an organization.

It is a question of fact whether the rental income described would be incidental and directly connected to the not-for-profit objectives of the housing provider.  Income from the rental of XXXXXXXXXX parking spots under a XXXXXXXXXX-year term lease to a third party by an organization providing affordable housing will generally not be considered to be directly connected to the objective of providing affordable housing. However, a review of all of the circumstances, including (but not limited to) how and why the extra parking spots were acquired by the housing provider, and why the extra spots continue to be maintained, may indicate that the housing provider does not have a profit purpose, notwithstanding the lease.

It is also a question of fact whether the income of the organization is payable to or otherwise made available for the personal benefit of any member.  An organization may fail to comply with this requirement if it distributed income during the year, either directly or indirectly, to, or for the personal benefit of, any member.  It is not clear in your situation whether the board member is also a member of the housing provider."  

CRA also provided other exemptions for affordable housing providers under the following sections of the Act that do not have the same requirements and restrictions imposed by paragraph 149(1)(l): 

*           Municipal corporations are exempt from tax under paragraph 149(1)(d.5) provided at least 90% of the capital is owned by municipalities or public bodies performing a function of government. We note that paragraph 149(1)(d.5) does not apply to an organization that is only funded, not owned, by a municipality. Paragraph 149(1)(d.5) does not preclude a municipal corporation from having a profit purpose, which may allow for more funding flexibility. Paragraph 149(1)(d.5) imposes a restriction that no more than 10% of income may be earned from activities carried on outside the geographical boundaries of the municipality or municipalities; however this restriction may not be a concern for a municipal housing organization.

*           An affordable housing provider may be a registered charity. In Policy Statement CPS-020 for “Applicants that are Established to Relieve Poverty by Providing Rental Housing for Low-Income Tenants”, the Charities Directorate has determined that, on the basis of the Act and the common law, certain low-income housing organizations may be considered to be established for the purpose of relieving poverty and are eligible for registration.  A registered charity is exempt from tax under paragraph 149(1)(f) and as a charity, cannot qualify for the NPO exemption provided by paragraph 149(1)(l).  An affordable housing provider that is a charity must generally be registered in order to be exempt from tax (assuming that one of the other provisions noted does not apply).

*           Corporations that are “constituted exclusively for the purpose of providing low-cost housing accommodation for the aged” are exempt from tax under paragraph 149(1)(i). This provision does not specifically preclude a profit purpose, although it does require that income not be available for the personal benefit of proprietors, members and shareholders.

*           Paragraph 149(1)(n) exempts from Part 1 tax the taxable income of a person for a period when that person was a limited-dividend housing company (within the meaning of that expression as defined in section 2 of the National Housing Act), all or substantially all of the business of which is the construction, holding, or management of low-rental housing projects where the dividends payable are limited by its charter or instrument of incorporation to five per cent per year or less.

Here is a copy of the CRA letter. 

May 23, 2015

Canadian Charities Conducting International Activities (2015)

Here is an article entitled Canadian Charities Conducting International Activities (2015). It will be of interest to Canadian charities that are, or considering, operating outside of Canada.

May 21, 2015

Fundamentals of International Activities by Canadian Registered Charities

Over 5000 Canadian registered charities operate outside of Canada and they cumulatively spend around $3 billion per year on foreign activities.  The Fundamentals of International Activities by Canadian Registered Charities is a 1/2 day presentation with charity lawyer Mark Blumberg which discusses international activities by Canadian charities and related regulatory issues.  The first Fundamentals of International Activities by Canadian Registered Charities will be held on Tuesday September 22, 2015 from 1PM-4PM. Some charities operating abroad are not aware of, or compliant with, their legal requirements and foreign activities has been an area that has been scrutinized by CRA in its audits and can result in revocation of charitable status if the rules are not followed.

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May 21, 2015

Fundamentals of Political Activities by Canadian Registered Charities

The involvement of charities in political activities has been a major story since 2012. The 2012 Federal Budget introduced new reporting requirements for charities for 2013 but does not fundamentally affect the ability of charities to engage in political activities. Significant resources have been provided to the Charities Directorate to audit charities who conduct political activities. On Tuesday September 22, 2015 we will conduct a 1/2 day program from 9AM-12PM entitled Fundamentals of Political Activities by Canadian Registered Charities.  

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May 18, 2015

Presentation to the Université de Montréal Charity Law Conference 2015

I was delighted to present as part of a panel at the Université de Montréal Charity Law Conference 2015 on May 8, 2015.  The panel was entitled The Modern Charities Regulator and my presentation was entitled "Overview of the Regulatory Environment in Canada for Registered Charities".

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May 18, 2015

Article in Bottom Line “Ontario non-profits await new legislation” by Mark Blumberg

The Bottom Line recently published an article entitled Ontario non-profits await new legislation by Mark Blumberg.  The article discusses options for Ontario non-profits including waiting for ONCA or moving forward to the new CNCA and skipping ONCA altogether. 

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May 18, 2015

Court decides former registered charity IRFAN cannot use funds to pay further legal costs

In a decision on April 9, 2015 in the Federal court The Honourable Madam Justice Mactavish dealt with an issue of whether The International Relief Fund for the Afflicted and Needy (Canada) ("IRFAN") could use funds to pay past and future legal costs.   IRFAN used to be a registered charity and then lost its charitable status and finally was in April 2014 added as a listed terrorist entity.   Such listing effectively freezes the assets of IRFAN.   IRFAN was alleged to have provided resources to Hamas, which is a listed terrorist organization.   

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May 17, 2015

CBC says “Giving Tree Foundation to be stripped of charity status”

CBC recently reported in an article "Giving Tree Foundation to be stripped of charity status: Charity that gives $2M a year to children's causes faces demise after tax review".  CBC notes "The group has a relationship with EquiGenesis Corp., a company that designed a complicated donation tax strategy that helped the Giving Tree Foundation quickly raise millions of dollars after it was re-organized five years ago."

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May 17, 2015

Toronto Star article on Fraser Institute and political activities

In a recent Toronto Star article entitled "Critics say Fraser Institute letter highlights ‘enormous lack of clarity’ in charity-audit rules" the Toronto Star discusses a letter from the Fraser Institute to supporters. The article raises some interesting points but I have some concerns with the article as well.

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May 14, 2015

Upcoming Webinars for the Canadian Charity Law Association

The Canadian Charity Law Association is delivering some upcoming webinars.  Registration is free but space is limited. 

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May 12, 2015

CRA releases updated GST/HST Information Sheets for Charities

CRA has recently released an updated Information Sheet on GST/HST Guidelines for Charities. The Information Sheet provides basic information on how the GST/HST applies to many issues commonly faced by charities and replaces the previous Information Sheet from June 2011.

CRA has also released an updated Information Sheet on 'How a Charity Completes Its GST/HST Return'.  This Information Sheet explains how a charity that is a GST/HST registrant calculates its net tax and completes its GST/HST return and replaces the previously Information Sheet from June 2011.  
 

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April 29, 2015

Coverage of the Clinton Foundation and transparency around donations from Canada

There have been a large number of articles discussing the transparency of the Clinton Foundation and gaps or mistakes in their filings.   Here is an article from the New York Times, the Washington Post and Bloomberg News.  Here is a response from the Clinton Foundation blog to all the coverage.

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Topics: News

April 28, 2015

Fundamentals of Receipting by Canadian Charities [SOLD OUT]

Properly issuing official donation receipts has been challenging for many registered charities.  According to the CRA, 89% of registered charities that are audited are not correctly issuing official donation receipts.  Issuing incorrect receipts can result in revocation or penalties. It is easier to do it right than fix problems later! Here is a new half-day program from Blumbergs entitled "Fundamentals of Receipting by Canadian Charities".

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April 27, 2015

Fundamentals of Employment Law for Charities and Non-Profits

Blumbergs will be holding a half-day seminar on May13, 2015, Fundamentals of Employment Law for Charities and Non-Profits from 9AM-12PM.  

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April 25, 2015

Ontario budget and non-profit corporate legislation

As many have noted the Ontario budget was not that exciting.  There is one sentence on ONCA hidden at the end of a paragraph on business modernization. "As an early priority, the government will take steps to enable the proclamation of the Ontario Not-for-Profit Corporations Act, 2010."  It is interesting that the government is concerned with modernizing corporate legislation as "a comprehensive review of corporate and commercial statutes has not been undertaken in the past 10 years".  Wow 10 years! Well the Ontario Corporations Act has not been substantially changed since the 1950s (that is over 60 years!) and ONCA was passed in 2010 and still has not been brought into force.  

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April 24, 2015

Political Activity Audits and the CRA Program Update 2015

We have blogged about the CRA Program Update 2015 separately but wanted to focus here on what the update provides in terms of information on the political activity audits of CRA's Charities Directorate.  CRA should be commended for publishing a program update.  I am certainly not aware of any regulatory requirement that they need to, but the program update does provide useful information for the charity sector.  In the program update you have to read pretty far into the 5000 word document to see the "Charities and Political Activities" update but it is important so we have created a separate blog post. 

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April 23, 2015

Sowa v. Canada - FCA dismisses appeal of disallowed donation

Sowa v. Canada involves an alleged donation of $10,250 in 2006 by Emily Sowa.   The Tax Court of Canada "doubted the truthfulness of the appellant’s claim that she donated $10,250.00."   Also the purported receipt did not contain all the required elements.  The FCA did not find any error on the TCC's part and dismissed the appeal with costs.

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April 23, 2015

SCC denies leave to appeal in Humanics Institute case

The case of Humanics Institute v. Minister of National Revenue deals with the refusal of CRA to register an organization as a charity in the category of advancement of religion.  The Humanics Institute had lost in the Federal Court of Appeal and now the Supreme Court has denied them leave to appeal.  

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April 22, 2015

Mark Blumberg on The Agenda with Steve Paikin - Charity Goes Viral

On March 26, 2015 Mark Blumberg was on The Agenda with Steve Paikin discussing crowdfunding.  Other guests included Marina Glogovac, Caroline Riseboro, Bruce MacDonald, Daryl Hatton and Sabrina Nicosia.  It was entitled "Charity Goes Viral".  

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Topics: News

April 22, 2015

Upcoming Webinars for the Canadian Charity Law Association

The Canadian Charity Law Association is delivering some upcoming webinars.

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April 21, 2015

2015 Federal Budget and its Impact on Canadian Charities

Today the Federal government released its budget.  There were a few items that will impact charities and non-profits in Canada.  Here are the actual provisions in the 2015 Federal budget that impact charities.

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April 20, 2015

Blumbergs’ Snapshot of the Canadian Charity Sector 2013

We have just released the Blumbergs' Snapshot of the Canadian Charity Sector 2013 as part of the Sean Blumberg Transparency Project.   The database covers about 83,000 of the 86,000 registered charities in Canada that had filed their T3010 and were processed into CRA’s Charity Listing database by December 2014. 

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April 17, 2015

Largest Canadian Registered Charities by Employment Compensation

We prepared an article on the largest Canadian charity employers.  The article is entitled "Largest Canadian Registered Charities by Employment Compensation"

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April 10, 2015

CRA’s Charity Program Update 2015 - provides useful information on the charity sector and regulation

The Charities Directorate of CRA has released the Charity Program Update 2015.  We will discuss the update in this note, except for the parts dealing with political activities which we will discuss here.

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March 24, 2015

CRA letter on qualifying as a municipal or public body performing a function of government

CRA recently released a letter which discusses whether a park qualifies as a 'municipal or public body performing a function of government'  in Canada within the meaning of paragraph 149 (1) (c) of the Act. CRA concluded that they would require additional information on the park in order to make a determination that the park would qualify and would be accountable to the public, the province and the municipalities from which it was created.

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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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