What's New from the Charities Directorate of CRA
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 16, 2016
A recent case, Credit Counselling Services of Atlantic Canada Inc. v. The Queen, 2016 FCA 193, dealt with an annulment of a registered charity. CRA had annulled the registered charity status of Credit Counselling Services of Atlantic Canada Inc. in this Notice of Annulment of Registration in 2013 that we had previously posted on our website. Credit Counselling Services of Atlantic Canada Inc had appealed the decision to CRA but CRA confirmed the Notice of Annulment in April of 2015. Credit Counselling Services of Atlantic Canada appealed to the Federal Court of Appeal and in a decision on June 24, 2016 the Federal Court of Appeal upheld the CRA decision and dismissed the appeal. There are really two issues in the case. First, is the 'prevention of poverty' a recognized charitable purpose as opposed to 'relief of poverty' which is one of the four heads of charity. The Court found that prevention of poverty is not a charitable purpose. Second, annulments are far more unusual than revocation as a result of audit and therefore the case provides some clarity standards for review of annulment. Essentially, annulments being contested will be treated by the FCA in a similar way to a revocation.
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 29, 2016
As a result of the 2016 Quebec Budget, Canadian registered charities are no longer required to complete a separate charitable registration in Quebec in order to be able to issue tax receipts to donors in Quebec.
June 28, 2016
The Department of Finance has established an advisory committee to review tax expenditures. This will be part of an initiative to reduce "poorly targeted and inefficient programs, wasteful spending, and ineffective and obsolete Government initiatives." What are tax expenditures? Finance notes "The tax system can be used to achieve public policy objectives through the application of special measures such as low tax rates, exemptions, deductions, deferrals and credits. The Department of Finance Canada publishes cost estimates and projections for these measures annually in the Tax Expenditures and Evaluations publication. The tax measures presented in the Tax Expenditures and Evaluations publication are the responsibility of the Minister of Finance."
June 19, 2016
The Finance Committee of the House of Commons has requested pre-budget submission be provided by August 5, 2016. If you have ideas that could help Canada be a better country you might want to make a submission.
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.
June 17, 2016
CRA recently released two new online registered charity information request forms which have been created to simplify the process when requesting certain types of information from CRA. Previously this information was typically requested by sending a letter/fax to CRA. Now it can be done online. This is a giant step forward in making it easier for Canadians to be able to access public information from the CRA's Charities Directorate on Canadian registered charities.
May 30, 2016
The Canadian Charity Law Association is delivering some upcoming webinars. Registration is free but space is limited.
May 27, 2016
I am pleased to be on a panel for AFP GTA Fundraising Day with Caroline Riseboro, Bruce MacDonald, Hilary Pearson, and Stewart Wong. The topic of the panel will be "The Time is Now: Government Relations for Canadian Charities".
May 26, 2016
CRA recently released a letter which discusses whether an official receipt issued for property donated in kind can include an amount less than the fair market value of the property. CRA cited section 3501 of the Income Tax Act (Canada) Regulations to confirm that an official donation receipt should include the amount of the fair market value or the deemed fair market value of the property, in certain circumstances.
May 22, 2016
Industry Canada has sent out notices to thousands of Canada Corporations Act (CCA) corporations warning them of their pending dissolution as they have failed to transition to the Canada Not-for-profit Corporations Act (“CNCA”). Industry Canada wants to wind down the CCA and in order to do so they need to remove all remaining corporations under the CCA. It appears that up to 2000 of such corporations may be registered charities. Industry Canada had generally held off sending the notices to registered charities but the transition deadline of October 2014 is now over 1.5 years old.
May 10, 2016
CRA recently released a letter which considers whether a Tribal Council should be considered a public body performing a function of government within the meaning of paragraph 149(1)(c).
May 10, 2016
We have previously blogged about the decision of the Tax Court of Canada in David, R. et al. v. the Queen (TCC) (here, here and here). In the previous decision of Canada v. Castro, 2015 FCA 225, the Minister appealed the decision in David v. The Queen by asserting that the Tax Court of Canada erred in law.
May 09, 2016
Mark Blumberg will be presenting to the CPA Ontario Not-for-Profit and Charity Finance Leadership Certificate Program on June 6, 2016 on legal issues affecting the non-profit sector.
May 04, 2016
CRA recently released a new guidance which provides information for low-cost housing corporations for the aged which are interested in becoming Qualified Donees. The guidance replaces the Income Tax Rulings Directorate letter dated March 18, 2013.
April 27, 2016
CRA has been sending out notices relating to the 2015 T3010 Registered Charity Information Return asking that a one page form entitled "New Reporting Requirement" be added to a registered charity's 2015 T3010 filing. The notice essentially asks the question "Did the charity have direct partnership holdings at any time during the fiscal period?" and CRA has already included that question in the 2016 T3010 under question C15 but it was not included in the 2015 T3010.
Do you require legal advice with respect to Canadian or Ontario non-profits or charities?
Blumberg Segal LLP
Barristers & Solicitors
#1202 - 390 Bay Street
M5H 2Y2 Canada
Charity Law List
Join Blumbergs' non-profit and charities newsletter
View recent issue: June 2016