Finance releases Notice of Ways and Means Motion to amend the ITA to implement 2013 budget changes

April 22, 2013 | By: .(JavaScript must be enabled to view this email address) Mark Blumberg
Topics: News, What's New from the Charities Directorate of CRA, Canadian Charity Law, Ethics and Canadian Charities, Avoiding 'Charity' Scams

Today the Department of Finance released the “Notice of Ways and Means Motion to amend the Income Tax Act, the Excise Tax Act and Related legislation”.  This will introduce the First-Time Donor Credit, improve the efficiency of the Tax Court of Canada which has been bogged down with charity gifting cases and allowing CRA with abusive gifting tax shelters to collect 1/2 of the taxes allegedly owed.

Here is a link: http://www.fin.gc.ca/drleg-apl/nwmm-amvm-0413-eng.asp

Here is some of the text from the explanatory notes relating to non-profits and charities:


“Clause 10

First-Time Donor Credit

ITA
118.1(1), (3.1) and (3.2)

Section 118.1 of the Act provides rules for determining the tax credit available to an individual in respect of gifts made to qualified donees. The definition “first-time donor” is added to subsection 118.1(1) for the purpose of determining whether an individual is eligible for the first-time donor credit in new subsection 118.1(3.1). A first-time donor is an individual (other than a trust) who has not deducted a charitable donations tax credit under subsection 118.1(3) for a prior taxation year that ended after 2007. If the individual is married, or has a common-law partner, on December 31 of a taxation year, there is the further requirement that the individual’s spouse or common-law partner has not deducted an amount for the charitable donations tax credit for a prior taxation year that ended after 2007.

The first-time donor credit under new subsection 118.1(3.1) is 25% of the total amount of gifts (to a maximum of $1,000 in gifts) that are available for the credit. Gifts of money made by a first-time donor (or by their spouse or common-law partner) after March 20, 2013 and before 2018 are eligible for the first-time donor credit. The charitable donations tax credit under subsection 118.1(3) in respect of those gifts must also be claimed by the individual (or by the individual’s spouse or common law partner) for the same taxation year as the individual claims the first-time donor credit. The first-time donor credit may be claimed only once for the 2013 to 2017 taxation years.

New subsection 118.1(3.2) provides that if an individual and their spouse or common-law partner are otherwise entitled to claim a first-time donor credit under subsection 118.1(3.1), the couple must share the credit. If they cannot agree as to how the credit will be shared, the Minister will fix the portion that may be deducted by each.

Subsections 118.1(3.1) and (3.2) apply in respect of gifts made after March 20, 2013 and are repealed for the 2018 and subsequent taxation years.

...

Clause 18

Partial Disposition of Appeal

ITA
171(2)

Section 171 of the Act relates to the authority of the Tax Court of Canada (the Tax Court) to dispose of appeals made to it. Where an appeal raises a number of issues, new subsection 171(2) authorizes the Tax Court to hear and dispose of one or more of those issues separately if the parties to the appeal consent, in writing, to the separate hearing and disposition.

New subsection 171(2) applies to issues disposed of by the Tax Court after the day on which Royal Assent is received.

Disposal of remaining issues

ITA
171(3)

Where the Tax Court has disposed of an issue(s) pursuant to subsection 171(2) of the Act, new subsection 171(3) allows the appeal procedure at the Tax Court to continue on the remaining issues. Parties to the appeal are not required to recommence procedures on the remaining issues, such as by filing a new notice of objection with the Minister under section 165 of the Act or a new notice of appeal to the Tax Court.

Subsection 171(3) applies to issues disposed of by the Tax Court after the day on which Royal Assent is received.

Appeal to Federal Court of Appeal

ITA
171(4)

Where the Tax Court has disposed of an issue(s) pursuant to subsection 171(2) of the Act, new subsection 171(4) allows the parties to appeal the disposition of the Tax Court to the Federal Court of Appeal, in accordance with the provisions of the Tax Court of Canada Act or the Federal Courts Act, while the remaining issues continue to be dealt with at the Tax Court.

New subsection 171(4) applies to issues disposed of by the Tax Court after the day on which Royal Assent is received.

Clause 19

Reference of Common Questions to the Tax Court of Canada

ITA
174

Section 174 of the Act provides rules relating to the joining of two or more taxpayers to the determination of a question by the Tax Court of Canada (the Tax Court). Section 174 is amended to extend the circumstances under which the Minister of National Revenue may apply for such a determination.

These amendments apply in respect of applications made to the Tax Court after the day on which Royal Assent is received.

Common questions

ITA
174(1)

Currently, under subsection 174(1) of the Act, the Minister of National Revenue may apply to the Tax Court to determine a question arising out of one and the same transaction or occurrence, or series of transactions or occurrences, if the question is common to assessments or proposed assessments of two or more taxpayers.

Subsection 174(1) is amended to allow the Tax Court, on application by the Minister of National Revenue, to also hear a question arising out of substantially similar transactions or occurrences or series of transactions or occurrences. Under subsection 174(3), as amended, the Tax Court may bind taxpayers named in the application to an appeal of another taxpayer if, for example, their income tax filings raise issues that arise from transactions or occurrences identical or substantially similar to those relevant to the appeal. The questions put before the Tax Court will be restricted to the common issues, allowing other issues, if any, to be dealt with independently.

Applications to court

ITA
174(2)

Subsection 174(2) of the Act provides that an application by the Minister of National Revenue to the Tax Court for a determination under subsection 174(1) shall set out the question in respect of which the Minister requests a determination, the names of the taxpayers that the Minister seeks to have bound by the determination, and the facts and reasons on which the Minister relies and on which the Minister based or intends to base assessments of tax payable by each of the taxpayers named in the application.

This subsection currently requires that a copy of an application be served by the Minister on each of the taxpayers named in the application, as well as on any other person who, in the opinion of the Tax Court, are likely to be affected by the determination of the question. By virtue of Rule 24 of the Tax Court of Canada Rules (General Procedure), service must be effected personally or by registered mail.

Subsection 174(2) is amended to specify that the Minister can serve notice of the application by way of regular mail or may seek direction from the Tax Court as to alternate means of service.

Determination of question by the Tax Court

ITA
174(3)

Subsection 174(3) of the Act provides that the Tax Court may proceed to determine a question set out in an application under subsection 174(1) if it is satisfied that
•the question will affect assessments or proposed assessments of the taxpayers named in the application; and
•those taxpayers have been served with a copy of the application.

If one or more taxpayers named in the application have appealed the issue to the Tax Court, the Tax Court may make an order joining a party or parties to the appeal and proceed to determine the question.

It is possible that none of the taxpayers named in the application have filed an appeal to the Tax Court. Subsection 174(3) is amended to clarify that an order of the Tax Court naming the taxpayers in respect of whom the question will be determined may be distinct from an order joining a party or parties to an appeal of a taxpayer. The Tax Court may proceed to determine the question in either case.

The subsection is also amended to clarify that, in order to proceed to determine a question, the Tax Court must be satisfied that the question is common to the assessments or proposed assessments.

Determination final and conclusive

ITA
174(4)

Subsection 174(4) of the Act provides that, subject to the appeal rights set out in subsection 174(4.1), a determination by the Tax Court is final and conclusive for those taxpayers named in an order of the Tax Court under subsection 174(3).

Subsection 174(4) is amended consequential to the amendment of subsection 174(3), to refer to an order made under paragraph 174(3)(a).

Appeal

ITA
174(4.1)

Subsection 174(4.1) of the Act allows the Minister of National Revenue, or any taxpayer named in an order of the Tax Court pursuant to subsection 174(3), to appeal a determination of the Tax Court under that subsection to the Federal Court of Appeal, in accordance with the provisions of the Act, the Tax Court of Canada Act or the Federal Courts Act.

Subsection 174(4.1) is amended to provide that a taxpayer named in an order of the Tax Court pursuant to paragraph 174(3)(a) may appeal the determination if
•the question determined by the Tax Court arises out of one and the same transaction or occurrence or series of transactions or occurrences;
•the taxpayer had filed an appeal to the Tax Court from an assessment in respect of which the question determined by the Tax Court is relevant; or
•the taxpayer has been granted leave to appeal to the Federal Court of Appeal by a judge of that Court.

Binding to appeal

ITA
174(4.2)

New subsection 174(4.2) of the Act provides that any taxpayer named in an order pursuant to paragraph 174(3)(a) is bound by the determination of the Tax Court and will also be bound by any subsequent determination of the question by the Federal Court of Appeal or the Supreme Court of Canada.

Clause 20

One-Half Collection

ITA
225.1(7)

Subsection 225.1(7) of the Act provides an exception to the rules in subsections 225.1(1) to (4) that restrict certain collection activities of the Minister of National Revenue, in respect of an amount assessed under the Act, until after the times specified in those provisions. Subsection 225.1(7) generally allows the Minister to take the collection actions described in subsection 225.1(1) in respect of one-half of any amount assessed in respect of a “large corporation”, as defined in subsection 225.1(8), whether or not an objection or appeal has been filed in respect of the assessment. In this regard, subsection 225.1(7) allows the Minister to commence those collections actions for one-half of the amount assessed notwithstanding that less than 90 days have passed since the day of the mailing of the notice of assessment and notwithstanding that the taxpayer may have objected to or appealed the assessment.

Subsection 225.1(7) is amended to allow the Minister of National Revenue to take the collection actions described in subsection 225.1(1) in respect of one-half of any amount of assessed tax, interest or penalties that results from the disallowance of a deduction or tax credit claimed in respect of a tax shelter (as reported by the taxpayer or as determined by the Minister) that involves a charitable donation. Amended subsection 225.1(7) will allow the Minister to commence collection action, for one-half of the amount assessed, notwithstanding that less than 90 days have passed since the day of the mailing of the notice of assessment and notwithstanding that the taxpayer may have objected to or appealed the assessment.

This amendment will apply to amounts assessed in respect of taxation years that end after 2012.”

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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