March 2010
I think that some people assume that if a tax avoidance scheme is sufficiently complicated or “grey” and sufficiently well documented that the courts will allow those schemes. If you make that assumption you might want to read Coleman v. The Queen, 2010 TCC 109 (January 25, 2010) as this case may change your mind. Coleman discusses in detail whether a “donation” to a charity that provides a scholarship or bursary through a scheme to their child or grandchild should be receiptable. The decision is 45 pages long which will be presumably ‘welcomed’ by those who complain that some of the recent Federal Court of Appeal decisions are too short! Blake Bromley of Benefic Law Corporation argues for the unsuccessful appellants. Mr. Justice Campbell J. Miller of the Tax Court of Canada decides for the CRA in this very well written case in which he decides that there is no donation when the children or grandchildren of a donor benefit from the gift. In addition to the pure legal issues in this case there are also some interesting ethical issues raised by the conduct of the registered charity (National Foundation for Christian Leadership) and the donors.
The CRA discusses questions including 1.What is meant by broad and vague objects? 2.What is the problem with broad and vague objects? 3.Is there a way to keep our objects broad and still be eligible for registration as a charity? 4.What is the difference between purposes (or objects) and activities? 5.Why are purposes and activities important? 6.What is “sufficient” information?
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What's New from the Charities Directorate of CRA |
Canadian Charity Law
CRA will be updating the Charities and Giving home page. Here is a note on the What’s New section of the CRA website. [The Changes have now taken place - see http://www.cra-arc.gc.ca/chrts-gvng/chrts/menu-eng.html as of April 9, 2010]
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.(JavaScript must be enabled to view this email address) on 03/25/2010 |
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Canadian Charity Law |
Ethics and Canadian Charities |
Avoiding 'Charity' Scams
Here is a copy of a letter I am told was sent from The Hon. Albina Guarnieri, M.P.. The letter is in italics. I have placed in bold italics the parts that I find most objectionable and at the end of each paragraph in brackets and bold my comments. I have previously written on this issue at http://www.canadiancharitylaw.ca
In Lockie v. The Queen, 2010 TCC 142 (March 18, 2010) the Tax Court of Canada ruled that with a donation scheme involving pens and toothbrushes that were donated to a charity as part of a charity gifting tax shelter scheme that the fair market value of the items is not the retail fair market value of the items as suggested by the taxpayer but is the amount paid by the taxpayer for the items. That is how a $20,043 tax receipt should only have been $3,800. Every year there are a number of new gifting tax shelter schemes that argue they are different than earlier schemes. It is interesting to see how carefully the judges went into detail to discredit the valuation provided in support of the taxpayer position and there is no reason to believe that with any tax shelter gifting arrangement that I have seen the result would be any different.
Posted by
.(JavaScript must be enabled to view this email address) on 03/22/2010 |
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Canadian Charity Law
Will Recent Legal Changes that make social enterprise for registered charities easier in Canada be enough?
In this recent press release from CRA they noted that “Promoters and other third‑party representatives are penalized when they make false statements involving schemes that are against the law. Currently, there are 71 audits involving promoters. Recent examples include a scheme involving RRSPs, for which the promoter was assessed a penalty of $1.8 million, and a tax shelter gifting arrangement case where the Canada Revenue Agency (CRA) proposed two penalties of $24 million against the promoters involved.”
Posted by
.(JavaScript must be enabled to view this email address) on 03/17/2010 |
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What's New from the Charities Directorate of CRA |
Canadian Charity Law
The CRA has just released a brochure entitled GI-067 Basic GST/HST Guidelines for Charities http://www.cra-arc.gc.ca/E/pub/gi/gi-067/README.html This will be helpful especially to charities in BC and Ontario that are moving to HST on July 1, 2010. They have also put out GI-066 How a Charity Calculates the Net Tax to be Reported on its GST/HST Return at http://www.cra-arc.gc.ca/E/pub/gi/gi-066/README.html CRA has also put out a brochure for “Public Institutions” which includes registered charities that are a “school authority, a public college, a university, a hospital authority, or a local authority determined by the CRA to be a municipality” and it is located at http://www.cra-arc.gc.ca/E/pub/gi/gi-068/README.html.
Posted by
.(JavaScript must be enabled to view this email address) on 03/16/2010 |
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Canadian Charity Law |
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Avoiding 'Charity' Scams
The Globe and Mail reported on March 16, 2010 that a Liberal MP is proposing a private members bill that would make salary disclosure mandatory for the top 5 executives of a registered charity and cap all payments to any employee at a Canadian registered charity to $250,000 per year. It is nice to see a politician that is interested in the inner workings of the charitable sector but I don’t think this particular proposal is helpful. [MB. I have added further information as it has become available.]
Here are some recent items from the Charity Law Information Program (CLIP) Communique.
It was a pleasure having Marie-Luise Ahlendorf of Transparency International Global Programmes presenting this report and handbook at the recent Charity Law Information Program conference in Toronto. The handbook is easy to read and “compiles best practice from the field, including ways to track resources, confront extortion and detect aid diversion.” Preventing the diversion of humanitarian assistance should only be a concern of those who care whether beneficiaries actually receive the aid! http://www.transparency.org/content/download/49759/795776/Humanitarian_Handbook_cd_version.pdf
The 2010 Canadian Federal budget had some changes to the Income Tax Act to prevent transactions by registered Canadian charities that “may reasonably be considered that a purpose of the transaction was to avoid or delay unduly the expenditure of amounts on charitable activities”.
Posted by
.(JavaScript must be enabled to view this email address) on 03/15/2010 |
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These resources may be of interest to those who wish to combat fraud in the charitable sector or targetting charities.
Posted by
.(JavaScript must be enabled to view this email address) on 03/11/2010 |
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Here is a copy of an article I wrote for the newsletter “Charitable Thoughts” of the Ontario Bar Association Charity and Not-for-Profit Law Section
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.(JavaScript must be enabled to view this email address) on 03/10/2010 |
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Canadian Charity Law
Over the next few years there may be changes to the accounting standards for non-profit organizations in Canada. This piece entitled Changes to Accounting Standards for Not-for-Profit Organizations from the Canadian Institute of Chartered Accountants (CICA) reminds those who are interested that certain exposure drafts were released March 3, 2010 by the Accounting Standards Board and the Public Sector Accounting Board. The public can comment on those drafts until July 15, 2010.
Posted by
.(JavaScript must be enabled to view this email address) on 03/08/2010 |
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Avoiding 'Charity' Scams
The Canadian government recently blacklisted a Somali group called al-Shabab for involvement with terrorism. Canadian charities and individuals must take care not to support directly or indirectly any groups that are on Canada’s terrorism watch list. Here is an article that I recently wrote on “Canadian Charities and Terrorism - Preventing Abuse of your favourite charity” - http://www.capacitybuilders.ca/files/resources/Canadian_Charities_and_Terrorism_-_Preventing_Abuse_of_Your_Favourite_Charity_1262115622.pdf
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.(JavaScript must be enabled to view this email address) on 03/05/2010 |
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CIDA
The March 4, 2010 Federal budget increased Canada’s foreign aid or “International Assistance Envelope” by 8% for the 2010/2011 year. The government has said that it will review thereafter whether there is any increase. In light of the difficult financial circumstances in Canada this is a good news story. Hopefully the government will continue in future years to increase the budget as Canada is a wealthy nation and we are still far below the 0.7 gross national income target. There will also hopefully be greater transparency at CIDA and in the aid process so that Canadians and others can understand how their money is being spent and how decisions are arrived at to spend that money.
The Canadian federal government announced disbursement quota reform in the 2010 Budget to remove the 80/20 expenditure requirement for registered Canadian charities. For many charities this will have no real impact - they were handily satisfying their disbursement quota requirements and for those that were not (except in extreme cases) CRA was not using the DQ to revoke charitable status. As one observer noted on the changes “No more 80/20 ordinary gift. No more enduring property, including 10 year gifts. No more specified gifts. No more intercharity transfer rules based on original DQ designation. Just a simple obligation to use the equivalent of 3.5% based on previous 24 month market average for charitable purposes. ... The 3.5% obligation doesn’t kick in for charitable organizations until there is $100k in assets, while for foundations it stays at $25k.” We will probably have a revised T3010 at some point to reflect these changes and one can expect with the simpler formula that in the future CRA will more vigorously enforce the DQ provisions as this will be easier to understand. There is no cost associated with this change and a number of other proposals to increase tax incentives from some organizations were not included in the budget, which makes sense in light of the difficult fiscal situation in addition to other reasons.
Posted by
.(JavaScript must be enabled to view this email address) on 03/04/2010 |
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Plan Canada Presents: 4-day Advanced Training Session in Results-Based Management and Gender Equality
Toronto, Ontario April 6th-9th 2010
Posted by
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What's New from the Charities Directorate of CRA |
Canadian Charity Law
The CRA has just announced that “The Charities Directorate is now displaying T3010 returns for revoked charities, and detail pages for annulled charities in the Charities Listings.”
This letter from CRA is a reminder that when leaving funds to a registered charity under a will the drafting is important.
