Ethics and Canadian Charities

New CRA Application for “Municipal or public bodies performing a function of government in Canada”

The CRA has just released its new process for recognizing “municipal or public bodies performing a function of government in Canada”.  This will be of particular interest to Aboriginal bands, school boards and others who may wish to obtain this recognition as it makes them a qualified donee and therefore able to issue official donation receipts and also more easily receive funds from other Canadian charities.  We hope that this new process will facilitate philanthropy in the Aboriginal space.  There are probably over a thousand organizations that could one day be listed on the CRA website, which will make donations to them far simpler and easier.  It is important to note that as of January 1, 2014 for a group to be recognized under the category “municipal or public bodies performing a function of government in Canada” it cannot self-assess but must be on the list.  Some organizations will want to proceed quickly with the process as CRA has not set out a service standard yet and therefore it is difficult to know how long the process will take.  It is also interesting to note that “...organizations that apply before January 1, 2014, and that can show that they met the requirements to be a municipal or public body performing a function of government in Canada as of January 1, 2012, will be given qualified donee status retroactive to that date.”  Although a lawyer is not required to send the letter to CRA some organizations may wish to retain legal counsel to assist with this and other matters such as appropriate issuance of receipts and required books and records.

FCA overturns TCC in Guindon case - reinstates third party civil penalties for charity tax scheme

The Federal Court of Appeal (FCA) has overturned a Tax Court of Canada (TCC) decision in Guindon.  The FCA found that, in this case in which no notice of constitutional questions was served by Guindon, “the Tax Court did not have the jurisdiction to find that section 163.2 of the Income Tax Act creates an offence, triggering the rights under section 11 of the Charter.” 

The Court notes “[9] Ms. Guindon is a lawyer, practising mainly in the area of family law and wills and estates. She became involved in a charitable donation scheme called “The Global Trust Charitable Donation Program.” [10] Ms. Guindon provided a legal opinion vouching for the scheme. She signed tax receipts on behalf of the charity. In her legal opinion, she represented that she had reviewed certain documentation. She had not. The scheme was a sham. A full account of the facts appears in the reasons of the Tax Court.” The CRA assessment of penalties of $564,747 was upheld by the FCA. 

The FCA explains the background of the Third-Party Civil Penalties and discusses in detail the penalties and even responds to some academic articles on the provision. The FCA noted “[37] In my view, the assessment of a penalty under section 163.2 is not the equivalent of being “charged with a [criminal] offence.” Accordingly, none of the section 11 rights apply in section 163.2 proceedings. In this regard, I disagree with the Tax Court’s conclusion on this question of law.  [38] The Income Tax Act contains a complex web of provisions constituting a discrete regulatory and administrative field of endeavour with unique characteristics. Justice Wilson of the Supreme Court of Canada described it in this way: A chief source of revenue for the federal government is the collection of income tax. The legislative scheme which has been put in place to regulate the collection of tax is the Income Tax Act. The Act requires taxpayers to file annual returns and estimate their tax payable as a result of calculations made in these returns. In essence, the system is a self-reporting and self-assessing one which depends upon the honesty and integrity of the taxpayers for its success. (R. v. McKinlay Transport Ltd., [1990] 1 S.C.R. 627.)  [39] The provision of accurate information that permits the proper calculation of tax is another aspect of self-compliance. This is achieved through tax returns, reports, certificates, forms and other information supplied. Timely elections, designations, reports and payments also allow for the efficient administration of the tax system. [40] Conduct that is antithetical to the proper functioning of this system must be deterred. Compliance and order within this self-assessment system must be maintained. This is done – in this administrative field of endeavour as in many others – through the imposition of administratively simple sanction or, as the Act calls them, penalties. Given the complexity and breadth of the discrete regulatory and administrative field of endeavour set up by the Act, the sanctions must be administratively simple. [41] Seen in this way, penalties under the Act are not about condemning morally blameworthy conduct or inviting societal condemnation of the conduct. They are not among the “most serious offences known to our law”: Wigglesworth, supra, at page 558. Rather, the penalties are about ensuring that this discrete regulatory and administrative field of endeavour works properly. [42] In my view, section 163.2 is mainly directed to ensuring the accuracy of information, honesty and integrity within the administrative system of self-assessment and reporting under the Act. The imposition of a section 163.2 penalty by way of assessment and the subsequent procedures for challenging the assessment are proceedings of an administrative nature aimed at redressing conduct antithetical to the proper functioning of the administrative system of self-assessment and reporting under the Act. Put another way, proceedings under section 163.2 aim at maintaining discipline, compliance or order within a discrete regulatory and administrative field of endeavour. They do not aim at redressing a public wrong done to society at large.”

Blumbergs’ Canadian Charity Law Institute 2013 - corporate law, CRA compliance and more

On October 15, 2013, Blumbergs will be having the 2nd Annual Blumbergs’ Canadian Charity Law Institute in Toronto. It will be a full day of practical legal and ethical compliance information geared toward charities, professional advisors and those interested in regulatory issues affecting charities.
 

Industry Canada starts sending out default notices under the CNCA

Corporations Canada, under Industry Canada, has started sending out default notices to organizations that are under the new CNCA but have not filed their Form 4022 - Annual Return.  The Annual Return is quite easy to complete. Here is a link to it:
http://www.ic.gc.ca/eic/site/cd-dgc.nsf/vwapj/FRM-4022-e.pdf/$file/FRM-4022-e.pdf  It can also be filed online at http://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs04956.html

Giving to Syria - advice from the Charity Commission of England and Wales

The Charity Commission of England and Wales has offered some advice to donors interested in supporting Syria.  I would point out that in Canada the Humanitarian Coalition is now collecting funds for Syria. http://humanitariancoalition.ca/  Here is blurb on the Humanitarian Coalition “As a joint Canadian approach to humanitarian response, the Humanitarian Coalition is a “one-stop-shop” for all Canadians during times of international humanitarian crises. The five member agencies of the Humanitarian Coalition work together to reduce unnecessary competition, inform the public on humanitarian needs, increase the impact of Canadian humanitarian responses and reduce administrative costs.”  The Humanitarian Coalition is the Canadian version of the Disasters Emergency Committee (DEC) mentioned in the UK advice.

Charity Commission of England and Wales revamps website

The website of the Charity Commission of England and Wales has been redesigned.  The website always offered very useful information on legal issues affecting charities in the England and Wales.  However, most importantly much of that information was also useful for charities around the world.  Check out the new website at: http://www.charitycommission.gov.uk/

CRA revokes the registration of The Life Centre Word of Faith Ministries Inc.

The CRA has revoked the registration of The Life Centre Word of Faith Ministries Inc. as a charity. The Globe and Mail covered this story in “Toronto pastor, wife charged in alleged $8.6-million Ponzi scheme” http://soa.li/mVtmmlY

CRA revokes Trinity Global Support Foundation as a charity

The Canada Revenue Agency has revoked the charitable registration of the Canadian registered charity Trinity Global Support Foundation.  The London Free Press has written extensively on this charity and we have covered here: “FCA case on Trinity Global Support Foundation - CRA wins again”  http://www.globalphilanthropy.ca/index.php/blog/comments/fca_case_on_trinity_global_support_foundation_-_cra_wins_again

FCA case on Trinity Global Support Foundation - CRA wins again

In this case Trinity Global Support Foundation (the “Foundation”) asked the court to delay CRA publishing a notice of intention to revoke the registered charity status until the Foundation’s other legal claims have been dealt with.  The FCA ruled against the Foundation because the Court determined that “there is no substantive evidence that the Foundation or its clients will be forced to shut down or be significantly affected prior to its notice of objection being considered.”  The Court also did not think that losing its charitable status caused irreparable harm as “It is clear from the evidence that the reputation of the Foundation has already been subject to intense public scrutiny for reasons distinct from the notice of intention to revoke.  As such, I see no basis upon which to conclude that any possible further harm to the Foundation’s reputation will be such as to amount to irreparable harm.” The judge does not mention the London Free Press coverage but presumably that is what is being referred to.  The conclusion of the FCA decision is important “Given my conclusions with respect to irreparable harm, I need not consider the balance of convenience element of the test.  However, it is clear that serious allegations have been raised in the context of the proposed revocation.  It is clear from the Foundation’s own evidence that it has been engaged in fundraising activities using tax shelter arrangements, which have been an activity of legitimate concern generally to the Minister.  As such, in my view the public interest in the Minister protecting the integrity of the charitable sector outweighs the Foundation’s interest in staying revocation and I see no reason for the Court to grant an equitable remedy to the Foundation.”

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

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. 

CRA information on “Taxes in Dispute and Charitable Donation Tax Shelters”

The CRA has provided more information on the provision in the 2013 Federal Budget dealing with taxes in dispute and abusive charity gifting tax shelters. 

Globe and Mail article “New Canada Revenue rules target charitable tax shelters” by Paul Waldie

I wish it was an April Fool’s joke but unfortunately there are still Canadians investing in the ‘abusive charity gifting tax schemes’.  The Globe and Mail had an article today by Paul Waldie discussing “New Canada Revenue rules target charitable tax shelters”.  The article discusses a measure in the 2013 Federal Budget dealing with donation tax shelters.  Over the last decade over $6 billion in receipts have been issued as part of abusive charity gifting tax schemes.  As a result billions of dollars have either not been collected or have been delayed in collection.  The CRA has been winning these cases (for example Marechaux) and now the CRA will be given an increased ability to collect funds on disputed amounts related to donation tax shelters.  In the past CRA could not collect until the process was completed (sometimes 10 or more years later).  Now CRA can collect on 50% of potential taxes if CRA disputes the charity donation tax shelter.  If the taxpayer wins they would get their 50% back.  This just makes these schemes a little less attractive. It also reduces the likelihood of someone trying to avoid a large amount of taxes and then skipping off to Bermuda or Panama or wherever people skip off to these days. 

Kathryn Blaze Carlson in Globe & Mail “Canada Revenue Agency struggling to put a lid on tax fraud”

In an article today in the Globe & Mail entitled “Canada Revenue Agency struggling to put a lid on tax fraud”  Kathryn Blaze Carlson discusses false receipting schemes. 

CRA revokes Marketplace Ministries International as a charity for involvement with tax shelter

The Charities Directorate of the Canada Revenue Agency has announced the revocation of Marketplace Ministries International as a registered charity for its involvement in the “Insured Giving Donation Program tax shelter gifting arrangement”.

A better way to do remittances - from Vancity Credit Union in Vancouver

Almost $15 billion is sent by people in Canada to developing world countries as remittances.  Over the years I have written quite a bit about remittances, how important they are; how they dwarf charitable funds in Canadian charities used for international disaster relief and development; and the prohibitive rates of Western Union and others.  Here is some good news.  Vancity in Vancouver has set up a much more affordable way for their customers to send funds to the Philippines.  Thank you Vancity for taking the lead in this important area. 

AFP Greater Toronto Chapter Fundraising Day 2013 - Planned Giving Institute - June 5, 2013

On June 5, 2013, Trevor Clark and myself will be delivering the “Planned Giving Institute” for AFP Toronto’s Fundraising Day. 

OBA program “Not‐for‐Profit and Charitable Organizations in the Health Sector”

I will be speaking at an upcoming Ontario Bar Association conference on April 8, 2013 dealing with “Not‐for‐Profit and Charitable Organizations in the Health Sector: Evolving Governance & Compliance Issues”.  My topic will be: “Tax issues – Canada Revenue Agency’s new fundraising guidance, receipting and inter‐charity transfers”

House of Commons Finance Committee releases report today on Tax Incentives for Charitable Giving

Today the House of Commons Standing Committee on Finance (FINA) released its much anticipated report on Tax Incentives for Charitable Giving in Canada.  The report discuss “Charitable Donations and Donors in Canada”, “The Regulation of Charities”, “Tax Incentives and their Estimated Federal Fiscal Cost”  as well as specific proposals such as Charitable Donations Tax Credit Thresholds and Rates and Donations of Real Property and Shares of Private and Public Corporations.  There is also discussions of bequests and tax fairness as well transparency and accountability of charities. 

Chronicle of Philanthropy covers fundraising costs and changes to Charity Navigator system

Here is an interesting article entitled “Watchdog Cracks Down on Misleading Statements on Fundraising Costs”

“David Baines: Vancouver museum’s “Michelangelo” sculptures fail to sell at auction”

Vancouver Sun investigative reporter David Baines has just written a followup article entitled “Vancouver museum’s “Michelangelo” sculptures fail to sell at auction”.  In this article he discusses how the valuations of the sculptures exaggerated their fair market value and how the Canadian Cultural Property Export Review Board validated the inflated figures.  Interesting that “In an email Friday, the Canadian Cultural Property Export Review Board—which certified both transactions—said it has the legislative authority to reopen files and Canada Revenue Agency “has the legislative authority to reassess taxpayer returns.”  Who should care if property is donated by people as part of a transaction, they receive over $30 million in tax receipts and about $13 million in tax savings and the property is actually only worth 100 - 200,000.  The answer is that taxpayers should be concerned - normal Canadians, who don’t get involved in tax schemes are paying billions in extra taxes and receiving billions in less services as a result of these tax schemes.  As well if you are concerned with the cultural and arts sector in Canada - it is distressing that all sorts of questionable objects are being provided to Canadian charities who are then spending large amounts of money storing them etc.

The Cup Trust - UK government refuses to pay out Gift Aid claims

The UK is dealing with a scandal right now called The Cup Trust.  It involves a complicated scheme to get money refunded through the Gift Aid system.  I thought this quote is interesting “Margaret Hodge MP, Labour chairwoman of the Commons Public Accounts Committee said: ‘To exploit a mechanism designed to encourage charitable giving in order to avoid tax is just disgusting.’ 

Vancouver Sun article “Baines: Couple who cheated tax department suffer litany of woes”

I missed this article by Vancouver Sun columnist David Baines last summer entitled “Baines: Couple who cheated tax department suffer litany of woes: Chartered accountant Martin Johnson and estranged wife Celia Martin failed to declare fees earned on art donation”.  The story talks about some of those involved with a donation to a major Toronto university. 

Glooscap Heritage Society v. The Queen - FCA refuses applic. to delay revocation of charity status

In the case of Glooscap Heritage Society v. The Queen, a charity had its charitable status revoked for improperly issuing tax receipts and operating for the benefit of a tax shelter. The Charity filed an objection to the revocation and applied for an order delaying the revocation until their challenge was heard but this objection was ultimately dismissed.  The Court acknowledged that “Glooscap’s activities are socially worthy and important to the community” but the Court noted that “Glooscap’s involvement with the tax shelter is central.”  There is a very important discussion about the issue of reputation.  There is also an interesting recognition by the FCA on the subject of “the regrettable, often abysmal, sometimes unspeakable events surrounding Canada’s history of aboriginal/non-aboriginal relations: Report of the Royal Commission on Aboriginal Peoples: Looking Forward, Looking Backward, vol. 1 (Ottawa: Canada Communication Group Publishing, 1996)”.  In this case the Court noted that Glooscap issued $19,775 in total donations during 2007-2011 that were not related to the tax scheme but issued $116 million in tax receipts related to the scheme.

CRA releases new T3010 (13)  for registered charities with fiscal year ends after January 1, 2013

The Charities Directorate has released a new T3010 (13) Registered Charity Information Return for Canadian registered charities with fiscal year ends after January 1, 2013.  The changes on the T3010 (13) are basically more questions about the political activities of Canadian charities as a result of the 2012 Federal Budget.    Canadian charities will need to answer more questions on political activities in Section C5; and fill out a new Schedule 7, Political Activities.  If your fiscal year end is in 2012 then use the old T3010-1 - otherwise, for those with fiscal year ends after January 1, 2013 use the new T3010 (13). As pointed out to me by Steven Ayer of Common Good Strategies there are also an additional question on receipted foreign funds, more country codes and other small changes.

Charity Commission of England and Wales publishes guidance on protecting charity from extremists

The Charity Commission notes that the Guidance “explains trustees’ duty to prevent their charity being used to promote extremist views or terrorist ideology.  The toolkit also suggests steps trustees can take to minimise risks associated with particular activities, such as organising public events and debates and circulating information.  It is aimed in particular at charities that host regular events involving external speakers, and those with educational purposes that distribute material and information. Examples include charitable think tanks and debating societies, students’ unions, schools, colleges and universities and religious charities.”

Afovia v. The Queen - recent TCC case confirms that mandatory elements of receipt are mandatory

In a recent Tax Court of Canada case Afovia v. the Queen, Paris J. decided that CRA can revoke a charity for issuing official donation receipts that do not have all the mandatory elements on them.  As well, CRA can deny the credit to the taxpayer if the receipt does not have all the mandatory elements.  It is very important that Canadian charities that issue tax receipts are aware of the rules and follow them.  Here is a 145 page “Receipting Kit” that may be of assistance. http://bit.ly/A2jbA2 

Hudson Institute’s study on remittances shows Canada at 14.7 billion

The Hudson Institute has published its 2012 report on remittances.  It shows that Canadian remittances to developing countries were $14.7 billion in 2010.  CIDA gave $5.2 billion and Canadian charities gave about $1.95 billion.

CRA revokes the registration of Trinity Divine Outreach Ministries, a Scarborough-based charity

The Charities Directorate of the Canada Revenue Agency has announced the revocation of the registration of Trinity Divine Outreach Ministries as a registered charity for involvement in the Innovative Gifting Inc. scheme which we have discussed a number of times on this blog.  Here is a copy of the CRA letter to Trinity Divine Outreach Ministries

CRA revokes the registration of International Fellowship Mission Inc. for involvement w/ tax shelter

The Charities Directorate of the Canada Revenue Agency has announced the revocation of the charitable registration of International Fellowship Mission Inc.. 

Finance Memo on Registered Charities - Political Activities, Foreign Funding and Transparency

Here is a copy of a memo marked “Secret” and attachments from the Department of Finance on Finance released under Freedom of Information dealing with “Registered Charities - Political Activities, Foreign Funding and Transparency”.