What's New from the Charities Directorate of CRA
April 2010
The Canada Revenue Agency has just announced that it has revoked the charitable status of the Canadian charity “Liberty Wellness Initiative” for involvement in a charity gifting tax shelter.
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The Israelite Church of Christ Canada is a short procedural case dealing with the jurisdiction of the Federal Court of Appeal in which the federal court of appeal granted CRA’s motion to quash the appeal . Here is CRA’s summary policy on appeals to the Federal Court of Appeal. http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/csp/csp-a14-eng.html Here is more information on the appeal choices that charities have http://www.cra-arc.gc.ca/gncy/prgrms_srvcs/dsgr/chrts-eng.html Here is the decision of the Federal Court of Appeal.
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.(JavaScript must be enabled to view this email address) on 04/13/2010 |
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The Charities Directorate of the CRA has issued a Notice of Suspension to International Relief Fund for the Afflicted (IRFAN). Prior to this suspension there was only 1 other charity that was suspended. CRA is making greater use of the intermediate sanctions - ie suspensions or penalties rather than revocation. Here is a copy of the CRA press release.
I was recently wondering how many Canadian charities have recently lost their registered charity status for cause? Also for what reasons did they lose their registered charitable status? See my note
Canadian Charities Recently Revoked by CRA for Cause.
Here is a copy of a press release from the Canada Revenue Agency entitled “Charges laid in donation tax fraud investigation”. In the press release CRA discusses the charges it has laid against three people who allegedly issued donation receipts for more than the amount of the donation. CRA noted that “The Income Tax Act permits registered charities to issue tax receipts only for the amounts actually donated. Schemes that promise a tax receipt in excess of what a donor gives are usually fraudulent. The CRA audits charities to put a stop to such schemes and intends to prosecute tax preparers, directors of charities, and donors who are found to be involved.”
Posted by
.(JavaScript must be enabled to view this email address) on 04/10/2010 |
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The Income Tax Act (Canada) sets tremendous limits on the ability of CRA to disclose information about Canadian charities. Essentially, the Income Tax Act in section 241 and its confidentiality provisions forbid CRA from disclosing any information about any registered charities either through informal request or a formal access-to-information request unless the information falls within certain narrow exceptions. I will note below the provisions but I think that CRA should have greater flexibility to be able, especially in the few cases of major charity scams or tax avoidance schemes, to warn Canadians about any concerns that CRA has. Unless a charity consents to disclosure (not likely), CRA now can only provide, after the charity has lost its registered status, either its “entirety of or any part of any letter sent by or on behalf of the Minister to the charity relating to the grounds for the revocation or annulment”. By the time the charity has lost its registered charity status it could be years after CRA had significant concerns about the charity.
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Here is the contact information for the Charities Directorate of the Canada Revenue Agency.
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It is very important that Canadian registered charities file their T3010B Registered Charity Information Return. This is supposed to be done within 6 months of the year end. However, it is important not only that it is filed but also that it is accurate and complete. In the Charities Directorate mailing called RC296E What’s the Scoop 2010 or the French version at RC296F En exclusivité 2010 Renseignements pour les organismes de bienfaisance enregistrés the CRA discusses what “What constitutes a completed annual filing?”
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In this piece CRA identifies certain common mistakes in how registered Canadian charities that were incorporated in Ontario and subject to the Ontario Corporations Act file Form RC232-WS or Form RC232. This directors/officer worksheet is filed with their T3010B Registered Charity Information Return.
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The CRA has announced that they will be producing an electronic publication to replace Registered Charities Newsletter. It will be called “Charities Connection”
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According to CRA “Thanks to changes in processes, more resources, and the dedication of staff and management in the Directorate’s Assessment, Determinations and Monitoring Division, it now takes significantly less time to process applications for registration as a Canadian charity.” More complicated applications that I file that used to take 6-9 months to now being responded to in 6-9 weeks - it is an amazing improvement which is welcomed by all those involved with applications for charity status. On a sad note after four years in the Charities Directorate, David Moore, the Director of the Determinations Division, and instrumental in reducing the backlog has moved to the Treasury Board Secretariat (TBS) from the Charities Directorate. David Moore was responsible for establishing the Client Interface and Service Division and led the work on the Small and Rural Charities Initiative which was and continues to be very successful in making CRA more responsive to the needs of small and rural charities. David will be missed. I understand that Linda Desrochers, will become the interim Director of the Determinations Section.
Posted by
.(JavaScript must be enabled to view this email address) on 04/09/2010 |
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In December 2009 I delivered a presentation on “CRA’s Fundraising Guidelines –Legal, Ethical and Practical Issues” to the Association of Fundraising Professionals (AFP) GTA Congress 2009. Prior to giving the presentation I handed out a mini poll to the 100 or so attendees at my session and about 47 of them returned the poll to me. The attendees were almost all fundraisers and probably the fundraisers who had the greatest interest in the topic. This is certainly not scientific.
Abusive tax schemes involving tax havens or secrecy jurisdictions undermine our tax system and all the program that are supported by taxes - not to mention impose additional burden on other taxpayers. I thought that this sentence from the CRA publication on “Using Tax Havens to Avoid Paying Taxes -Worth the Risk?” is interesting that “For tax shelters that involve gifting, CRA audits have determined that 96% of these arrangements make use of tax havens.” Here is the file rc4507- “Using Tax Havens to Avoid Paying Taxes -Worth the Risk?”
In a recent article by Jonathan Chevreau of the National Post, Gordon Pape warns Canadians not to be involved with charity tax shelter schemes that promise an official donation receipt greater than your cash contribution.
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.(JavaScript must be enabled to view this email address) on 04/06/2010 |
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This letter from CRA discusses whether a particular First Nation band is a public body performing a function of government?
This letter from the Canada Revenue Agency discusses the issue of “Are students who attend classes at a Canadian campus of a foreign institution “enrolled at an educational institution in Canada” for purposes of 118.5(1)(a) of the Act? and also “Do students who are taking distance education courses (internet) from a foreign university with a Canadian campus rely on 118.5(1)(a) or 118.5(1)(b) for the tuition tax credit?
The most important document for Canadian registered charities to understand their obligations for fundraising is the CRA’s Fundraising Guidance. You can see the document in English at: http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cps/cps-028-eng.html and in French at:
http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cps/cps-028-fra.html To make it more convenient for some the Charity Law Information Program (CLIP), which is supported in part by funding from the Canada Revenue Agency, has taken the main document and inserted the content of the “Additional Information” directly next to the part of the Guidance it is referring to. A reader can read the guidance from beginning to end without having to jump backwards and forwards between the two documents. The CLIP version of Fundraising Guidance is at: http://www.capacitybuilders.ca/files/resources/CRA_Fundraising_Guidance_1259599283.pdf
Whatever version you wish to use - this is a guidance document that anyone involved in governance and fundraising of charities should review.
Posted by
.(JavaScript must be enabled to view this email address) on 04/02/2010 |
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Well I was wondering whether the Charities Directorate got more calls from the public than my son Ethan gets from his friend Gerald. It appears that CRA wins by a slight margin because it gets 120,000 calls per year! I cannot wait for Ethan to become a teenager! Client services staff also answered 11,000 written enquiries which according to CRA now means the backlog in written enquiries has been eliminated. For CRA to be responding to written requests more quickly is very important because some issues require a written communication from CRA. By eliminating the backlog in responses to written communication CRA will be helping charities more efficiently and effectively comply with their legal obligations and move ahead with operational issues.
Posted by
.(JavaScript must be enabled to view this email address) on 04/01/2010 |
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The Charities Directorate of the Canada Revenue Agency has recently mailed out a one-time direct mail piece to Canadian registered charities. For an electronic copy see the English edition of RC296E What’s the Scoop 2010 or the French version RC296F En exclusivité 2010 Renseignements pour les organismes de bienfaisance enregistrés
Posted by
.(JavaScript must be enabled to view this email address) on 04/01/2010 |
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The Charities Partnership and Outreach Program (CPOP) is an important CRA initiative to enhance Canadian charity’s understanding of their compliance obligations. Over the last few years there have been about 20 programs run by Canadian registered charities and funded in part by the CRA. One of the projects that I worked on, the Charity Law Information Program of the Ontario Community Support Association, has received funding from the CRA.
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There are some that are wondering how the budget, revisions to the disbursement quota, some changes to the T3010 and new anti-avoidance will affect their charity. Cathy Hawara, the Acting Director General of the Charities Directorate recently provided some information, requested feedback and will be putting out a “Questions and Answers” on the subject shortly.
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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.(JavaScript must be enabled to view this email address) on 03/30/2010 |
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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]
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.
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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.”
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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.
Here are some recent items from the Charity Law Information Program (CLIP) Communique.
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”.
