Blumbergs’ Canadian Charity Law List - December 2010
Posted under News | What's New from the Charities Directorate of CRA | Canadian Charity Law | Global Giving | CIDA | New corporate non-profit acts | Planned Giving and Canadian Charities | Ethics and Canadian Charities | Avoiding 'Charity' Scams
Here is a copy of the Blumbergs’ Canadian Charity Law List for December 2010.
1) GIVE THE GIFT OF COMPLIANCE - upcoming CLIP Webinars
Here are a few of many upcoming CLIP webinars (online seminars) and charity chats on receipting, fundraising and foreign activities. They are available at no charge and provide 1 hour webinars on these important subjects - great for people who work at charities, as well as volunteers such as board members. You just need a computer connected to the internet. The Charity Law Information Program (CLIP) is supported by a contribution from the Charities Partnership Outreach Program (CPOP) of the Charities Directorate of the Canada Revenue Agency.
C-470 Salary Caps and Compensation Disclosure
2) Finance committee reviews C-470 and amends to remove salary cap, increase salary disclosure for 100G
The Finance Committee has reviewed C-470. The Finance Committee has amended the private members bill and it will be sent for Third reading in the House. The $250,000 compensation cap has been removed which is important as it could have resulted in many hospitals, universities, research institutions having to terminate employment contracts that paid over 250,000 or possibly be revoked. If the bill is passed in its current form, there would be a requirement for the Minister to disclose any employee or executive earning above the $100,000 for years beginning in 2012 “unless otherwise justified”. The amendments made it mandatory for the disclosure to be made, except that in some cases an organization – for example a women’s shelter, may able to justify that information not being disclosed. It would be effective as of 2012 rather than 2011 as originally proposed to give CRA time to make changes.
3) “Bill C-470 and the Backlash Against Fundraising” - by Malcolm Burrows
Malcolm Burrows recently wrote a very thoughtful article for the September 2010 edition of Gift Planning in Canada on C-470, the private members bill to cap salaries at registered charities and to force charities to disclose salary information on the top 5 employees irrespective of their earnings. I have received permission to reproduce the article here and thought that some who are interested in compensation and HR practices in the charitable sector would find it useful.
4) Blumberg Segal LLP’s submission on C-470 compensation Bill - enough red herrings, more transparency
The House of Commons Standing Committee on Finance asked a number of organizations and individuals to submit one-page submissions on Bill C-470 and here is our submission.
5) Blumbergs' Submission “Canadians demand more transparency in non-profit and charitable sector”
Here is a Pre-Budget Submission to the House of Commons Standing Committee on Finance entitled “Canadians demand more transparency in non-profit and charitable sector” by Blumberg Segal LLP.
Charity Scams and Abuse
6) Australians cracking down on Canadian-style abusive charity gifting tax shelters
A while ago, I got a call from Australia. An investment advisor was wondering about certain Canadian individuals involved with what he thought were some pretty risky charity gifting tax shelter schemes in Australia. Here is an Aggressive Tax Planning alert from the Australian government which “describes a leveraged donation arrangement where a taxpayer (donor) claims a gift deduction for pharmaceuticals and other items to a Deductible Gift Recipient (charity) for use overseas, which far exceeds the amount of cash outlaid.” The market for these schemes in Canada seems to have collapsed as CRA is denying the amounts, former investors are complaining bitterly about the schemes and their promoters and investors are launching class action lawsuits against the charities involved, the schemes promoters and the law firms who provided legal opinions.
7) CP article entitled “Probes of tax scams prompt revamp of charitable receipts”
The Canadian Press has written an article on the fraudulent misuse of charitable receipts.
8) Canadian MP Calls for RCMP probe of promoters involved with abusive charity gifting schemes
Here is a good idea from Albina Guarnieri, MP from Mississauga East-Cooksville. I must admit I only recently saw this, I was too focused on her extremely ill conceived Private members Bill on charity compensation disclosure.
9) Maréchaux v. Queen - victory for CRA at Federal Court of Appeal in “leveraged donation” scheme
The decision is quite concise and well worth reading for the ever decreasing number of people in Canada who still believe that you can take part in a tax shelter gifting arrangement and make money off a donation to a registered charity. F. Max E. Maréchaux, is a partner at the law firm Miller Thomson LLP and he is represented by Miller Thomson LLP in this matter. According to the decision “F. Max E. Maréchaux participated in a “leveraged donation” scheme. The essence of the scheme was that, for an expenditure of $30,000, he received a charitable donation tax receipt for $100,000, and claimed a tax credit of $44,218, a potential return on his outlay of nearly 50% in a matter of months. Very little of the money was retained by charities to advance their purposes.” Mr. Maréchaux had lost a decision at the Tax Court of Canada and his appeal to the Federal Court of Appeal was dismissed, as “Mr Maréchaux had not made a “gift””.
10) Advisory on Tax Shelter Gifting Arrangements by the Canadian Cultural Property Export Review Board
Here is an advisory recently posted on the site of the Canadian Cultural Property Export Review Board warning people to be cautious about any tax shelter involving the gift of cultural property in Canada. The Canadian Cultural Property Export Review Board has instituted a number of measures to minimize the possibility of inflated valuations of cultural property including changes to the application form.
11) R. v. Viccars, 2010 ABPC 351 - lawyer involved with tax evasion scheme convicted and sentenced
This case deals with sentencing of a lawyer, Mr. Viccars, for facilitating a tax evasion scheme dealing with tax write offs for computer software. It has nothing to do with charities or non-profits but it is interesting to read the judge’s comments as it relates to lawyers and their responsibilities. Governments have been using criminal proceedings to go after some people involved with fraudulent issuance of charitable donation receipts, what is sometimes referred to as fraudulent receipting. It will be interesting to see if criminal prosecutions will be used as a tool to deal with professional advisors involved with certain sophisticated abusive charity gifting tax shelters. Shutting down a registered charity, controlled by a promoter of an abusive charity gifting tax shelter, who has another ten in his back pocket is helpful - but we need criminal prosecutions exactly as we saw here.
12) The CRA revokes the registered status of Biathlon Canada
Another registered Canadian amateur athletic association (RCAAA) loses its status because of involvement with abusive charity gifting tax shelters. $25.9 million in donation receipts. This sports group should be ashamed of itself.
13) R. v. Leo-Mensah, 2010 ONCA 139 - charity receipting fraud results in longer sentence
Charity receipting fraud in Canada is a big problem. According to CRA, between 100,000-135,000 donors have been involved between 2004 and 2009 with hundreds of millions in fraudulent donation receipts issued. There is no question that the courts will sentence anyone involved to prison. The issue is how much time. In R. v. Leo-Mensah it dealt with that issue. The Crown sought a stiffer sentence and the courts agreed and gave the accused an extra two years, that is after he had already spent 11 months in pre-trial custody for which he receive a credit on a two-for-one basis. He also received a significant fine. The trial judge had not taken into account “as an aggravating factor, that the value of the fraud committed exceeded $1,000,000. This she was obliged to do pursuant to s. 380.1(1)(a) of the Criminal Code.”
What's New from CRA?
14) Auditor General Report on CRA, Registered Charities and Abusive Charity Gifting Schemes
The 2010 Fall Report of the Auditor General of Canada has been released and Chapter 7 deals with Registered Charities and the Canada Revenue Agency. The audit report is positive for the Charities Directorate.
15) Cathy Hawara appointed Director General of the Charities Directorate of the CRA
Cathy Hawara, previously Acting Director General, has now been appointed Director General of the Charities Directorate of the CRA, effective October 5, 2010. This is very good news as we will have some greater stability at the Charities Directorate. She has continued the approach of consultation with the sector, providing education to registered charities on their Income Tax Act obligations and a much needed vigorous crackdown on a few bad apples who are involved with abusive charity gifting tax shelters and receipting fraud.
16) CRA encourages donors to “Donate wisely this holiday season”
Here is a CRA press release on donating wisely. If you are interested in donating wisely there are a number of articles on my website that may be helpful including: http://www.globalphilanthropy.ca/index.php/blog/comments/how_to_effectively_donate_to_a_canadian_charity_-_some_suggestions_from_a_c/
17) CRA notes new guidances that will be released for consultation
The Charities Directorate of CRA in Charities Connection No. 5 - November 2010 notes new guidances that will be released for consultation by the Charities Directorate.
18) CRA releases Charities Connection #5 with info on new T3010-1, Guidance Documents and Consultation
The CRA has just released Charities Connection #5 with information on the new T3010-1 Registered Charity Information Return, highlights from some recent Guidance Documents, information on their upcoming consultations and speakers kits that anyone can use to educate groups about wise giving. The biggest piece of information is confirmation that the t3010-1 is essentially similar to the T3010B but certain minor changes are made to the form to comply with the recent disbursement quota changes announced in March 2010.
19) New T1044 Form - Non-Profit Organization (NPO) Information Return and Guide for Canadian non-profits
The CRA has revised its T4117 Income Tax Guide to the Non-Profit Organization (NPO) Information Return and the T1044 Form - Non-Profit Organization (NPO) Information Return. If an organization is a registered charity under the Income Tax Act they would not have to complete the form. Although this form is filed with CRA, unlike the T3010 Registered Charity Information return, it is not available to the public.
20) Cathy Hawara’s presentation “What’s New at the Charities Directorate” November 2010
Here is a copy of the presentation “What’s New at the Charities Directorate” delivered by Cathy Hawara, Director General, Charities Directorate. It covers a number of topics including the recent very positive Auditor General’s Report on the Charities Directorate, Changes to the Disbursement Quota (DQ), the Charities Directorate’s strategic direction, a Compliance update and view guidance posted on web site and upcoming guidance consultations.
21) CRA to introduce new T3010-1 form for fiscal periods ending on or after Dec 1, 2010
CRA advised today “A revised Registered Charity Information Return has been developed in response to changes announced in the federal budget of March 4, 2010. This new Form T3010-1 will be used by charities with fiscal periods ending on or after December 1, 2010 and will be mailed to charities early in January 2011.”
22) New T3010 form - the T3010-1 appears to be similar to earlier form
It appears that the changes from the T3010B to the T3010-1 will be minor and all of the changes are referenced in the link: http://www.cra-arc.gc.ca/chrts-gvng/chrts/bdgt2010/t3010_nsrt-eng.html relating to the March 4, 2010, Federal Budget. That will be a relief for many charities wondering if there will be dramatic changes.
23) CRA’s Annual Report to Parliament 2009-2010 - has references to registered charities
The Canada Revenue Agency’s annual report to parliament is interesting reading. It has some references to the Charities Directorate, the Charities Partnership and Outreach Program, audits by the charities directorate etc.
Foreign Activities and CIDA
24) CIDA Launches Two Calls for Proposals under the new Partners for Development Program
There are now 3 CIDA calls for Proposals under the new Partners for Development Program.
25) Copy of Mark’s Presentation on new CRA Foreign Activity Guidance
Here is a copy of a presentation I have given on CRA’s Foreign Activity Guidance. It has been delivered in Calgary, Edmonton and Ottawa over the last couple of months. If groups are interested in trying to arrange such a presentation then let me know.
26) CIDA Call for Proposals (Muskoka Initiative Partnership Program)
Here is information from the Canadian International Development Agency (CIDA) Partnerships with Canadians Branch (PWCB) on a new $75 million “call for projects over $500,000 to take a comprehensive and integrated approach to address maternal, newborn, and child health (MNCH), under its Partners for Development Program.”
Ratios, Evaluating Charities and Smart Giving
27) Is fundraising by commission allowed or a good thing in Canada - part of the Great Debate
Recently there was a debate between Ken Mayhew, Dan Pallotta and myself on a number of issues surrounding compensation. Ken Mayhew and myself opposed commission based fundraising and Dan Pallotta supported it. There are a number of concerns with commission based fundraising, principal among them that it encourages aggressive short term behaviour by fundraisers that may undermine the reputation of their charity and the charitable sector.
28) How Much Should A Canadian Charity Spend on Overhead - an article by Mark Blumberg
Canadians are increasingly asking “How Much Should A Canadian Charity Spend on Overhead?” Is this the right question? In this article I discuss the shortcomings of using certain rations in evaluating charities.
29) My presentations to the AFP Congress 2010 - Top Legal Issues and the Great Debate
Here is a copy of my presentation on Top Legal and Ethical Issues for Canadian Fundraisers and my slides for the Great Debate in which we discussed a number of issues relating to ratios, fundraising costs and compensation.
30) Article entitled “Third-party fundraising, boon or bust?” By Andy Levy-Ajzenkopf
Here is an article by Andy Levy-Ajzenkopf entitled “Third-party fundraising, boon or bust?” which discusses the issue of charities using third party fundraisers. http://www.charityvillage.com/cv/archive/acov/acov10/acov1037.asp
31) Xentel DM, telemarketer, hit with $500,000 fine for violating National Do Not Call List rules
The CBC notes in an article entitled “Telemarketer hit with $500,000 CRTC fine” that “The federal telecommunications regulator has hit a Calgary-based telemarketing firm, Xentel DM, with a $500,000 penalty for misusing the charity exemption to the National Do Not Call List rules.” Xentel DM Incorporated has recently changed its name to “iMarketing Solutions Group Inc."
32) Fiduciary Considerations Involving Charitable Property - presentation by Ken Goodman, Deputy PGT
Here is an interesting presentation by Ken Goodman entitled "Fiduciary Considerations Involving Charitable Property". It is important to remember directors of registered charities have to comply with BOTH the requirements of the Income Tax Act AND their fiduciary obligations.
33) Globe and Mail article “Ottawa gives Bill Clinton foundation special designation” by Paul Waldie
Here is an article by Paul Waldie on a rarely used category of qualified donee which are organizations that Her Majesty in right of Canada has made gifts to over the last two years and that are listed in an attachment to IC84-3R, Gifts to Certain Charitable Organizations Outside Canada. There are only about 5 organizations that are currently eligible for this status.
34) Maintaining Proper Books and Records: What You Need to Know from CCCC and Teresa Douma
I recently saw a great presentation on books and records from Teresa Douma, Senior Director, Legal Services for the Canadian Council of Christian. Charities. Maintaining adequate books and records is vital for accountability and properly running a charity, not just because the Income Tax Act requires it.
35) “Philanthropist Frank Giustra hit with tax penalty” reports Globe and Mail about Guistra charity
Private foundations in Canada have to comply with the “Excess Corporate Holdings” requirements introduced by Finance in the 2007 Federal Budget. Canadian private foundations that hold more than 2% of the issued and outstanding shares of any class of shares of a corporation at any time during their first fiscal periods beginning after March 18, 2007, must complete an Excess Corporate Holdings Worksheet and may in certain circumstances have to divest themselves of some shares or pay a penalty. This rule only does not apply to charitable organizations and public foundations, but only private foundations. Paul Waldie of The Globe and Mail reported that “A private foundation formed by mining financier Frank Giustra, who has won wide acclaim for his philanthropic work, has run afoul of federal tax authorities for violating investment rules governing charities. In a rare move, the Canada Revenue Agency has hit Mr. Giustra’s The Radcliffe Foundation with a $147,000 penalty for “excessive corporate holdings.”
36) CRA reviews two new disbursement quota scenarios
The letter from CRA discusses two disbursement quota scenarios in a gift from one charity to another related charity and depending on whether all or a portion of the gift is designated a “designated gift” how it will affect the disbursement quota obligations of the charities. I was wondering how CRA will deal with the issue of the new anti-avoidance provisions with the limited information provided as to the reasons for the transaction: “We note that the proposed amendments to paragraph 149.1(4.1)(a) and existing paragraph 149.1(4.1)(b) of the Act can subject donor and recipient charities to revocation of their registration if it may reasonably be considered that a purpose of the transaction was to avoid or unduly delay the expenditure of amounts on charitable activities. Whether any purpose of a transaction is to avoid or unduly delay the expenditure of amounts on charitable activities is a question of fact and must be determined on a case-by-case basis.”
37) CLIP Seminar Slides on CRA’s Fundraising Guidance, Top Legal Issues and Charitable Receipting
Here are my seminar slides on Understanding CRA’s Fundraising Guidance, Top Legal Issues and Charitable Receipting by Mark Blumberg prepared for the Charity Law Information Program (CLIP).
38) Determining the “Cost” of Life Insurance Policies as a Charitable Gift when transfer to charity
Here is a letter from CRA in response to a question about valuing a life insurance policy when it is transferred from a non-arm’s length person to a donor and subsequently gifted to a qualified donee. It deals with the deemed fair market value rules.
39) Ontario Not-For-Profit Corporations Act Receives Royal Assent
The Ontario Not-For-Profit Corporations Act received Royal Assent on October 25, 2010. Here is a copy of the Explanatory Notes and the Ontario Not-For-Profit Corporations Act.
40) CRA updates document “Employee or Self-Employed?” - make sure your staff are properly classified as either employees or independent contractors
Here is a copy of the updated document Employee or Self-Employed rc4110-10e.pdf from the CRA.
41) As this is the season for giving - here are some ideas for last minute procrastinators on how to effectively donate to a Canadian charity
The charity sector provides vital services and support in communities all over Canada. Here are a few tips to consider when donating to a Canadian registered charity. Hopefully this is helpful - but there is no science to donating - and I expect that not everyone will agree with the thoughts and this is a work in progress.
As noted above I will be delivering about 30 webinars over the next 3 months. For more information and a few of the topics see: http://www.globalphilanthropy.ca/index.php/blog/comments/upcoming_clip_webinars_online_internet_seminars_on_charity_law_fundraising_/Webinars
I am co-chairing a program entitled "Charity Corporate Changes and Avoiding Compliance Problems" which will be part of the OBA’s Institute 2011. For further information see http://www.globalphilanthropy.ca/index.php/blog/comments/ontario_bar_association_institute_2011_charity_corporate_changes_and_avoidi/ The OBA Institute is the largest continuing legal education event in Ontario. Lawyers may find this program helpful if they are interested in the new Ontario non-profit corporate legislation, the new federal Canada not for profit corporations act, avoiding problems with issuing receipts and class action lawsuits dealing with abusive charity gifting schemes.
Here is the upcoming UJA Federation of Greater Toronto 2nd Annual Charity Law Seminar for Jewish communal organizations on January 13, 2011 http://www.globalphilanthropy.ca/index.php/blog/comments/uja_federation_of_greater_toronto_2nd_annual_charity_law_seminar_for_jewish/
I will be presenting on a number of topics.
I will be speaking at the Strategy Institute 8th Annual Foundation, Endowment & Not For Profit Investment Summit being held in Toronto on January 18 - 19, 2011. My topic is Governance and Compliance Challenges for Foundations in 2011. For more information on the summit see http://foundationendowment.ca/
I will be giving a presentation on "Recent Legal Developments Affecting Registered Charities" for the Institute of Chartered Accountants of Ontario (ICAO).
I delivered a number of presentations over the last few months from Vancouver to Montreal for CLIP. I also did some Online Charity Chats and Online Webinars.
I delivered workshops in Ottawa with Volunteer Ottawa on 1) Top CRA Compliance Issues for Canadian Registered Charities and their Directors and 2) Foreign Activities by Canadian Charities: CRA’s new Guidance on Activities Outside of Canada for Canadian Registered Charities
I presented 3 programs for the Institute of Chartered Accountants of Ontario (ICAO) including on Top Compliance Issues - Registered Charities, Directors, CAs; Charity Fundraising and Receipting Rules and Recent Legal Developments Affecting Registered Charities.
At the 2010 AFP Greater Toronto Congress I delivered 2 presentations including:
1) "Top 20 Legal and Ethical Issues for Canadian Fundraisers" on December 1, 2010 Speaker - Mark Blumberg
2) The Great Debate: Charity Ratios and Ranking on Thursday, December 2, 2010 with Dan Pallotta, Author/ Founder of Pallotta Teamworks, Mark Blumberg, Blumberg Segal LLP, Ken Mayhew, Chief Development Officer, Multiple Sclerosis Society of Canada, Susan Storey CFRE, Vice President, KCI (Ketchum Canada Inc.)
I delivered a presentation entitled “Selecting and Working with Canadian Charities as CSR Partners” at the 4th Annual Risk Mitigation & Corporate Social Responsibility (CSR) in Africa Conference organized by the Southern Africa - Canada Chamber of Business.
I also did a number of presentations for the CMAs in Ontario.
I hope that you found the above material helpful and please feel free to forward the e-mail newsletter to anyone you think may be interested. They can also sign up for the BLUMBERGS non-profit and charities law newsletter at http://www.canadiancharitylaw.ca/index.php/pages/subscribe/
For further information on legal resources for Canadian Non-Profits and Charities please visit www.canadiancharitylaw.ca or www.globalphilanthropy.ca
If you are on Twitter you might want to follow me at: http://twitter.com/canadiancharity Surprisingly I now have about 525 followers on Twitter.
If you want general information on registered charities in Canada you might find the archived webinars that were prepared for the Charity Law Information Program (CLIP) of Capacity Builders helpful http://www.globalphilanthropy.ca/index.php/blog/comments/webinars_on_canadian_charity_law_-_charity_law_information_program_clip_by_/
Mark Blumberg, B.A., LL.B., LL.M., TEP
Blumberg Segal LLP
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