Blumbergs’ Canadian Charity Law List - June 2012
1) Top Ten Canadian Charity Law Issues - revised for 2012
Here is an updated version of my article Top Ten Canadian Charity Law Issues incorporating some of the recent changes.
2) Toronto Star article “Charity tax shelter promoters face criminal probe”
The Toronto Star on May 14th reported that “Seven charitable tax shelter promoters whose schemes have left thousands of Canadians with a $5 billion financial headache are under criminal investigation.”
3) CRA’s New Fundraising Guidance for Canadian Registered Charities 2012 just released
On April 20, 2012 CRA released a new Guidance on Fundraising for Canadian registered charities. This guidance is the most important information from the Charities Directorate on the obligations of Canadian registered charities when it comes to fundraising.
POLITICAL AND CROSS-BORDER CHARITABLE ACTIVITIES
4) How accurate are the T3010 charity returns when it comes to political activities?
Canadian registered charities must file the T3010 Registered Charity Information Return within six months of the end of their fiscal year, although some are not able to meet that deadline and file soon thereafter. It is a very important form because despite its limitations it is really the only uniform way to obtain information on all registered charities in Canada. Some people are surprised to find out that answers on the T3010 are not always reliable. I am going to make a few comments on the reliability of the T3010 and specifically with respect to questions relating to “political activities”.
5) CRA speech covers political activities and Canadian charities - including budget 2012
Here is an excerpt from a speech by Cathy Hawara, Director General of the Charities Directorate of the CRA on the issue of Canadian charities and political activities.
6) Toronto Star - “Catholic teachers under fire for promoting pro-life motion to students”
Here is an article in the Toronto Star ““Catholic teachers under fire for promoting pro-life motion to students”.
7) Some recent articles on political activities and Canadian charities
There have been a number of articles dealing with Canadian charities and political activities over the last few months.
8) CPS-022 CRA’s Guidance on Political Activities and Canadian Registered charities
The Charities Directorate of CRA has a guidance entitled “Political Activities” for Canadian registered charities. CRA notes in the guidance that it”... provides information for registered charities on political activities and allowable limits under the Income Tax Act (the Act). It also provides a framework that explains how we distinguish between political and charitable activities. In addition, it seeks to clarify the extent to which charities can usefully contribute to the development of public policy under the existing law. The guidance in this policy statement is based on subsections 149.1(6.1) and 149.1(6.2) of the Act and on general principles of charity law and court decisions that define what is charitable and what is political. This information applies to all registered charities.” While CRA’s Guidance is pretty good and will probably be
improved over the next few months or years - it is of little assistance to a charity if they don’t know it exists or don’t read it.
9) New blog on Political Activities and Canadian charities
Whether I like it or not the involvement of Canadian charities in political activities has become a major issue. Therefore, I am creating a new blog category on Canadian charities and political activities. The discussion has been squarely on environmental groups and the oil pipelines. It is interesting because environmental groups actually have very little funding compared to other far better funded charities and perhaps some environmentalists wish that all those funds can be used for political activities but in fact a tiny percentage of their funds of environmental groups receive are spent on political. If you are looking for the big bucks and political activities you are going to have to look elsewhere. The media in Canada will eventually wake up and follow a more balanced approach. In fact I will blog further on the US and UK - the big money and scrutiny has been on certain
right wing groups using almost all their money on funding political activities - some of which are decidedly partisan. I guess one could say that a Pandora’s box has been opened and it will be interesting to see where it goes. It is important that Canadian charities follow the rules - whether environmental groups, “business” think tanks or religious organizations.
10) Globe and Mail “New rules in budget ‘create more fear’ among politically active charities”
The Globe and Mail published an article “New rules in budget ‘create more fear’ among politically active charities”.
11) National Post article “The politics of charity: When is a tax-exempt organization too political?”
Kathryn Blaze Carlson of the National Post has written another article on charities and political activities entitled “The politics of charity: When is a tax-exempt organization too political?”
12) Cato Institute think tank in the US having problems
On March 4, 2012 Debra E. Blum of the Chronicle of Philanthropy wrote an interesting article “Think Tank in Koch Brothers Dispute Could Find Its Tax Status at Risk”. The article discussed the litigation surrounding the US Cato Institute. It also has ramifications in Canada in that we are dealing with some similar issues of political involvement by think tanks and also the Cato Institute apparently funds initiatives in Canada.
13) Highlights of Federal Budget 2012 relating to charities
Here is a short summary of the major provisions relating to charities in the 2012 Federal Budget - tried to keep it to 100 words but I did not make it.
14) 2012 Canadian Federal Budget - March 29, 2012 and its impact on charities
On March 29, 2012 Finance Minister Jim Flaherty released the Federal Budget. There are about 10 pages of information dealing with charities in the almost 500 page document. Here are the pieces of the 2012 Canadian Federal Budget that affect the Canadian charitable sector.
15) Standing Committee on Finance deals with charity provisions in the budget - May 28, 2012
The Standing Committee on Finance dealt with the charity provisions in the 2012 Federal Budget on May 28, 2012 from approximately 7 p.m. to 9 pm. The subject mater was “Bill C-38, An Act to implement certain provisions of the budget tabled in Parliament on March 29, 2012 and other measures”. Despite the title the meeting was interesting - no I don’t mean interesting for me from a charity geek perspective but actually could be interesting for any regular citizen. There was some heated discussion about the role of charities. You had Ethical Oil, the west coast blogger Vivian Krause, the CEO of Imagine Canada, Dennis Howlett from Canadians for Tax Fairness, the Canadian Federation of Independent Business and myself. (Also on non-charity matters, not admitting that such a thing exists, there were reps from PDAC which represents mining companies and the Grain Growers of
16) Budget 2012 changes rules for category of foreign charities to whom the Federal Gov has made a gift
The Federal government in its 2012 budget has made changes to the category of qualified donee called “Gifts to Certain Charitable Organizations Outside Canada”. There are currently 9 foreign charities that are in a list “Gifts to Certain Charitable Organizations Outside Canada”. FInance is proposing to modify the rules to allow the CRA in consultation with Finance to recognize such organizations only if they are “• related to disaster relief or urgent humanitarian aid; or • in the national interest of Canada.”
17) Federal Budget 2012 - transparency and political activities.
The 2012 Federal budget has an important piece on transparency namely “...to ensure that charities are accurately reporting in respect of all the activities in which they engage, the CRA will be granted the authority to suspend the tax-receipting privileges of a charity that provides inaccurate or incomplete information in its annual information return until the charity provides the required information.” This highlights the importance of charities not only filing the T3010 but being accurate and complete. If you don’t file your T3010 you will be revoked, but if you file an incomplete or inacurate T3010 you can be suspended. I have expressed concerns with some charities making ridiculous claims on their T3010 - that they have no fundraising costs is my favourite when they are organizing lots of expensive fundraising events, inflating gift-in-kind valuations etc.
Well now just such a filing can get the charity in trouble. This follows the recent US IRS example where a charity was penalized for filing an inflated valuation of gifts in kind.
18) Finance releases Notice of Ways and Means Motion for 2012 Federal Budget - charity pieces
Finance has just released the “Notice of Ways and Means Motion to implement certain provisions of the budget tabled in Parliament on March 29, 2012 and other measures”. There are also “Explanatory Notes” that are helpful.
19) CRA comments on revised category of foreign charities who receive gift from government of Canada
Cathy Hawara, Director General of the Charities Directorate, made some comments on the 2012 Federal budget changes affecting the category of qualified donee charitable organizations outside Canada to which Her Majesty in right of Canada has made a gift. She also addressed some of the media confusion about those changes.
20) CRA FAQ on Budget 2012 and Gifts to foreign charitable organizations
Here is the CRA FAQ on “Gifts to foreign charitable organizations”
COMPLIANCE AND MISUSE OF CHARITY RESOURCES
21) Abusive charity gifting tax schemes only down slightly in 2011
According to Danie Huppé-Cranford, Director of the Compliance Division of the Charities Directorate the tentative 2011 numbers for abusive charity gifting tax schemes in Canada are down slightly in 2011 compared to 2010.
22) CRA revokes registration of Help Eliminate Disease and Addiction Canada as registered charity
The Canada Revenue Agency has revoked the registration of Help Eliminate Disease and Addiction Canada as a registered charity.
23) Letters from CRA to HEDAC (Help Eliminate Disease and Addiction Canada) explain HEDAC’s revocation
Here are the letters from CRA to HEDAC (Help Eliminate Disease and Addiction Canada) which explain why HEDAC was revoked for cause.
24) Letters from CRA to Power Zone Outreach Ministries about revocation for cause
The CRA recently revoked for cause the charitable registration of Power Zone Outreach Ministries.
25) Globe and Mail article “Noose tightens around donation tax schemes”
The Globe and Mail had an article today entitled “Noose tightens around donation tax schemes”. It discusses litigation around some schemes that the CRA characterizes as “abusive gifting tax schemes”.
26) Toronto Sun opinion piece “Beware of too-good-to-be-true tax shelters”
Here is an opinion piece that appeared in the Toronto Sun entitled “Beware of too-good-to-be-true tax shelters”.
27) CRA press release “Art-donation scheme in Larouche: Claude Simard guilty of tax evasion”
The CRA noted in a press release “Claude Simard, one of the promoters of the art-donation scheme in the municipality of Larouche in the Saguenay region, was found guilty of tax evasion today before the Court of Quebec in Montréal and was fined $300,000.”
28) CRA says “Toronto tax preparer guilty of over million dollar tax fraud scheme”
Here is a press release from the CRA entitled “Toronto tax preparer guilty of over million dollar tax fraud scheme” which involves claims of over 1 million in false charitable deductions.
29) Toronto Star reports “Tax preparer becomes fugitive in fraud case” involving charity receipting
The Toronto Star covered the story of a tax preparer from Vaughan, Ontario who is a fugitive after having prepared thousands of tax returns with fraudulent charitable donation receipts amounting to millions of dollars. Most interesting is that the CRA cannot release a photo of the woman even though she is a fugitive. I think S. 241 of the Income Tax Act (confidentiality provisions) needs to be modified to allow CRA to release more information on charities and now tax preparer fugitives. I have sent submissions to Finance on that and lets wait and see.
30) CRA says “Toronto tax preparer guilty of over million dollar tax fraud scheme” with false receipts
Here is a press release from CRA relating to a tax preparer who pleaded guilty to fraud for filing false income tax returns with false charitable donation receipts.
31) Transparency - IRS imposes penalty on charity that allegedly inflated pharmaceutical donation
In an article by The Chronicle of Philanthropy by Caroline Preston entitled “Update: IRS Levies Fine on Food for the Hungry Over Drug Valuations” it describes how the US IRS has levied a penalty against a charity that misreported donations on its annual return.
32) CRA imposes two penalties on Canadian charities for “inappropriately funding non-qualified donees”
CRA has imposed a penalty on the HINDU MISSION OF MISSISSAUGA and the HINDU TEMPLE SOCIETY OF CANADA. You can read on the CRA website the amounts and the reasons.
33) Charity Commission of England and Wales releases revised counter-terrorism strategy
The Charity Commission of England and Wales has released its revised Counter-terrorism Strategy recently. It also has links to a number of helpful UK guidances on how charities should operate to avoid involvement with terrorism. Many of the same principles apply here in Canada and Canadian charities may find reviewing the strategy and UK guidance helpful.
BRAID MOTION AND TAX INCENTIVES
34) Canadian Standing Committee on Finance (FINA) review of charitable tax incentives
The Standing Committee on Finance (FINA) is holding hearings on tax incentives for charitable donations and here is a little information on FINA with links to its pages.
35) The Cost of New Proposed Canadian Tax Measures to Support Private Share and Real Estate donations
The Office of the Parliamentary Budget Officer has released a very interesting report entitled “Cost Estimates of Proposed Tax Measures to Encourage Charitable Donations of Assets”. It was written by Stephen Tapp. It looks at the effect of increasing certain tax incentives of donations of private shares, real estate and ecologically sensitive land. There are lots of interesting nuggets in the study that go far beyond just the issue of tax incentives for these measures.
36) Transcript of testimony to Finance Committee on charity transparency, tax incentives and political
Here is the transcript from the Standing Committee on Finance on May 8, 2012. 6 witnesses, lots of questions. I was one of the witnesses.
37) Op Ed in New York Times “Tax Write-Off Now, Charity Later”
Here is an Op Ed in New York Times that I just noticed in November 2011 entitled “Tax Write-Off Now, Charity Later” which discusses donor advised funds in the US and how they may disproportionately high net worth individuals and financial institutions and provide little benefit to charities. The piece suggests some improvements to the rules around donor advised funds to increase their public benefit.
38) Transparency for Canadian qualified donees - comments from the Director General
Here are some comments from Cathy Hawara, Director General of the Charities Directorate, relating to the 2011 Federal Budget provisions enhancing transparency for qualified donees (ie. those organizations who can issue official donation receipts).
39) CRA Revamping Charities Listing with Charity Quick View - get ready before it is too late!
The CRA has sent notices to registered charities announcing that in August 2012 the Charities Directorate will introducing “Charity Quick View”. Here is a copy of the CRA announcement entitled “Introducing Charity Quick View” in English and French. Currently one can access data on all registered charities at http://www.cra-arc.gc.ca/ebci/haip/srch/advancedsearch-eng.action
The information currently is not that easy to access and understand. After August 2012 charities and donors will be able to access a better and more graphical user interface. What should charities do? First keep on filing your T3010. Second, make sure the T3010 filing is accurate. Third, check out Imagine Canada’s Charity Focus to see if there are mistakes in your previous T3010 filings at http://www.charityfocus.ca
Fourth, if you notice any mistakes then fill out a T1240 Registered Charity Adjustment Request (http://www.cra-arc.gc.ca/E/pbg/tf/t1240/t1240-10e.pdf) so that CRA can change your filing before the Charity Quick View is launched. It is very important that T3010 returns are accurate in the last Federal Budget there is a provision for suspending a charity’s receipting function if it files an incomplete or inaccurate T3010.
40) CRA FAQ on Federal 2012 budget “Transparency and accountability” provisions
CRA has posted an FAQ on the Transparency and accountability provisions relating to registered charities in the 2012 budget.
41) Mark Blumberg’s submission to the Standing Committee on Finance on transparency
I presented to the House of Commons Standing Committee on Finance today along with 5 other witnesses. There was a lively discussion of transparency, cross border philanthropy, tax incentives and preventing abuse of registered charities.
42) CRA releases information on “Budget 2012 - Enhancing transparency and accountability for charities”
The Charities Directorate of the CRA has posted information on the Federal 2012 Budget.
43) TIDES US 2010 Form 990 - an example of transparency in action
Some senators have been complaining about environmental groups outside Canada being involved with public policy and political discussions in Canada. I have written about the disclosure of foreign funding by Canadian charities at “So how much do Canadian charities receive from foreign sources according to the T3010 Returns?” . But I want to point out that in fact the US has significant requirements in terms of disclosure with its Form 990. Below is a copy of the TIDES US Form 990 to serve as an illustration. It is 181 pages long and provides detailed information on the work of Tides US. Far from there being no transparency about US funding of Canadian groups - there is tremendous transparency in the US 990 Return. The IRS has spent a considerable amount of time revising its form 990 and now it includes a large amount of information that Canadian charities don’t
have to disclose.
44) WSJ article “California Couple Loses $18.5 Million Charitable Deduction on Technicality”
The Wall Street Journal had an article “California Couple Loses $18.5 Million Charitable Deduction on Technicality” which describes how a couple donated $18.5 million to a charitable remainder trust but did not get a ‘qualified appraisal’ of the real estate under the US rules. Actually the person did their own “appraisal”. The case underscores the importance of getting an independent valuation when you are donating substantial assets and expecting to get a charitable deduction.
45) UK tax relief limit for charitable donations is dropped
The UK government has backtracked on a proposal to cap charitable giving for high net worth individuals at the greater of 1/4 of income or £50,000. The change of course is not surprising but shows how in increasingly difficult times some governments have tried to increase revenue by decreasing various types of tax incentives including gifts to charities.
46) National Post articles criticizing the way certain hospitals run Tim Horton franchises
The National Post has written two articles on Canadian hospitals and their Tim Horton operations. As these articles deal with the nexus between our charitable sector (very important) and Tim Hortons (vital) I feel I must comment.
47) US House of Representatives Announces Hearing on US Tax Exempt Organizations
The US House of Representatives is conducting hearings on Tax Exempt Organizations.
48) CP article “Controversial Islamic school ordered out of Toronto public school property”
The Canadian Press article “Controversial Islamic school ordered out of Toronto public school property” raises some interesting issues. The TDSB is the largest registered charity in Canada with over $3 billion in revenue. Many people don’t know but lots of school boards are registered charities.
49) Imagine Canada launches new standards program for Canadian charities
Imagine Canada launched their new Standards Program. It provides accreditation to certain charities and the standards focus on certain issues such as board governance; financial accountability & transparency, ethical fundraising, staff management; and volunteer involvement. .Charities should look at this voluntary program as it provides some very useful ideas, irrespective of whether one joins the initiative.
50) Receipting webinars for Canadian registered charities in French
Here are some receipting webinars prepared for the Charity Law Information Program in French by Daniel Brunette. They are free and last approximately 1 hour each.
51) LA Times article “The worst way to judge a charity”
Here is an interesting article entitled “The worst way to judge a charity”. Notice in paragraph 3 an attack on Canada!
52) Chronicle of Philanthropy “Good Governance Makes Tax Compliance More Likely, Says IRS Study”
The Chronicle of Philanthropy recently published an article “Good Governance Makes Tax Compliance More Likely, Says IRS Study”.
53) Brad Offman article “Canada’s Charities Deserve Better”
Brad Offman, Vice President, Strategic Philanthropy at Mackenzie Financial Corporation and Managing Director of the Mackenzie Charitable Giving Fund has written an interesting article entitled “Canada’s Charities Deserve Better”. Brad argues quite correctly that using one or two financial ratios to judge a charity is shortsighted and basically “Canada’s Charities Deserve Better”.
54) The Sheldon Inwentash and Lynn Factor Charitable Foundation Case - public vs. private foundation
Can a public foundation have only one trustee? The answer is no according to this Federal Court of Appeal decision. A charity with one trustee must be a private foundation.
I will be making two presentations on June 14, 2012 to the Community Foundation of Grey Bruce on “Recent legal developments for donors and charities” and “Top 20 compliance issues for Canadian charities”
I will also be making a number of presentation to the Institute of Chartered Accountants of Ontario, Alberta and BC over the next few months.
I will be presenting to the Association of Professional Researchers for Advancement (APRA) Canada Conference on “Transparency in the Canadian Charity Sector – the T3010 and Beyond” on October 10, 2012.
I presented submissions to the Standing Committee on Finance on May 8, 2012 and May 28, 2012
I presented to the Ontario Hospital Association Conference on “Top legal compliance concerns for Canadian registered charities” and a second presentation on “Ethical Decision-Making in the Not-For-Profit Sector”.
I presented to AFP Fundraising Day in Toronto on the CRA’s Guidance on Fundraising.
I delivered a webinar for the Association of Fundraising Professioanl (AFP) International on “Fundraising from Canada” on May 22, 2012.
In April I co-presented at the AFP International Conference in Vancouver on “Fundraising Compliance and Ethical Issues for Canadian Registered Charities”.
Here are some recent links:
SMARTGIVING.CA - a website to help donors make more informed giving decisions
List of Canadian Charities Revoked for Cause over the last five years and their directors
Canada Not-for-profit Corporations Act (CNCA) Suitcase
Budget 2011 and new “ineligible individual” category: How this can affect your charity
Blumbergs Canadian Charity Legal Checklist
CRA letters to Canadian registered charities when revocation for cause
Receipting Kit for Canadian Registered Charities launched by the Charity Law Information Program
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 use Twitter you might want to follow me at: http://twitter.com/canadiancharity
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
Barristers & Solicitors
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