Blumbergs’ Canadian Charity Law List - March 2012
1) Why did CRA revoke a number of Registered Canadian Amateur Athletic Associations
Why did CRA decide to revoke a number of RCAAAs over the last few years? Here are the actual letters from CRA that were recently released with details for Little League Baseball Canada, Canadian Lacrosse Association, Canadian Amateur Football Association and Biathlon Canada.
2) CRA letters to Escarpment Biosphere Foundation Inc.
As noted before the Canada Revenue Agency Charities Directorate has revoked the registration of Escarpment Biosphere Foundation Inc. as a charity for participating in the Canadian Humanitarian Trust tax shelter gifting arrangement (Donation Program). Here is detailed information from the CRA on the involvement of the Escarpment Biosphere Foundation Inc in an abusive charity gifting tax scheme. The letters cover topics such as fair market value, pharmaceutical donations, the revocation of registered charities who act in concert with each other to unduly delay expenditures on charitable activities, limitations on the charitable goods policy and direction and control.
3) 2012 Federal Budget
Today at 4PM EST Finance Minister Jim Flaherty will be releasing the Federal Budget. I will blog on aspects that affect Canadian registered charities and non-profits here.
COMPLIANCE AND MISUSE OF CHARITY RESOURCES
4) March is Fraud Prevention Month - donors and charities need to be careful
Various organizations are reminding Canadians to beware of fraud and charities. Capital One and CanadaHelps have a quiz “to educate Canadians on how to identify false charities so their generous donations don’t end up in fraudsters’ hands.” CRA advises “Fraud Prevention Month also offers an opportunity for the Agency to remind Canadians that some individuals are selling tax scams that have serious legal consequences. Canadians are urged to remember the old adage: If it sounds too good to be true, it probably is.”
5) Article in Canadian Fundraiser ““Behaviour modification” the goal in suit against law firm”
At the Hillborn website charityinfo.ca there is an interesting article entitled ““Behaviour modification” the goal in suit against law firm” which discusses a recent class action lawsuit by Scarfone Hawkins related to the Banyan Tree Foundation abusive charity gifting tax scheme.
6) L’Ecole Notre Dame Du Nord Inc.- if you don’t exist you cannot be a Canadian registered charity!
L’Ecole Notre Dame Du Nord Inc. was a registered charity that was revoked by CRA. I thought it was worth mentioning because the reason for dissolution provided by CRA seems quite mundane but important for charities to pay attention to. In May 2011 CRA noticed that the corporate entity L’Ecole Notre Dame Du Nord Inc had become dissolved. CRA advised “Upon termination of its corporate status L’Ecole Notre Dame Du Nord Inc. ceased to exist as an entity at law and as such no longer qualifies for registration as a charity under the Income Tax Act, subsection 248(1).” They were then given 90 days to show “proof that it exists as a corporate entity. Failure to comply will result in the CRA revoking the charity’s registration by publishing the follow notice in the Canada Gazette ...”. CRA then revoked for failing to be revived. Federal corporations need to pay attention to new corporate law requirements to continue under the new CNCA and failure to do so will result in dissolution of the Federal non-profit corporation and subsequent revocation of charitable status.
7) The Canada Revenue Agency revokes the registration of Escarpment Biosphere Foundation Inc.
As noted above the Canada Revenue Agency has revoked the registration of Escarpment Biosphere Foundation Inc. as a charity for participating in the Canadian Humanitarian Trust tax shelter gifting arrangement (Donation Program). The CRA notes “Our audit revealed that the Escarpment Biosphere Foundation Inc. (the Organization) received cash and pharmaceuticals with a purported value of over $407 million as a result of its participating in the Canadian Humanitarian Trust tax shelter gifting arrangement (Donation Program). It is our position the Organization failed to verify the value of the properties and to maintain direction and control over the distribution of the properties. Further, we believe the Organization agreed, for a fee of approximately $1 million, to lend legitimacy to the Donation Program by representing that it had received and distributed the properties in its own charitable programs. As such, it is our position the Organization failed to operate exclusively for charitable purposes by acting as a conduit for the Donation Program and redistributing 99% of the cash received to other parties in the Donation Program.”
8) Canadian Lawyer Magazine “$144-million charitable tax scheme class action certified”
Here is another short article on the Cannon v. Funds for Canada Foundation class action lawsuit.
9) The Threat of Terrorism - How Charities Can Protect Themselves - by Alastair Bland of the CRA
Recently, Alastair Bland of the Review and Analysis Division of the Charities Directorate of the Canada Revenue Agency presented on the subject of “The Threat of Terrorism - How Charities Can Protect Themselves.” It was a very interesting presentation and here are the slides.
10) Blumbergs Submission to Finance on AML and Anti-Terrorism Provisions affecting Canadian charities
Here is the Blumbergs submission to the Department of Finance on AML and Anti-Terrorism Provisions affecting Canadian charities -March 2012.
11) Letters from CRA about the revocation of charity World Assembly of Muslim Youth for supporting terrorism
Here is a copy of the Letters from CRA about the revocation of the charity World Assembly of Muslim Youth for supporting terrorism. We noted at globalphilanthropy.ca (TM) on February 23 the revocation at http://bit.ly/xNGt4M
12) CRA revokes charity “World Assembly of Muslim Youth” for providing funds to a listed terrorist org.
The Charities Directorate of CRA has revoked the registered charity status of the group “World Assembly of Muslim Youth”. CRA notes: “Summary of Reasons for Revocation - WORLD ASSEMBLY OF MUSLIM YOUTH On the basis of our audit and of our review of the Organization’s Registered Charity Information Returns for the years from 2005 to 2009, we have concluded that the Organization: failed to comply with or contravened subsection 230(2) of the Act; ceased to comply with the requirements of the Act for its continued registration; and failed to file an information return as required under the Act. Our analysis of the Organization’s operations has led the CRA to believe that the Organization, which has been inactive since at least 2005, was established to support the goals and operations of its parent organization located in Saudi Arabia. Our analysis particularly noted that the Organization shared a common director, contact information, and a bank account with the Benevolence International Fund in Canada (BIF-Canada), and provided $50,246 to the Benevolence International Foundation in the United States (BIF-USA) in 2001. On November 21, 2002, BIF-Canada and BIF-USA were added to the Consolidated List of the United Nations Security Council’s Al-Qaida and Taliban and Sanctions Committee.”
13) United Holy Land Fund - “trust and faith of proper usage of funds” is not “direction and control”
The CRA recently revoked the registered charity status of the United Holy Land Fund. CRA alleges that the United Holy Land Fund did not have “direction and control” over the use of its resources, failed to maintain adequate books and records and made gifts to non-qualified donees. The amounts involved appear to be quite small - about $16,000.
CROSS-BORDER CHARITABLE ACTIVITIES and POLITICAL
14) Canadian Senators comment on foreign funding and political activities of registered charities
A Canadian Senator Nicole Eaton has been commenting on Canadian charities and a number of senators have spoken in agreement and in disagreement. I wish the Senate had access to better information on the charitable sector.
15) Marcel Lauzière of Imagine Canada piece on “Role of charities”
Marcel Lauzière of Imagine Canada has written a good piece entitled “Role of Charities” in which he nicely summarizes why charities have, and should have, involvement in the political process. Remember that charities cannot be involved in partisan political activity, but they can spend some of their resources on dealing with political issues that are related to their legal objects.
16) Canadian charity stops funding Israeli charity after investigation
The Jerusalem Post has written articles on an Israeli soup kitchen that received a large amount of funds from Canada and other countries around the world. The Canadian charity was concerned that their agent in Israel was not providing adequate information on the operations and the Canadian charity investigated the matter and subsequently stopped funding the Israeli charity. This story even has a little intrigue as ex-Mossad agents were apparently hired to do some of the investigating. I checked the CRA Guidance on foreign activities (http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cgd/tsd-cnd-eng.html) and there does not appear to be any requirement to use ex-Mossad agents - although I guess it cannot hurt! This story is also a little unusual in that the Canadian charity is discovering a problem abroad AND they are telling the public about it. Usually these matters are hidden under the carpet. The Israeli charity denies any wrongdoing.
17) Blumbergs submission on the importance of transparency to the charity and non-profit sector
Here is a copy of our submission to the House of Commons Standing Committee on Finance on Motion 559 dealing with transparency.
18) TIDES US 2010 Form 990 - an example of transparency in action
Some parliamentarians in Canada 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 in my article “So how much do Canadian charities receive from foreign sources according to the T3010 Returns?” which lists all Canadian charities receiving over $10,000 from foreign sources. But I want to point out that in fact the US has significant requirements in terms of disclosure with its Form 990. Attached 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.
19) StatsCan releases data on volunteering “Caring Canadians, Involved Canadians”
Statistics Canada has released a report entitled “Caring Canadians, Involved Canadians” based on the 2010 Canada Survey of Giving, Volunteering and Participating (CSGVP). Statscan will be releasing further reports on the data.
20) CharityFocus.ca adds Director search feature
CharityFocus.ca is a new tool created by Imagine Canada to allow searches of Canadian registered charities. You can now also search by directors.
21) ORNGE - A lesson for charities in the dangers of too little transparency
ORNGE, for those outside of Ontario, is a Canadian registered charity that runs the air ambulance service in Ontario. Their helicopters are painted orange. It is a charity but largely funded by the Ontario government. ORNGE has been receiving a large amount of media scrutiny over the last few months.
22) Article “Ornge to be restructured amid OPP probe”
Here is an article on the Ontario air ambulance service Ornge which discusses the involvement of legal and accounting firms in the structuring of the transaction.
23) Largest Gifts from Canadian Charities to other Qualified Donees - 2010
Here is a list of the Largest Gifts from Canadian Charities to other Qualified Donees - 2010. You might find this interesting.
24) Various CRA Letters on Article XXI of the Canada-US Tax Treaty
Here are some letters from the Canada Revenue Agency dealing with Article XXI (7) (formerly XXI(6)) of the Canada-US Tax Treaty.
25) Charity Commission publishes report on charity loan to football club and conflicts of interest
The Charity Commission of England and Wales published a report on a charity loan to a football club. “The Commission’s investigation concluded that the charity trustees had not met their legal duties and responsibilities as trustees, including the need to safeguard the charity’s funds and apply them for the proper purposes of the charity. It also concluded that the trustees, all of whom had links to or interests in Plymouth Argyle FC, had not properly managed their conflicts of interest. In these particular circumstances, the Commission concluded that the trustees had placed the interests of the charity secondary to those of the football club. The Commission is critical of the trustees for allowing the situation to arise, but found they have since done everything expected of them to rectify it.” Many of the same principles would apply in the Canadian context.
26) Toronto Star article “ORNGE paid lawyers $11 million”
The Toronto Star has been doing a number of articles on a Canadian registered charity named “ORNGE” which provides air ambulance services in Ontario. In this article Kevin Donovan, investigative reporter for the Toronto Star, is discussing amounts of legal fees paid by ORNGE and the services provided.
In early April I will be co-presenting at the AFP International Conference in Vancouver on “Fundraising Compliance and Ethical Issues for Canadian Registered Charities”.
ON May 23rd, I will be presenting at the OHA’s Governance Centre of Excellence Annual Conference for Not-For-Profit and Charitable Organizations on legal compliance and ethics.
On May 24, 2012 I will be presenting at The Canadian Institute’s Forum on “Protecting & Defending the Board” on “Protecting D&Os of Not for Profit and Charitable Organizations: Understanding the Impact of New Federal Legislation - Canadian Institute”
On February 13 and 14, 2012 I Chaired the CLIP Conference ‘Being Good at Doing Good’ http://www.clipconference.wildapricot.org. We had over 200 attendees at the two-day conference including the head of the IRS Exempt Division, Lois Lerner, and Alice Holt, Head of Legal Services - London for the Charity Commission, and a number of senior Charities Directorate speakers and other experts talking about governance, financial management and compliance.
On February 9, 2012, I delivered a webinar on “Successfully funding First Nations communities in Canada in compliance with CRA guidance” with The Circle on Philanthropy and Aboriginal Peoples in Canada, Canadian Environmental Grantmakers’ Network and the Charity Law Information Program.
On February 29, 2012 I was lecturing and co-leading the Federated Press conference on “Tax-Effective Planning for Insurance & Investments Course”. I presented on “Tax Effective Giving and the Use of Private Foundations” including factors to consider before establishing a private foundations and alternatives to private foundations and the process, requirements and costs of establishing a private foundation. The conference registration information is at: http://www.federatedpress.com/pdf/CEC/TEPT1202-E.pdf
I also did a number of workshops on charity compliance and recent legal developments for the Institute of Chartered Accountants of Ontario as well as the Institute of Chartered Accountants of British Columbia.
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
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
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