Blumbergs Canadian Charity Law List - October 2011
1) Industry Canada announces that on Monday October 17, 2011 Canada Not-for-profit Corporations Act (CNCA) will come into force
The long awaited Canada Not-for-profit Corporations Act (CNCA) will come into force on October 17, 2011. Until October 16, 2011 the current legislation (the Canada Corporations Act) can be used for incorporation but as of October 17, 2011 only the new CNCA can be used for incorporation of Federal non-profits. If you are incorporated under the old act you will have 3 years to move to the new act. Under the old CCA, CCA corporations will still for 3 years be able to amend by-laws, obtain supplementary letters patent, file an annual summary or surrender the corporation’s charter. At Blumbergs we will be busy helping organizations incorporate under the new CNCA and also transition/continue from the old act to the new act. While one does not require legal assistance with incorporation or transition for many organizations that are charities or have more complicated governance structures
they may find legal assistance helpful.
2) Upcoming Charity Law Information Program seminars with Mark Blumberg
Here are some upcoming CLIP Seminars across Canada which will discuss fundraising compliance, receipting rules and a little bit on the recent Federal Budget and the new CNCA. Further dates and places will be added shortly. CLIP is a project of Capacity Builders and receives funding from the Charities Directorate of the Canada Revenue Agency.
3) Failure to control and document use of charity funds can lead to serious problems
Here is an interesting report involving a UK charity with many lessons that can be learned by Canadian charities. The UK charity raised money for the Tsunami in 2004 and the Pakistan earthquake in 2005. In 2006 allegations in the media that the UK charity was involved with supporting terrorism. The Charity Commission of UK and Wales spent a number of year investigating. “The Inquiry concluded that from the information examined, there was no evidence to indicate that the trustees diverted charitable funds for unlawful or non-charitable purposes. However, the Commission concluded that the trustees were unable to satisfactorily verify the end use of charitable funds in both Indonesia and Pakistan. It found that the measures taken to control, monitor and document the use of charitable funds by third parties overseas were insufficient. This prevented the charity’s trustees
from being able to demonstrate that those funds had been used legitimately and in furtherance of the charity’s purposes.” “The report provides various lessons for the wider charity sector which trustees are encouraged to read. The lessons include the steps which trustees should take to put safeguards in place to mitigate the risk of charitable funds being used unlawfully. This is particularly important for charities working overseas and potentially working through partners. The report provides important advice on trustee responsibilities in financial management and the supervision of overseas activities, and the importance of charities having effective governance where all trustees are aware of their responsibilities in terms of setting polices, decision making, and ensuring the charity is run in line with its governing document and general law.”
4) Draft receipting kit for Canadian charities that issue receipts along with CRA receipting policies
The Charity Law Information Program (CLIP) will be putting together a 25 page receipting kit which will explain the most important information that a registered charity needs to understand about receipting. In addition it will have a 120 reference tool with all the CRA policies on receipting. If you wish to review a draft and provide feedback you can see the draft on our website.
5) Budget 2011 and new “ineligible individual” category: How this can affect your charity
Here is my article Budget 2011 and new “ineligible individual” category: How this can affect your Canadian registered charity.
6) Statistics on the Canadian charitable sector from the Canada Revenue Agency, Charities Directorate
The Charities Directorate has recently released statistical information obtained from the T3010 Registered Charity Information Return. It paints an interesting portrait of the Canadian charitable sector.
7) Blumbergs Charity Checklist
What is new is not always most important. Here is a charity checklist that may be helpful for boards to keep on top of the most important compliance issues. It has been recently updated and is available in PDF.
8) Canadians donated $70 million to East Africa famine relief
According to the Globe and Mail “Canadians contributed $70-million to East Africa famine relief, a figure that will be matched by the Harper government. This brings the total government response to $142-million – $70-million in matching funds and $72.35-million that was provided earlier for humanitarian efforts in Djibouti, Ethiopia, Kenya and Somalia, where more than 13 million people are affected by a devastating drought.” The matching funds are provided to Canadian charities that have the best plans and experience to operate in the region, not necessarily the organization that raised the most funds.
9) Canadian government announces “Projects under the Muskoka Initiative Partnership Program”
On September 20, 2011 Prime Stephen Harper announced a list of projects that will receive funding under the Muskoka Initiative Partnership Program.
10) Canadian charities spending on foreign activities rises by 16% in 2009 from 2008
In 2009, according to the CRA and its T3010 data, Canadian charities spent $2.9 billion outside of Canada.
11) 10 Steps to Foreign Contractors carrying out work for Canadian charities - a simplified view
Here is a brief note entitled Foreign Contractors of Canadian Registered Charities Carrying out the Canadian Charity’s Projects – A Very Simplified View of the Process.
12) Why does Brad Pitt give to charity?
Here is a short note quoting Brad Pitt on why he gives to charity. It is quite interesting.
13) Which Universities Outside of Canada are qualified donees and “prescribed universities”?
Here is a note on “Which Universities Outside of Canada are prescribed universities under Schedule VIII of the Income Tax Act (Canada) and therefore qualified donees?” This list is difficult to find on the Federal government website.
14) New qualified donee “The Rhodes Trust – Public Purposes Fund” added to IC84-3R
The Canada Revenue Agency (CRA) has updated “Attachment to IC84-3R, Gifts to Certain Charitable Organizations Outside Canada” to add The Rhodes Trust – Public Purposes Fund based in the UK. This is effective as of December 15, 2010.
COMPLIANCE AND ABUSE
15) Globe and Mail article “Lawyers targeted over charity tax schemes”
The Globe and Mail published an article “Lawyers targeted over charity tax schemes” dealing with a number of class-action lawsuits against Canadian law firms over legal opinions.
16) “A crazy tale of tax fraud” article in Financial Post by Jamie Golombek
Here is an interesting article by Jamie Golombek entitled “A crazy tale of tax fraud”. Unfortunately these types of unsophisticated schemes cost hundreds of millions of taxpayer dollars. They are referred to as receipting fraud.
17) Dangerous Opinions – Legal and Ethical Issues with Legal Opinions on Charity Law and the ITA
Here is an archived webinar that was originally recorded on March 23, 2011 entitled “Dangerous Opinions – Legal and Ethical Issues with Legal Opinions on Charity Law and the Income Tax Act” with David Thompson from Scarfone Hawkins LLP. Mr. Thompson is a class action lawyer who has launched the Banyan Tree Foundation lawsuit and more recently the class action in the case of Redeemer University and its forgivable loan program.
18) Chronicle of Philanthropy deals with valuation of drugs for development and misuse of valuation
The Chronicle of Philanthropy has published a lengthy article by Caroline Preston entitled “Multiple Methods of Valuing Drugs Create an Unclear Picture of Aid Totals”. It covers a number of important issues for both Canadian and US charities who either receive pharmaceutical donations or who purchase pharmaceuticals to use in developing nations.
19) Class Action against Redeemer University College for Forgivable Loan Program
In March 2011 a $6 million dollar claim was launched against Redeemer Foundation and Redeemer University College in relation to their “Forgivable Loan Program”. CRA disallowed certain years of the program. We have covered the Redeemer University on this blog in its unsuccessful fight against CRA that went all the way to the Supreme Court. By my count this is the 5th class action lawsuit against a Canadian charity for issuing allegedly inappropriate official donation receipts. None of the allegations have yet been proven in court.
20) More Third Party Penalties upcoming against individuals and Canadian charities
I requested from CRA information about the status of Third Party Penalties (TPP). Some Third Party Penalties are applied to individuals (who are involved with charities) and some to the registered charity itself.
21) The Valuation Law Review - Vol 17 Issue 2 September 2011 Taxation Decisions - Marechaux, Lemberg etc
Here is a copy of The Valuation Law Review - Vol 17 Issue 2 September 2011 Taxation Decisions. It is published by The Canadian Institute of Chartered Business Valuators (CICBV). In this edition it discusses various cases including Marechaux, Lemberg, Lockie, Innovative Gifting and Russell and we have been able to reproduce the whole journal with the permission of the CICBV. The editor is Dennis Turnbull, CBV.
22) F. Max E. Maréchaux v. Her Majesty the Queen - court documents shed light on case
As noted on this blog in June of this year the Supreme Court of Canada denied leave to appeal in the case of F. Max E. Maréchaux v. Her Majesty the Queen. It is an important case dealing with what CRA terms “abusive charity gifting tax schemes”.
23) CRA nixes private share donation transaction and revokes 4 charities involved
Here are letters from the CRA on a private share donation transaction in which CRA revoked the status of the 4 registered charities involved.
WHAT’S NEW WITH CRA
24) CRA announces 2011 Charities Information Sessions
The CRA has announced the date and time of the 2011 Charities Information Sessions that CRA is offering.
25) CRA updates note on qualified donees under the Income Tax Act (Canada)
Here is a CRA note on what is a qualified donee. If you are involved with governance or management of a charity it is important to understand what is a qualified donee because registered charities can make gifts to qualified donees but registered charities cannot make gifts to “non-qualified donees”. If a registered charity makes a gift to a non-qualified donee it could faces penalties and revocation.
26) CRA updates note on what is confidential versus public information for registered charities
The Charities Directorate on August 15, 2011 put out a note CG-008 - Confidentiality – Public Information Guidance which discusses the circumstances in which the CRA can divulge information about a charity. What most people don’t realize is that the confidentiality provisions of the Income Tax Act (s. 241) preclude CRA from disclosing almost anything about a charity other than the application and T3010 public filings until after such charity has been revoked. So for example in the extreme case if a charity is involved with a $500 million dollar fraud CRA is forbidden to say anything until after revocation which could be years afterwards. There are only a small number of charities doing really bad things and I personally believe that the public has a right to know more about these few charities. The interesting thing is that the situation is even worse with non-profits that are not
registered charities who we can find out almost no publicly accessible information. So here is the CRA note on the charity confidentiality provisions and at the bottom is a Pre-Budget Submission from our law firm to the House of Commons Standing Committee on Finance dealing with the issue of transparency.
27) CRA provides guidance on donation of Gift Certificates or Gift Cards to Canadian charities
The CRA has just issued a revised guidance on “Donation of Gift Certificates or Gift Cards Guidance”. This guidance replaces Policy Statement CPS-018, Donations of Gift Certificates. Gift certificates and gift cards are frequently donated to charities but can the charity issue a tax receipt? Well it depends.
28) CRA Guidance “Promotion of Animal Welfare and Charitable Registration” for Canadian Charities
The CRA on August 22, 2011 published their Guidance CG-011, Promotion of Animal Welfare and Charitable Registration. CRA had completed and public consultation and here is the revised guidance.
29) Legislative Proposals Relating to the ITA released August 16, 2011
The Dept. of Finance has released some Legislative Proposals Relating to the ITA on August 16, 2011. These proposals deal with implementing the June 2011 budget proposals which include a number of proposals to prevent abuse of charities and RCAAAs.
30) CRA letter on whether cooperative is tax exempt under 149(1)(l) of the Act
Here is a CRA letter on whether a particular cooperative in Canada is tax exempt under s.149(1)(l) of the Act
31) CRA Charities Connection No. 8 - receipting, East Africa Drought Relief Fund and PM volunteer awards
The Charities Directorate of CRA has just put Charities Connection No. 8. It discusses receipting, the East Africa Drought Relief Fund and the PM’s volunteer awards.
32) Charities Directorate service standards for telephone inquiries and charity applications
Here is a short note from the Charities Directorate on their service standards for telephone inquiries and charity applications.
33) Canada’s Voluntary Sector and Public Policy by Max Bell Foundation - interesting discussion
Here is a very interesting document from the Max Bell Foundation which outlines some of the difficulties and opportunities for Canadian charities and NGOs to engage in more meaningful and effective public policy discussions.
I will be delivering a number of seminars across Canada as noted above as part of the CLIP Project in Calgary, Edmonton, Hamilton, Peterborough, Ottawa, Waterloo, London and Mississauga/Toronto For further details see http://ow.ly/6xnJu
I will also be delivering workshops for the Institute of Chartered Accountants of Ontario as well as the Institute of Chartered Accountants of Alberta.
I will be presenting at the Pillar Nonprofit Network and Foundation Western Foundation Investment Forum 2011. Here is a copy of the agenda.
Here is an upcoming Webinar: “The role of the Not-for-Profit Board Treasurer” with CICA, PWC and the HR Council that I will be delivering along with James Temple and Sara Oates.
I delivered CLIP seminars in Saskatoon, Regina and Toronto.
I delivered a workshop on capacity building in the Canadian non-profit sector at CIVICUS World Assembly in Montreal.
I presented at the Philanthropic Foundations Canada conference in Toronto on “The End of Lone Ranger Philanthropy?” along with 2 other presenters on collaboration within the charity sector.
I attended the AFP leadership retreat in Saskatoon in August.
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 I am up to 1037 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
Barristers & Solicitors
390 Bay Street, Suite 1202
Toronto, Ontario, M5H2Y2
Tel. (416) 361-1982 ext. 237
Toll Free 1-866-961-1982
Fax. (416) 363-8451
You can follow me on Twitter at: http://twitter.com/canadiancharity