Canadian Charity Law List
November 2012

UPCOMIMG PRESENTATIONS

Blumbergs’ Canadian Charity Law Institute – one practical program on charity law and compliance in Toronto you don’t want to miss
On November 28, 2012 we will be having the Blumbergs’ Canadian Charity Law Institute in Toronto. It will be a full day of practical legal and ethical compliance information geared toward charities, professional advisors and those interested in regulatory issues affecting charities.  www.globalphilanthropy.ca

On November 28, 2012 we will be having the Blumbergs Canadian Charity Law Institute in Toronto.  Only a few more days to register. It will be a full day of practical legal and ethical compliance information geared toward charities, professional advisors and those interested in regulatory issues affecting charities. We are delighted to have over 120 registrants so far for the program.

Over the last week the Salvation Army has told the media that they have fired one employee in Ottawa for allegedly stealing funds and an employee in Toronto for allegedly stealing over $2 million in toys.  The stories illustrate the importance of internal financial controls.  Apparently the Salvation Army had upgraded their internal controls after a large fraud a few years ago.  The Salvation Army quite notably went straight to the media when they learned of the problem.  That is very commendable.  Many charities prefer to ignore or hide situations of material diversion of assets and it is welcome that the Salvation Army acknowledged the problem and swiftly took action.  Hopefully something positive will come out of this difficult situation.  Perhaps there will be greater awareness for the need to have financial controls in charities.  Hopefully also this story will not result in reduced donations to charities during this important time of year.

Here is a recent press release from CRA. They went after a tax preparer for issuing some false donation receipts.

The Parliamentary Budget Office has recently released a report entitled “Federal Cost Estimate of Bill C-399: Volunteer Tax Credit”.  It is written by Stephen Tapp of the PBO and deals with a private members bill.  The discussion in the PBO report is interesting.

Financed announced today a detailed Notice of Ways and Means Motion to implement certain outstanding technical amendments to the Income Tax Act.  A number of them relate to charities in Canada and donations to Canadian charities.  For example the split receipting rules, deemed fair market value rules, and rules to prevent artificial transactions.  The press release advises “The last comprehensive package of technical income tax legislation was passed by Parliament in 2001. This has led to a significant backlog of outstanding measures,” said Minister Flaherty. “Today’s Notice of Ways and Means Motion will begin the process of addressing the backlog.””

The Canada Revenue Agency has changed some of their procedures to deal with gifting tax shelter schemes.  They state in a recent press release “All gifting tax shelter schemes are audited and the CRA has not found any that comply with Canadian tax laws.” CRA reminds people “This is the time of year when promoters are heavily marketing their tax schemes to Canadians. For this reason, the CRA is reminding Canadians that if it seems too good to be true, it probably is. If a tax shelter promoter offers a tax receipt for a larger amount than the donation or payment, it is very likely not a valid donation.”  CRA states that “Starting with the 2012 tax year, the CRA will put on hold the assessment of returns for individuals where a taxpayer is claiming a credit by participating in a gifting tax shelter scheme. This will avoid the issuance of invalid refunds and discourage participation in these abusive schemes. Assessments and refunds will not proceed until the completion of the audit of the tax shelter, which may take up to two years.”

The Vancouver Sun published a story today entitled “Rick Hansen ‘donated’ rights to his name to his foundation, received $1.8-million tax receipt: Canada Revenue Agency says the 2009 donation does not qualify as a gift and the foundation must cancel the receipt”.

Here are a number of recent letters from the CRA to registered charities that were revoked by CRA for cause: Physicians for Global Survival (Canada), Canadian Burn Foundation, Jaamiah Al Uloom Al Islamivvah Ontario and Childhood Asthma Foundation.

On June 28, 2012, in Barrie, Ontario, a fundraiser named Adam Gour was convicted by McIsaac, J. of fraud for failing to disclose commissions to donors and deceiving donors.  The decision may be appealed.  The Gour case is important because it shows the effective use of criminal law in regulating inappropriate activities involving charities or fundraisers. Also it highlights the importance of charities being transparent about fundraising solicitations. 

The Charities Directorate of the CRA has revoked the registration of The Latitude Foundation as a registered charity.  According to CRA “The Canada Revenue Agency’s (CRA) audit has revealed that the Organization failed to devote its resources exclusively to its own charitable activities by participating in a promoted donation arrangement involving a university prescribed in Schedule VIII of the Income Tax Regulations – the University of the West Indies, Mona Campus. As a direct result, the Organization issued donation receipts exceeding $15.4 million for cash, substantially all of which was used to purchase life insurance policies with proceeds benefitting persons related to the Organization’s directors.

According to CRA “The Canada Revenue Agency’s (CRA) audit has revealed that the Organization failed to devote its resources exclusively to its own charitable activities by participating in a promoted donation arrangement in 2008. As a direct result, the Organization issued donation receipts exceeding $9 million for cash and shares purportedly traded on the Frankfurt Stock Exchange. Of the $1 million the Organization received in cash, it paid fundraising fees equivalent to 90% of the cash received to the donation arrangement promoter, Innovative Gifting Inc.

The CRA revoked the Universal Community Help as the “audit has revealed that the Organization is not complying with the requirements set out in the Income Tax Act. In particular, it was found that the Organization failed to maintain adequate books and records…did not maintain duplicate copies of all the donation receipts it issued and we were unable to quantify the amount of the receipts issued.

Here is a Charities Directorate reminder to Canadian Mennonite Publishing Service dated July 23, 2012 about political activities.  Canadian Mennonite has been complaining that CRA is trying to create a chill on charity political activities.

Bloomberg News has done a story on how a PR firm has been using charities to promote the interests of various clients and whether this violates certain US Internal Revenue Service (IRS) rules.

Some interesting comments from John Pecman, Interim Commissioner of Competition at the Canadian Competition Bureau.  They deal with non-profits and the importance of compliance and avoiding anti-competitive behaviour.

Here is a guidance from CRA entitled “Qualified donees – Consequences of returning donated property CG-016”.  It points out that this CRA Guidance is dealing with tax issues and “These provisions do not address whether a transfer of property to a qualified donee was a gift at law, nor do they confirm whether a qualified donee can legally return a gift. Before returning donated property, qualified donees should determine if other provincial or federal legislation may affect their ability to legally return donated property.” 

Andy Levy-Ajzenkopf has written an article in Charity Village on a recent private members bill that proposes extending the deadline for donations to end of February for Canadian who donate to registered charities.  The end of December deadline would become meaningless from a tax point of view.  It also includes a rather innocuous proposal for a National Charities Week at the end of February.

The Toronto Sun has written a followup article on the involvement of the mayor of London, Ontario in a type of tax shelter that CRA refers to as an “abusive charity gifting tax shelter.”  The Toronto Sun notes “As choppy political waters rock London mayor Joe Fontana locally, a charity he heads said it’s cutting ties with a tax shelter criticized by Canada Revenue Agency (CRA).”