The 2011 Alberta budget has a section in it warning Albertans about abusive charitable gifting schemes that offer a person tax savings that are greater than the “investment” by the taxpayer. The government is very direct and describes these as “illegal charitable donation “programs” or “tax planning arrangements”.”
Here is the text of the warning from the Alberta Government that appears on page 145.
BUYER BEWARE: CHARITABLE DONATIONS SCHEMES
Albertans have a history of generosity. Over the years, we have supported local, national, and international charitable organizations with donations of time and money. To reflect these values, Alberta enhanced the charitable donations tax credit in 2007, which effectively lowered the aftertax cost of giving. Combined with the federal tax credit, Albertans now receive 50 cents in tax credits for every dollar donated over the $200 threshold. This is the most generous tax treatment for charitable donations in the country.
While the overwhelming majority of charitable donations are well intentioned and directed at legitimate charities, some Albertans are falling victim to illegal charitable donation “programs” or “tax planning arrangements”. They are marketed as a way for donors to get more back as a tax refund than they initially give (e.g., participants receive a charitable donation receipt that is more than double their cash donation).
These programs contravene federal and provincial income tax legislation and participants should be aware that once discovered, the Canada Revenue Agency will disallow the charitable donations
credit and require individuals to pay unpaid taxes, interest, and penalties. This is in addition to the loss of the original donation. In the end, participants are worse off than if they had avoided the
Participating in these schemes can be very risky. Taxpayers would benefit from considering all the risks and seeking independent professional financial and/or legal advice.
If it sounds too good to be true, it probably is.
Here is an article that appeared in the Edmonton Journal: Beware charities offering generous tax refunds, Alberta warns
Do you require legal advice with respect to Canadian or Ontario non-profits or charities?
Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.