Blumbergs Canadian Charity Law List - September 2010

September 08, 2010 | By: .(JavaScript must be enabled to view this email address) Mark Blumberg
Topics: News, What's New from the Charities Directorate of CRA, Canadian Charity Law, Global Giving, Global Affairs Canada (GAC) formerly CIDA, Avoiding 'Charity' Scams

Here is my “Blumbergs Canadian Charity Law List - September 2010”.  You can add yourself to our newsletter at: http://www.globalphilanthropy.ca/index.php/pages/subscribe/

1) Upcoming Charity Law Seminars across Canada with Mark Blumberg or CLIP



Here are some of the upcoming charity law seminars I will be presenting across Canada through the Charity Law Information Program. The seminars will cover top legal issues, fundraising regulation and appropriate/innappropriate receipting practices.  A full day session is only $40 - great value for charities, their staff and members of the board of directors who want to understand compliance obligations.





2) Bill C-470 Canadian salary cap for registered charities - simply the wrong approach

A bill to impose a salary cap on Canadian registered charities has passed 2nd reading and will shortly be reviewed by the Finance Committee of the House of Commons.  As they say, there is usually one simple solution to a complex problem that is totally wrong.  To have a single cap for all Canadian charities means that Canadian hospitals, research institutions, and universities will not even have a chance of being able to compete with other similar institutions around the world.  While it may sound appealing to cap salaries at $250,000, it is actually a very problematic piece of legislation when you drill down to the details.  Recruiting certain types of talent that is in short supply is not about what charities want to pay - every charity would ideally want everything for free.  Charities need to be able to recruit people to accomplish their mission.  Charities should never pay more than they need to.  They should never pay more than fair market compensation.  But you cannot just put a one-size fits all number on what it is.  When there are only a few neurosurgeons you cannot pay what you want - you need to pay something related to the going rate for neurosurgeons or be prepared to do without them.  If you are a small community in the North and you want to have a specialist in your community, you may have to pay that person more than what a comparable hospital in Toronto or Chicago would pay.  This note discusses many concerns with this proposed legislation.



3) CBA Submission on Bill C-470

Here is a copy of a submission from the Canadian Bar Association on Bill C-470 in English and French.



4) NEW T3010B Registered Charity Information Return RELEASED

With the recent changes in the 2010 Federal budget including the elimination of the 80/20 expenditure rule it became necessary for CRA to revise the T3010 Registered Charity Information Return. 



5) Finance publishes Legislative Proposals Notice of Ways and Means Motions

The Department of Finance Canada has published “Legislative Proposals Notice of Ways and Means Motions” and “Explanatory Notes”.  Many readers will find the explanatory notes helpful in understanding the meaning behind these changes.  These proposals try to incorporate many changes that have been previously announced over the last 8 or so years but have not made it into the Income Tax Act.  They include changes dealing with ecological gifts, the definitions of charitable organizations/public foundation/private foundation, limited-recourse debt with gifts, provisions on gifting to a non-qualified donee, split receipting, deemed fair market value, greater disclosure and transparency about RCAAAs, including in the definition of qualified donee a “public body performing a function of government in Canada” and inter-charity transfers.  While it will be good to have these changes properly included in the Income Tax Act and not just “proposed” it will make little difference to most charities because, unlike other pieces of proposed legislation, budgetary items are treated as law when announced and CRA has been operating on that basis.



6) Revised Canadian Charity Law Checklist by Mark Blumberg

Is your charity keeping up with the most important legal compliance obligations?  Here is a revised version of the Canadian Charity Law Checklist by Mark Blumberg. 



7) Application of the GST/HST to Canadian Registered Charities- Questions and answers from CRA

HST implementation in Ontario and BC has been causing concerns for many.  Here are some questions and answers from the CRA relating to the Application of the GST/HST to Canadian Registered Charities.



8) Kootenay Doukhobor Historical Society v. The Queen - employee vs. independent contractor

The Kootenay Doukhobor Historical Society v. The Queen case illustrates quite well that even if a non-profit and a staff person agree that the staff person is an independent contractor, there is an independent contractor agreement, and the staff person has considerable latitude in carrying out the tasks, the staff person can be found to be an employee. It is vital that non-profits and charities properly categorize staff. Failure to consider someone an employee when they really are an employee, and failure to deduct and remit EI, CPP and income tax amounts, can result in considerable liability for a non-profit or charity. As well, directors of the non-profit or charity can be on the hook for the outstanding amount and this is probably the most common reason that the directors of a non-profit or charity would ever have personal liability.



9) CRA 2010 Charities Information Sessions now allowing registration

Here is a list of CRA 2010 Charities Information Sessions http://www.cra-arc.gc.ca/chrts-gvng/chrts/cmmnctn/sssns/nvttn-eng.html



10) Canadian Fundraising & Philanthropy article on GlobalPhilanthropy.ca (TM)

There was an article this week by Janet Gadeski, Editor of Canadian Fundraising & Philanthropy talking about GlobalPhilanthropy.ca (TM), its roots and mission.  http://www.canadianfundraiser.com/newsletter/article.asp?ArticleID=3409&ClientID=1



Pakistan Flooding and CIDA


11) CIDA Announces Pakistan Flood Relief matching program

CIDA has announced that it will have a matching fund for donations raised by Canadian charities for the Pakistan relief from August 2 to September 12.  The Pakistan Floods Relief Fund will not be given to each charity that raised funds but instead there will be an application process in which charities can apply for the funds and they will have to demonstrate that they have the capacity to do the work effectively.  This is similar to the Haiti earthquake fund a few months ago.



12) CRA provides information on Pakistani disaster relief for Canadian charities and donors

Here is a link to CRA’s new page “Floods in Pakistan” http://www.cra-arc.gc.ca/whtsnw/tms/pkstn-fldng-eng.html  It also has links to CIDA’s matching program.



13) Pakistan flooding - be careful of which disaster appeal you respond to

Donors should be careful in a disaster as to which organization they donate to.



14) CIDA presentation and material on Partnership with Canadians Branch (PWCB)- August 2010

Here is a copy of a CIDA presentation and material on changes to the Partnership with Canadians Branch, formerly called Partnership Branch.



15) Minister Oda announces next step to CIDA’s Aid Effectiveness

Here is a press release in which CIDA Minister Bev Oda announces further steps to achieve aid effectiveness. http://www.acdi-cida.gc.ca/acdi-cida/ACDI-CIDA.nsf/eng/CEC-722111726-KXG  There is also a backgrounder.  This document is a must read for any organization receiving CIDA funds or hoping to one day.  There is a lot in this document and it will be interesting to see if practically this makes any real difference at CIDA.


Abusive Tax Schemes and Fraud involving charities


16) Abusive Charity Gifting Schemes in Canada suffer decline in value and numbers in 2009

It is good to see that in 2009 the problem of abusive charity gifting tax shelters has been further reduced.  Here are the statistics from CRA.



17) Tax preparer in Ontario guilty of charity tax fraud scheme

The CRA is cracking down on tax preparers and others who issue false charitable donation receipts.



18) Nantel, M. et al. v. The Queen -English translation of case - valuation of art donated to charity

The Tax Court of Canada case Nantel, M. et al. v. The Queen provides an interesting discussion of valuation of art.  The court dismissed the taxpayers appeals and sided with the Canada Revenue Agency.



19) Christopher Paterson v. MNR - person loses right to EFILE after filing inflated donation receipts

The case involves the CRA denial of EFILING privileges to Mr. Christopher Paterson, an individual who prepares clients’ returns, because he assisted them with a “scheme” in which he “accepted money from taxpayers who wished to “donate” to these charitable organizations in exchange for an “enhanced receipt” for tax purposes (the scheme). The receipt provided to the taxpayer would reflect a much larger sum of money than was actually paid and would then be used in the preparation of the client’s tax return to provide the client with sizeable deductions from their taxable income.”  Mr. Paterson had objected to the CRA determination and the Federal Court upheld the CRA decision.  The CRA Chief of Appeals had noted “[The applicant’s] conduct was disreputable in nature because of [his] involvement in selling charitable donation receipts to [his] clients for gain. Further, [he] knowingly prepared returns using these donations receipts from which there were no actual contributions to the registered charities. As a result, [the CRA] find[s] that [his] conduct in this matter does not reflect positively on the integrity of the EFILE program…”  The court noted “While the applicant may not have had any reason to question the authenticity of the receipts his clients were being supplied, he most definitely knew that the amounts paid by his clients were not equal to the amounts they were given credit for when he was completing their income tax returns. There was evidently some sort of wilful blindness on the part of the applicant. The mere fact that the applicant did not believe this to be fraudulent does not detract from his admission that he participated in a scheme whereby taxpayers were making claims for the deduction of sums of money they never paid to these charitable organizations. As it is often said, ignorance of the law is no excuse.”



20) CRA adds various pages on revoking registrations of Canadian registered charities

The Charities Directorate of CRA has added a number of new pages dealing with revoking registrations of Canadian registered charities.  These pages will help a charity that is either proposed to be revoked or has been revoked understand its rights and obligations.  Here is What’s New http://www.cra-arc.gc.ca/chrts-gvng/chrts/whtsnw/menu-eng.html and here is the section on revocation: http://www.cra-arc.gc.ca/chrts-gvng/chrts/rvkng/menu-eng.html



21) Canada Revenue Agency deregistering or revoking record number of questionable Canadian charities

Here is a list with the 2008, 2009 and 2010 major deregistrations along with a link to the CRA press release and scanned copies of the actual letters sent by CRA to the charities outlining their reasons for revoking or annulling their charitable status.



22) Macleans article “An artful scheme” on use of cultural property as part of tax shelter scheme

Chris Sorensen of Macleans just wrote a piece entitled “An artful scheme: One firm’s pitch to help people use a tax shelter by buying and then donating old photos is raising eyebrows in the art world and words of caution from experts”.  It discusses a scheme called VIA (Vintage Iconic Archives) Project.



23) Innovative Gifting Inc. v. House of the Good Shepherd et al - be careful who “fundraises” for you

There was recently an interesting case “Innovative Gifting Inc. v. House of the Good Shepherd” that involved charities.  This was not a case involving the Federal Court of Appeal or Tax Court - the usual places charity law issues are dealt with.  This case was in the regular Ontario court system - some “fundraisers” called Innovative Gifting were trying to enforce an agreement they had with a number of Canadian charities.  The long and the short of it: the court would not enforce the agreements as the court found the agreements to be void or voidable because they were counter to public policy and the agreements were “vague, uncertain and filled with inherent inconsistencies”.



24) CBC article “Charity tax scheme resurfaces in Edmonton”

Just goes to show that no matter how many front charities the Charities Directorate shuts down there will always be gullible individuals ready to believe any business that says one can put down $1,000 and get a $5,000 donation receipt.  As one of the comments to this CBC article noted, it is interesting to note that these purveyors of tax shelters held their marketing session at the Fantasyland Hotel.  Such irony is priceless.
http://www.cbc.ca/canada/edmonton/story/2010/07/20/charity-tax-scheme-fast-edmonton.html#socialcomments  Do yourself and the “aids orphans in Africa” a favour and donate to real charities!



What’s New from CRA


25) CRA letter on Canadian unincorporated associations and who should pay tax if no longer exempt

Here is a CRA letter on Canadian unincorporated associations and who should pay tax if no longer meeting requirements for tax exemption.



26) CRA letter on whether Indian band is a public body performing a function of government and tax exempt

One of the categories of qualified donees under proposed legislation is municipal or public bodies performing a function of government in Canada.  Here is a CRA letter on whether an Indian band is a public body performing a function of government as is used in paragraph 149(1)(c) of the Income Tax Act?  It also discusses whether a subsidiary is tax exempt.



27) Canadian registered charity revoked for support of terrorism

According to a press release from the CRA, a Canadian registered charity has had its status revoked for being part of a support network for a listed terrorist organization.



Foreign Activities


28) Canadian Charities that Operate Abroad listed by Country and Region based on 2008 T3010 information

This document contains a list of countries and regions in which Canadian charities are conducting foreign activities.  The information comes from the 2008 T3010 Registered Charity Information Return and specifically Question C5:  “For programs the charity managed directly, outside of Canada, list the countries or regions where programs were carried on. Do not include countries or regions where programs were managed by a qualified donee.”  Here is the list of Canadian Charities that Operate Abroad listed by Country and Region based on 2008 T3010 information.



29) Philanthropic Foundations Canada - program Global Giving - Possibilities and Pitfalls

I will be one of the presenters at an upcoming PFC program called Global Giving - Possibilities and Pitfalls.



30) CRA’s new Guidance on foreign activities by Canadian charities

CRA has recently released a new guidance called “Canadian Registered Charities Carrying out Activities Outside Canada”.  http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cgd/tsd-cnd-eng.html   Although the name suggests “foreign activities” this document deals with a lot more than foreign activities.  It covers the relationship between a Canadian charity and any non-qualified donee, whether in Canada or abroad.  If a Canadian charity has dealing with, for example, a non-profit that does not have charitable status then the same rules apply as to a Canadian charity dealing with a foreign entity.  Essentially, almost all organizations outside of Canada are non-qualified donees.  If you are going to transfer resources to them you need to maintain “direction and control” over those resources.  This document helps a Canadian charity understand what is required for direction and control. Failure to maintain direction and control can result in a 105% penalty of the amount transferred and/or revocation of charitable status.



31) Advocacy and Political Activities for Canadian International Development Charities

Here is a copy of my presentation to the Ontario Council For International Cooperation (OCIC) on “Advocacy and Political Activities for Canadian International Development Charities: Some Legal and Ethical Perspectives”.


Philanthropy



32) Mark Blumberg on Global TV discussing how to decide if a Canadian charity is worthy of support

Here is the segment (2.5 minutes) with Sean O’Shea, a consumer reporter for Global TV on how to decide if a Canadian charity is worthy of support.  http://www.globaltoronto.com/Video+Donor+beware/3378491/story.html 



33) 10 Principles of Good Practice for the Intelligent Funder - from SCVO and CIVICUS

Here is an interesting guide for those involved with funding NGOs around the world.  Don’t be put off by the title -  you may still be intelligent even if you don’t follow all the principles! 



34) Charitable Donations and Gifts - Giving Wisely by Revenue Quebec and CRA

It is good to see more Federal and provincial cooperation in the charity area.  Here is a pamphlet jointly put out by Revenue Quebec and CRA entitled Charitable Donations and Gifts - Giving Wisely by Revenue Quebec and CRA.  It will be useful for donors.



35) N.Y. passes new law limiting tax deductions for people earning over $10 million

Here is an article on the Chronicle of Philanthropy about New York State’s new law limiting deductions for donors who earn over $10 million http://philanthropy.com/article/NY-Governor-Signs/123863/   It is thought that other states as well as the Federal government may follow this example.  There are some that argue the more the merrier when it comes to tax incentives for people giving to charity.  However, as New York is seeing, the greater the tax incentives for general charitable giving the greater foregone revenue needed to run basic government services.  This may be a ‘luxury’ that New York State with its budget deficits cannot afford.  Also, while some donors are fixated on tax rates, according to a number of surveys tax barely figures in the equation. Will Canada follow NY’s example?  We will see. 



Notes


Upcoming Events

I will be doing a number of workshops across Canada in the coming months for the Charity Law Information Program.  For more information see: Upcoming Charity Law Seminars across Canada with Mark Blumberg or CLIP

Here is information on some upcoming presentations I am doing with the Certified Management Accountants of Ontario on Top Compliance Issues for Canadian Registered Charities and their Directors in the GTA including Toronto, Mississauga, Markham, in the Kitchener-Waterloo area, in London, and in Ottawa.

I will be doing a number of programs for the Institute of Chartered Accountants of Ontario (ICAO) including on Top Compliance Issues - Registered Charities, Directors, CAs; Charity Fundraising and Receipting Rules and Recent Legal Developments Affecting Registered Charities.
Here are Mark’s programs for the Institute of Chartered Accountants of Ontario in Fall 2010

For those interested in international development you might want to check out the Ontario Council for International Cooperation’s Global Citizens Forum to be held in Toronto October 14-15.  I will be giving a couple presentations.  This event is held every three years and it is a great way to meet those involved with international development. http://www.ocic.on.ca/Page.asp?IdPage=9241&WebAddress=ocic
It is open to the general public.  You might want to also consider becoming a member of OCIC if you are not - it is very good value for those who want to keep up with foreign activities, international development, public engagement and global citizenship.


Past Events

On July 27, 2010 I delivered a presentation on advocacy and political activities for Canadian international development charities.

Also on July 27 I gave a presentation to the IDRF on Top CRA Compliance Issues for Charities.

On August 7, 2010 I made a presentation to the AFP Canadian Leadership Retreat.

I attended the CIVICUS World Assembly in Montreal in August - great event.

I attended a meeting of the Charity Partnership Outreach Program participants in Ottawa on August 25.


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 are on Twitter you might want to follow me at:  http://twitter.com/canadiancharity Surprisingly I now have about 390 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_/

If you would like to retain our law firm for legal services or legal advice with respect to non-profits or charities, please contact me at //';l[1]='a';l[2]='/';l[3]='<';l[4]='|97';l[5]='|99';l[6]='|46';l[7]='|115';l[8]='|103';l[9]='|114';l[10]='|101';l[11]='|98';l[12]='|109';l[13]='|117';l[14]='|108';l[15]='|98';l[16]='|64';l[17]='|107';l[18]='|114';l[19]='|97';l[20]='|109';l[21]='>';l[22]='"';l[23]='|97';l[24]='|99';l[25]='|46';l[26]='|115';l[27]='|103';l[28]='|114';l[29]='|101';l[30]='|98';l[31]='|109';l[32]='|117';l[33]='|108';l[34]='|98';l[35]='|64';l[36]='|107';l[37]='|114';l[38]='|97';l[39]='|109';l[40]=':';l[41]='o';l[42]='t';l[43]='l';l[44]='i';l[45]='a';l[46]='m';l[47]='"';l[48]='=';l[49]='f';l[50]='e';l[51]='r';l[52]='h';l[53]=' ';l[54]='a';l[55]='<'; for (var i = l.length-1; i >= 0; i=i-1){ if (l[i].substring(0, 1) == '|') document.write("&#"+unescape(l[i].substring(1))+";"); else document.write(unescape(l[i]));} //]]> "> or at 416-361-1982.


Mark Blumberg

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Mark Blumberg, B.A., LL.B., LL.M., TEP

Blumberg Segal LLP
Barristers & Solicitors
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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.

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