Canadian Charity Law

Although the CRA has little guidance on internal controls, they are increasingly focusing on internal controls, or the lack thereof, in charities.  Internal controls are "a procedure or policy put in place by management to safeguard assets, promote accountability, increase efficiency, and stop fraudulent behavior."  A simple example is having two people sign cheques or having two people count cash.  I am hoping that one day CRA will provide greater guidance on their expectations surrounding internal controls but for now here are some thoughts and suggestions.  

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CRA recently released a letter that discusses whether a transfer of property by a corporation to its shareholder that is a private foundation is a gift for purposes of section 38(a.1) of the Income Tax Act (Canada) such that the taxable capital gain from the transfer would be zero.

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The Canada Revenue Agency recently released its views on when the adjusted cost base of a life insurance policy may be used to determine the cost of a life insurance policy when a life insurance policy is gifted to a qualified donee. 

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An interesting new report from The Australian Charities and Not-for-profits Commission (ACNC) as well as the Australian Transactions Reports and Analysis Centre (AUSTRAC) published on August 28, 2017 looked at "the risk of money laundering and terrorism financing in the not-for-profit sector, key vulnerabilities and risk indicators of high-risk organisations, groups of high-risk organisations that will benefit from targeted outreach and support, vulnerabilities that could be exploited to support terrorism, and a strategy to counter these vulnerabilities".

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Here is Blumbergs' comments on the Ontario Government Proposal to Allow Compensation of Directors of Charities Without Court Order that were submitted to the Ministry of the Attorney General today. 

Here is information on the position.

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CRA has been encouraging charities to file their T3010 and now they are trying something new - automated phone calls.     

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CRA has recently announced that starting in late 2018, registered charities will be able to file their annual Form T3010, Registered Charity Information Return online through the Canada Revenue Agency’s My Business Account (MyBA). Currently the T3010 form must be printed and then mailed into CRA, so we hope that the online filing option will make the annual filing process easier for Canadian registered charities.   

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We were recently informed by the CRA Charities Directorate that the generic CRA email address previously provided for certain communications with CRA is no longer available. Regular communications with CRA should continue being completed through mail, courier or fax. Our previous blog on this issue is provided below: 

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CRA has recently released two new videos as part of their Gifting and Receipting video series. These vidoes are as follows: Auctions: when you can issue donation receipts and Auctions: advantage and 80% rule.  

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We have just released our updated Blumbergs' Receipting Kit 2017. The Blumbergs' Receipting Kit 2017 is for Canadian registered charities and other qualified donees who wish to issue official donation receipts under the Income Tax Act (Canada), which are sometimes referred to as "tax receipts".  It has a general description of how receipting should be conducted and then copies of documents and resources from the CRA and elsewhere that relate to receipting.

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You can subscribe to the Blumbergs' Charity Law List here.  It is a great way for directors and staff of non-profits and charities to keep on top of developments affecting the non-profit and charity sector.   

Here is a recent Charity Village article by Andy Levy-Ajzenkopf entitled Setting a new tone: The newly released report on the political activities of charities.  The article discusses The Report of the Consultation Panel on the Political Activities of Charities and we have discussed that report and charities and political activities in general in certain earlier blogs such as here. 

The Canadian Charity Law Association is delivering some upcoming webinars.  Registration is free but space is limited. 

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The New York Times recently had an article Canada Debates Whether Gift of Leibovitz Photos Is Also a Tax Dodge which discusses a donation of photographs taken by Annie Leibovitz.  There was also coverage in the CBC, another CBC and Toronto Star.   The story is fascinating as it involves celebrities, tax incentives, valuation, and cultural property all in one.    

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Global News recently had coverage entitled "Government revokes group’s charity status, audit cites possible funding of Pakistani militants" which discusses two recent revocations of Canadian charities.

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The Ontario Government is looking at adding a regulation to the Charities Accounting Act that would allow in certain circumstances compensation for directors without specific legislation or court order.  "The regulation would authorize incorporated charities to pay their directors and persons related to them, for goods, services, or facilities, without obtaining a court order, provided specific conditions are met."   I have some concerns with the proposal and will blog in the future about that.  The proposal was posted on July 10, 2017 and comments are due by August 29, 2017.

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The Canada Not-for-profit Corporations Act (“CNCA”) permits a not-for-profit corporation that is incorporated under another act (such as a provincial non-profit act) to continue (import) to the CNCA provided that the other act permits the continuance. This allows a not-for-profit corporation to effectively re-incorporate under the CNCA and be governed by it as though it was incorporated under it. The The Federal government has now made it easier for Ontario corporations to move to Federal jurisdiction by pre-approving Ontario and no longer requiring a legal opinion that the transfer can take place for Ontario corporations.  This will be helpful for some of the 50,000 Ontario corporations who may wish to skip ONCA and move directly to the CNCA. 

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The Canada Revenue Agency's website, which includes the Charities Directorate, will apparently be moving to the new www.canada.ca domain on July 11, 2017.  The old CRA pages will remain up during the interim period of the move.   Hopefully those visitors who go to pages on the old website will be automatically redirected to the new website.

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The Globe and Mail published an article titled "Canadian cancer charities merge amid crowded donation field" which discusses the recent merger between Colorectal Cancer Association of Canada and Colon Cancer Canada.  Although this has been compared to the recent merger of the Canadian Cancer Society and the Canadian Breast Cancer Foundation, the scale of this merger is much smaller. 

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Corporations Canada has service standards for the Canada Not-for-profit Corporations Act ("CNCA").   For example, an online incorporation is 90% of the time done either the day of filing or the next day.   Other incorporations are handled within 5 days 97% of the time.  Even amendments, revivals and continuances are only taking 5 days or less.  

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There were supposed to be 2 important changes taking place on July 1, 2017 with Canada’s anti-spam legislation (CASL).

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Corporations Canada of Innovation, Science and Economic Development Canada has been dissolving non-profit corporations that are under the Canada Corporations Act (CCA) but have not continued to the new Canada Not-for-profit Corporations Act ("CNCA").  Corporations Canada has advised me that as of June 13, 2017 there are only 304 remaining CCA non-profit corporations and that they are still processing some transitions.  

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The CRA sent out an email to certain stakeholders on June 20, 2017 announcing that they will no longer be accepting charity applications with draft governing documents.  We will discuss the impact below. For those wanting charity status, you will need to at least establish the organization ie. incorporate the corporation, establish the trust etc. if you want CRA to review your charity application. Practically, since December of 2014, we have not used draft applications and we have discouraged others from using them because of changes to the process which made them less useful.

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The Canadian Charity Law Association (CCLA) is pleased to present: Charities, Regulation and Donors - some international perspectives on June 22, 2017 at 8:30AM in Toronto.  The 1/2 day program will cover 4 thought provoking topics (see bios below) and have two excellent international guests.  The room can only hold 33 people so if you are interested book quickly.

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