Topics: News, What's New from the Charities Directorate of CRA, Canadian Charity Law, Ethics and Canadian Charities, Avoiding 'Charity' Scams
In March 2011 a $6 million dollar claim was launched against Redeemer Foundation and Redeemer University College and 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.
Here is a note from the law firm Scarfone Hawkins:
“REDEEMER UNIVERSITY COLLEGE
CLASS ACTION CLAIM
Overview of Claim
A Statement of Claim was issued in the Ontario Superior Court of Justice in Toronto on March 21, 2011, proposing a class action claim seeking damages relating to a “Forgivable Loan Program” (“FLP”) established by the Redeemer Foundation and Redeemer University College.
The claim seeks damages of $5 million, plus punitive damages.
The action has been commenced under the Class Proceedings Act, 1992, S.O. 1992, c.6, as amended.
The Statement of Claim alleges that Redeemer Foundation established the FLP in approximately 1989, to generate official donation receipts for payment of tuition and related education costs for attending Redeemer University College. The claim alleges that such payment would not otherwise result in a donation tax receipt, but only an eligible education tuition and textbook receipt.
The plaintiff alleges that students attending Redeemer University College were encouraged to solicit “donations” to Redeemer Foundation, which then in turn loaned those “donated” monies to the student who solicited the funds, to pay for part or all of their tuition and related education costs for an academic year. Provided certain nominal conditions were met, the loan was forgiven at the end of the academic year.
Canada Revenue Agency (“CRA”) disallowed the charitable donation tax credits under the FLP, however, CRA eventually extended a settlement offer to allow 10% of amounts contributed to Redeemer Foundation to be recognized and considered valid gifts.
Participants in the FLP paid an additional amount of 10% above tuition and related education costs of an academic year, such additional amount having said to be required to cover administrative costs.
Participants in the FLP became liable to CRA for interest charges and additional taxes on income tax filing reassessments.
In the Statement of Claim, the plaintiff says that he was not advised of any of the following:
•that CRA had previously conducted audits of Redeemer Foundation and Redeemer University College in respect of the FLP in 1997 and 2001;
•that CRA had cautioned the defendants that it would consider disallowing deductions to parents on their individual tax returns; and,
•that CRA was investigating the link between donors and students and was considering disallowance of charitable donation tax credits claimed by parents who participated in the FLP in support of their student children.
The Statement of Claim contains allegations which have yet to be proven in Court.
We are compiling a database of individuals who participated in the Redeemer Foundation Forgivable Loan Program for the taxation years 2001 and 2OO2.
If you have not already contacted us, we would appreciate hearing from you as it may assist us in pursuing this claim.
You may contact us by e-mail, telephone, mail, courier, fax, etc “
Here is a copy of the Statement of Claim in the Class Action:
Statement of Claim ISSUED March 21 2011 against Redeemer University and Redeemer Foundation
Here is an article in the Hamilton Spectator:
Redeemer faces $6m action after tax credits disallowed
Here is a note on the Redeemer site:
Redeemer Responds to Claim
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.