Topics: News, What's New from the Charities Directorate of CRA, Canadian Charity Law, Avoiding 'Charity' Scams
The Canada Revenue Agency’s annual report to parliament is interesting reading. It has some references to the Charities Directorate, the Charities Partnership and Outreach Program, audits by the charities directorate etc.
Here are some references to charities [emphasis is mine]:
“Our Day-to-Day Activities
Our Taxpayer and Business Assistance area helps taxpayers, businesses, and registrants meet their obligations under Canada’s self-assessment system by providing access to timely and accurate information. It also provides rulings and interpretations to clarify and interpret tax laws, as well as for CPP/EI purposes, and administers federal tax legislation governing registered plans and charities.”
There is a pie chart indicating that CRA’s Charities Directorate has a budget of $36 million.
“The telephone is still a popular way for taxpayers to seek information from the CRA. How quickly we respond to those enquiries is a key measure of our performance. In 2009-2010, we met our service standards for answering general and business tax enquiries in a timely manner. We also exceeded our service standard for answering charities enquiries.
For the second year in a row, for general and business enquiries, we were successful in realigning our resources and met our increased target for the percentage of callers able to reach us by telephone. We had to make constant adjustments during the year to balance taxpayer expectations with available resources to handle the fluctuation in demand and provide expected program performance. We also exceeded the 90% caller accessibility target for charities enquiries.
To ensure that the information we provide through our enquiries services is accurate, we make sure that agents have access to up-to-date training and online reference materials. We also use quality assurance techniques that provide ongoing, prompt feedback to our individual and business enquiries agents. Results show that our agents are able to provide technically accurate responses to taxpayers’ questions.
We made significant improvements in responding to simple and regular applications for charitable status within the established time frames. Simple applications have exclusively charitable objects and activities. Regular applications are not as straightforward and require further research to determine whether they are charitable. In 2009-2010, the intake of applications remained relatively consistent, however procedural changes were implemented to this workload that improved our response time.
Priority: Modernize and strengthen our charities program
Achievement: In 2009-2010, 16 webinars and 70 outreach sessions were delivered to registered charities. A revised Information Return can now be downloaded and saved from the Internet.In 2009-2010, in support of Canada’s national security agenda and international obligations to counter terrorism, we provided a checklist for charities to help them identify vulnerabilities to terrorist abuse, and funded a project within the charities sector to raise awareness of the need for safeguards against terrorism.”
For information on the webinars: http://www.cra-arc.gc.ca/chrts-gvng/chrts/cmmnctn/menu-eng.html
For information on the Charity Information Sessions: http://www.cra-arc.gc.ca/chrts-gvng/chrts/cmmnctn/menu-eng.html
For Information on the checklist for charities and terrorism: http://www.cra-arc.gc.ca/chrts-gvng/chrts/chcklsts/vtb-eng.html
[By the way just as a note the funded project referenced above was part of the Charities Partnership Outreach Program and funding was provided to the Ontario Community Support Association and its Capacity Builders Charity Law Information Program of which I am the lead trainer on legal issues.]
“The CRA is responsible for monitoring the operations of registered charities within Canada to make sure they comply with the requirements of the Income Tax Act. Audits are an important element of this process. During 2009-2010, the number of registered charities audits decreased by 15.7% compared with the previous year. This year, we encountered some staffing delays but we expect improvement in 2010-2011 and available resources to meet the performance results achieved in 2008-2009. “
“Charities – We processed over 80,000 annual information returns for registered charities, and conducted 719 audits.”
Here is an interesting metric on “Charities calls answered within two minutes of entering the queue” CRA met this metric in 2010 90% of the time. I wish some of the big Canadian corporations that I deal with could meet that metric. Now lets be clear I can beat this metric - when I am sitting at my desk and someone calls I can usually answer the phone in 10 seconds. But I guess I am not at my desk for 40 hours of the week, perhaps only 10. Oh, also I charge $385 an hour to help charities with legal issues and CRA’s 800 number is free.
Another metric “Percentage of responses to simple applications for charitable registration within targeted time frames (2 months)”. Charities Directorate had a target of 80% and they met it by processing simple applications within that time frame 82% of the time
In terms of “Percentage of responses to regular applications for charitable registration within targeted time frames (6 months)” they are meeting their current target of dealing with 80% within 6 months.
There have been huge improvements in the turn around time for charity applications. The key to having a quick and succesful application is making sure the application is complete, correct and within the rules for Canadian registered charities. Blumberg Segal LLP helps applicants compile and submit charity applications, although you do not need to use a lawyer to apply for charity status. We usually charge between 5-7,000 and complicated applications could be 8 or 9,000.
The Charities Directorate did not meet its target when it comes to “Percentage of registered charities audits completed compared to planned” because they did fewer audits. Perhaps this can be explained by the fact that some of the audits they did related to very large abusive tax gifting schemes in some cases issuing receipts in the hundreds of millions of dollars and not spending much on charitable activities. An example of such audit would be http://www.globalphilanthropy.ca/index.php/blog/comments/millennium_charitable_foundation_case_fca_not_impressed_with_charity_tax_sh/
Personally I would not be impressed if they met their target by quickly auditing small and rural charities but rather ignoring the major non-compliance.
There was some interesting material on aggressive tax planning at the above link:
“Aggressive tax planning
Some tax intermediaries promote aggressive tax plans and schemes that go beyond the spirit of the law and are designed to obtain tax advantages that were not intended by governments. These abusive schemes and transactions are used to reduce, avoid, or evade Canadian taxes, sometimes through international transactions and, in particular, through the use of tax havens. Left unchecked, aggressive tax planning presents a risk to the integrity and fairness of Canada’s tax system.
In 2009-2010, the CRA further addressed aggressive tax planning by implementing the International Tax Compliance Action Plan. We also undertook discussions with other tax administrations on tax information exchange agreements as part of our Exchange of Information initiative. On August 29, 2009, Canada signed its first tax information exchange agreement with the Netherlands Antilles.
The CRA worked with a number of international groups to identify and respond to international compliance threats as well as advance tax administration practices and protocols around the world. The CRA continued to participate in the cooperative analysis of international tax compliance issues through multilateral groups such as the Joint International Tax Shelter Information Centre (JITSIC). Member countries of JITSIC exchange information about specific abusive transactions and their promoters and investors within the framework of each country’s bilateral tax treaties. Some of these exchanges have led to audits relating to offshore debit card accounts, audits of promoters of aggressive tax planning schemes, and the identification of potential tax haven abusers.
Our compliance activities targeted interprovincial tax avoidance. The CRA continued to implement its action plan by engaging the provinces in identifying and challenging interprovincial tax avoidance arrangements. In 2009-2010, the CRA completed 107 interprovincial tax avoidance cases with provincial recoveries of over $190 million.”
“Aggressive tax planning
Our strategy to focus more of our audit resources in this area has increased the number of aggressive tax planning cases completed. The table to the right provides additional information on the volume of aggressive tax planning activities completed this past year. These results are included in the results table for the international and large business cases completed table on the next page. It is noteworthy that the twelve tax shelter lead audits that we undertook in 2009-2010, exceeding our target of ten such audits, involved almost 46,000 participants.
Project Trident: This project targets three types of fraud: identity theft, charities fraud, and tax preparer fraud.
From February 2007 to March 2010, the CRA prosecuted 25 Trident cases in the courts, resulting in total fines of $2.7 million, and 550 months of jail time for individuals.”
Tax fraud and evasion represent the most flagrant instances of non-compliance with tax statutes. Our Special Enforcement Program (SEP) conducts audits and undertakes other civil enforcement actions against individuals and businesses who are known or suspected of deriving income from illegal activities. Suspected significant cases of fraudulent non-compliance with the legislation we administer are dealt with by our Criminal Investigations Program, who investigate and refer cases for prosecution to the Public Prosecution Service of Canada. We also publicize each case which results in a conviction for wilful non-compliance with this legislation. Court convictions are publicized in local, regional, and national media to communicate the consequences of fraud committed against the Canadian public and to maximize the deterrent effect of these convictions. The table above summarizes key enforcement activities carried out in 2009-2010.
•the dollar value of court-imposed fines exceeded $11.9 million
•216 individuals and businesses were convicted
•34 individuals were sentenced to prison terms”
Here is the whole report from the beginning:
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.