4 class action lawsuits dealing with abusive charity gifting tax schemes have been commenced by various law firms and the defendants include a number of law firms.. Now the law firm Scarfone Hawkins LLP is looking into the possibility of launching 1 or more class action lawsuits with respect to specific leveraged charitable donation programs. Here is the press release from them.
LEVERAGED CHARITABLE DONATION PROGRAMS
We are investigating the possibility of a class proceeding claim relating to specific leveraged charitable donation programs.
Under these programs, donations are solicited and a portion of the funds paid by donors are donated to a charitable foundation with the donor borrowing the balance from a company said to be independent. Part of the cash donation is a security deposit on the loan that covers the difference between the amount actually paid and a total donation receipt.
The total donation receipt is for an amount in excess of the amount actually being paid in cash by the donor.
Some programs represent that the security deposit amount will be invested in a fund which will generate a return such that the returns will be used to fully satisfy the loan.
These programs allow participants to borrow approximately 85% of the total amount to be donated with only approximately 15% actually being provided in cash by the donor. A loan is obtained for the balance over a ten year period with donors being told that they will not be called upon to make payment of the loan.
The charitable donation credits being claimed by donors have been disallowed by the Canada Revenue Agency and some individuals are now being called upon to make payment of the loans.
We are investigating this situation with a view to possibly commencing action on behalf of donors who now find themselves being reassessed by Canada Revenue Agency, liable for payment of interest and penalties and facing the prospect of liability under the promissory notes executed in respect of the loans taken.
If you have any information in connection with leveraged charitable donation programs or have participated in such a program and wish to share your information with us, please feel free to contact us.
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.