Here is an excerpt from a speech by Cathy Hawara, Director General of the Charities Directorate of the CRA on the issue of Canadian charities and political activities.

Here are some comments from Cathy Hawara, Director General of the Charities Directorate, relating to the issue of Canadian charities and ineligible individuals rules in the 2011 Federal Budget.

Cathy Hawara, Director General of the Charities Directorate, made some comments on the 2012 Federal budget changes affecting the category of qualified donee charitable organizations outside Canada to which Her Majesty in right of Canada has made a gift.  She also addressed some of the media confusion about those changes.

Here are some comments from Cathy Hawara, Director General of the Charities Directorate, relating to the 2011 Federal Budget provisions enhancing transparency for qualified donees (ie. those organizations who can issue official donation receitps). 

The Canadian Press article “Controversial Islamic school ordered out of Toronto public school property” raises some interesting issues.  The TDSB is the largest registered charity in Canada with over $3 billion in revenue.  Many people don’t know but lots of school boards are registered charities. 

CRA has imposed a penalty on the HINDU MISSION OF MISSISSAUGA and the HINDU TEMPLE SOCIETY OF CANADA.  You can read on the CRA website the amounts and the reasons.

There have been a number of articles dealing with Canadian charities and political activities over the last few weeks.  Here are some of them:

The Federal Court of Appeal recently released a decision in The Sheldon Inwentash and Lynn Factor Charitable Foundation matter.  Essentially the question is whether an charity that has one trustee can be a public foundation or must it be a private foundation.  The Trust was given charitable status as a private foundation and the Trust appealed arguing that it should be designated a “public foundation”.  The court starts of by discussing the standard of review that would be used and then analysed the relevant Income Tax Act provisions.  In terms of standard of review CRA argued that a decision on whether a charity is a private or public foundation is “mixed fact and law which is subject to review on the standard of reasonableness.” as opposed to an “extricable question of law to be reviewed on the standard of correctness”.  The Court felt that some piece of the decision as to whether a charity is a private foundation could a matter of law and then subject to the higher standard of correctness.  So the courts applied the higher standard of correctness to the CRA decision and then agreed with the CRA that they had acted correctly.  The court concluded that a charity with one trustee will be a private foundation as CRA had determined.  The decision also looks at the differential treatment of private foundations and discusses some of the history of why private foundations were treated differently than public foundations and concerns about private foundations. 

I presented to the House of Commons Standing Committee on Finance today along with 5 other witnesses.  There was a lively discussion of transparency, cross border philanthropy, tax incentives and preventing abuse of registered charities.

Here are some receipting webinars prepared for the Charity Law Information Program in French by Daniel Brunette.  They are free and last approximately 1 hour each.

The Canada Revenue Agency has revoked the registration of Help Eliminate Disease and Addiction Canada as a registered charity. 

The Standing Committee on Finance (FINA) is holding hearings on tax incentives for charitable donations.

Here is information on a webinar that I will be delivering with AFP International entitled “Fundraising from Canada” on May 22, 1-2:30 p.m. ET.

Here is an interesting article entitled “The worst way to judge a charity”.  Notice in paragraph 3 an attack on Canada! 

I have been asked to testify before the House of Commons Standing Committee on Finance which is studying various issues relating to the charity sector including tax incentives for charitable donations, charities and political activities, and cross border philanthropy.  My comments will probably focus on the importance of transparency in the charitable and non-profit sector. 

On April 20, 2012 CRA released a new Guidance on Fundraising for Canadian registered charities.  This guidance is the most important information from the Charities Directorate on the obligations of Canadian registered charities when it comes to fundraising.

The Charities Directorate of CRA does Charities Information Sessions (which used to be called RoadShows).  The registration for new sessions has been announced and you can register at: http://www.cra-arc.gc.ca/chrts-gvng/chrts/cmmnctn/sssns/nvttn-eng.html

Here is an article in the Toronto Star ““Catholic teachers under fire for promoting pro-life motion to students”. 

Finance has just released the “Notice of Ways and Means Motion to implement certain provisions of the budget tabled in Parliament on March 29, 2012 and other measures”.  There are also “Explanatory Notes” that are helpful. 

Imagine Canada has announced that they will be launching their new Standards program on May 8, 2012.  According to Imagine “The Standards Program features a Canada‐wide set of shared standards for charities and nonprofits wishing to enhance and demonstrate their effectiveness in the fundamental areas of board governance, financial accountability and transparency, ethical fundraising, staff management, and volunteer involvement.”

Here is a press release from CRA relating to a tax preparer who pleaded guilty to fraud for filing false income tax returns with false charitable donation receipts.

I was on a panel today at the Green Living Show.  There was an interesting discussion on the environment, political activities, and charities.

The Toronto Star covered the story of a tax preparer from Vaughan, Ontario who is a fugitive after having prepared thousands of tax returns with fraudulent charitable donation receipts amounting to millions of dollars.  Most interesting is that the CRA cannot release a photo of the woman even though she is a fugitive.  I think S. 241 of the Income Tax Act (confidentiality provisions) needs to be modified to allow CRA to release more information on charities and now tax preparer fugitives.  I have sent submissions to Finance on that and lets wait and see. 

Canadian registered charities must file the T3010 Registered Charity Information Return within six months of the end of their fiscal year, although some are not able to meet that deadline and file soon thereafter.  It is a very important form because despite its limitations it is really the only uniform way to obtain information on all registered charities in Canada.  Some people are surprised to find out that answers on the T3010 are not always reliable.  I am going to make a few comments on the reliability of the T3010 and specifically with respect to questions relating to “political activities”.

The Charities Directorate of CRA has a guidance entitled “Political Activities” for Canadian registered charities. CRA notes in the guidance that it”... provides information for registered charities on political activities and allowable limits under the Income Tax Act (the Act). It also provides a framework that explains how we distinguish between political and charitable activities. In addition, it seeks to clarify the extent to which charities can usefully contribute to the development of public policy under the existing law.  The guidance in this policy statement is based on subsections 149.1(6.1) and 149.1(6.2) of the Act and on general principles of charity law and court decisions that define what is charitable and what is political. This information applies to all registered charities.”  While CRA’s Guidance is pretty good and will probably be improved over the next few months or years - it is of little assistance to a charity if they don’t know it exists or don’t read it.

Whether I like it or not the involvement of Canadian charities in political activities has become a major issue.  Therefore, I am creating a new blog category on Canadian charities and political activities.  The discussion has been squarely on environmental groups and the oil pipelines.  It is interesting because environmental groups actually have very little funding compared to other far better funded charities and perhaps some environmentalists wish that all those funds can be used for political activities but in fact a tiny percentage of their funds of environmental groups receive are spent on political.  If you are looking for the big bucks and political activities you are going to have to look elsewhere.  The media in Canada will eventually wake up and follow a more balanced approach.  In fact I will blog further on the US and UK - the big money and scrutiny has been on certain right wing groups using almost all their money on funding political activities - some of which are decidedly partisan.  I guess one could say that a Pandora’s box has been opened and it will be interesting to see where it goes.  It is important that Canadian charities follow the rules - whether environmental groups, “business” think tanks or religious organizations. 

In an article by The Chronicle of Philanthropy by Caroline Preston entitled “Update: IRS Levies Fine on Food for the Hungry Over Drug Valuations” it describes how the US IRS has levied a penalty against a charity that misreported donations on its annual return.

Kathryn Blaze Carlson of the National Post has written another article on charities and political activities entitled “The politics of charity: When is a tax-exempt organization too political?”

Here is a short summary of the major provisions relating to charities in the 2012 Federal Budget - tried to keep it to 100 words but I did not make it.

The Globe and Mail published an article “New rules in budget ‘create more fear’ among politically active charities”. 

The Charities Directorate of the CRA has posted information on the Federal 2012 Budget.

CRA has posted an FAQ on the Transparency and accountability provisions relating to registered charities in the 2012 budget.

Here is the CRA FAQ on “Gifts to foreign charitable organizations”

The 2012 Federal budget has an important piece on transparency namely “...to ensure that charities are accurately reporting in respect of all the activities in which they engage, the CRA will be granted the authority to suspend the tax-receipting privileges of a charity that provides inaccurate or incomplete information in its annual information return until the charity provides the required information.”  This highlights the importance of charities not only filing the T3010 but being accurate and complete.  If you don’t file your T3010 you will be revoked, but if you file an incomplete or innacurate T3010 you can be suspended.  I have expressed concerns with some charities making ridiculous claims on their T3010 - that they have no fundraising costs is my favourite when they are organizing lots of expensive fundraising events, inflating gift-in-kind valuations etc.  Well now just such a filing can get the charity in trouble.  This follows the recent US IRS example where a charity was penalized for filing an inflated valuation of gifts in kind.

On March 29, 2012 Finance Minister Jim Flaherty released the Federal Budget at approximately 4PM.  There are about 10 pages of information dealing with charities in the almost 500 page document.  Here are the pieces of the 2012 Canadian Federal Budget that affect the Canadian charitable sector.

Here is the Blumbergs’ Canadian Charity Law List - March 2012

As noted before the Canada Revenue Agency Charities Directorate has revoked the registration of Escarpment Biosphere Foundation Inc. (http://www.globalphilanthropy.ca/index.php/blog/comments/the_canada_revenue_agency_revokes_the_registration_of_escarpment_biosphere/) as a charity for participating in the Canadian Humanitarian Trust tax shelter gifting arrangement (Donation Program).  Here is detailed information from the CRA on the involvement of the Escarpment Biosphere Foundation Inc in an abusive charity gifting tax schemes.  The letters cover topics such as fair market value, pharmaceutical donations, the revocation of registered charities who act in concert with each other to unduly delay expenditures on charitable activities, limitations on the charitable goods policy and direction and control. 

Here are the actual letters from the Charities Directorate of the Canada Revenue Agency to Little League Baseball Canada.

Here are the actual letters from the Charities Directorate of the Canada Revenue Agency to Canadian Lacrosse Association.

Here are the actual letters from the Charities Directorate of the Canada Revenue Agency to Canadian Amateur Football Association.

Statistics Canada has released a report entitled “Caring Canadians, Involved Canadians”  based on the 2010 Canada Survey of Giving, Volunteering and Participating (CSGVP).  Statscan will be releasing further reports on the data. 

A Canadian Senator Nicole Eaton has been commenting on Canadian charities and a number of senators have spoken in agreement and in disagreement.  I wish the Senate had access to better information on the charitable sector.

The OHA’s Governance Centre of Excellence is presenting a Conference for Not-For-Profit and Charitable Organizations.  I will be speaking about legal compliance and ethics.

Recently, Alastair Bland of the Review and Analysis Division of the Charities Directorate of the Canada Revenue Agency presented on the subject of “The Threat of Terrorism - How Charities Can Protect Themselves.”

Marcel Lauzière of Imagine Canada has written a good piece entitled “Role of Charities” in which he nicely summarizes why charities have, and should have, involvement in the political process.  Remember that charities cannot be involved in partisan political activity, but they can spend some of their resources on dealing with political issues that are related to their legal objects.

Various organizations are reminding Canadians to beware of fraud and charities.  Capital One and CanadaHelps have a quiz “to educate Canadians on how to identify false charities so their generous donations don’t end up in fraudsters’ hands.”  CRA advises “Fraud Prevention Month also offers an opportunity for the Agency to remind Canadians that some individuals are selling tax scams that have serious legal consequences. Canadians are urged to remember the old adage: If it sounds too good to be true, it probably is.” 

Here are some letters from the Canada Revenue Agency dealing with Article XXI (7) (formerly XXI(6)) of the Canada-US Tax Treaty.

Here is the Blumbergs submission to the Department of Finance on AML and Anti-Terrorism Provisions affecting Canadian charities -March 2012

Here is a copy of the Letters from CRA about revocation of charity World Assembly of Muslim Youth for supporting terrorism.  We noted at globalphilanthropy.ca (TM) on February 23 the revocation at http://bit.ly/xNGt4M

CharityFocus.ca is a new tool created by Imagine Canada to allow searches of Canadian registered charities.  You can now also search by directors. 

The Charities Directorate of CRA has announced that registration for three new webinars is open.  These are free webinars offered by the the Charities Directorate to registered charities or others interested in compliance issues.

At the Hillborn website charityinfo.ca there is an interesting article entitled ““Behaviour modification” the goal in suit against law firm” which discusses a recent class action lawsuit by Scarfone Hawkins related to the Banyan Tree Foundation abusive charity gifting tax scheme.

Here are three free webinars from the Charity Law Information Program dealing with receipting by registered charities and gifts in kind on March 6, 2012.

The Charities Directorate of CRA has revoked the registered charity status of the group “World Assembly of Muslim Youth”  CRA notes: “Summary of Reasons for Revocation - WORLD ASSEMBLY OF MUSLIM YOUTH   On the basis of our audit and of our review of the Organization’s Registered Charity Information Returns for the years from 2005 to 2009, we have concluded that the Organization: failed to comply with or contravened subsection 230(2) of the Act; ceased to comply with the requirements of the Act for its continued registration; and failed to file an information return as required under the Act. Our analysis of the Organization’s operations has led the CRA to believe that the Organization, which has been inactive since at least 2005, was established to support the goals and operations of its parent organization located in Saudi Arabia. Our analysis particularly noted that the Organization shared a common director, contact information, and a bank account with the Benevolence International Fund in Canada (BIF-Canada), and provided $50,246 to the Benevolence International Foundation in the United States (BIF-USA) in 2001. On November 21, 2002, BIF-Canada and BIF-USA were added to the Consolidated List of the United Nations Security Council’s Al-Qaida and Taliban and Sanctions Committee.”

ORNGE, for those outside of Ontario, is a Canadian registered charity that runs the air ambulance service in Ontario.  Their helicopters are painted orange.  It is a charity but largely funded by the Ontario government.  ORNGE has been receiving a large amount of media scrutiny over the last few months.

The CRA recently revoked the registered charity status of the United Holy Land Fund.  CRA alleges that the United Holy Land Fund did not have “direction and control” over the use of its resources, failed to maintain adequate books and records and made gifts to non-qualified donees.  The amounts involved appear to be quite small - about $16,000.

L’Ecole Notre Dame Du Nord Inc. was registered charity that was revoked by CRA.  I thought it worth mentioning because the reason for dissolution provided by CRA seems quite mundane but important for charities to pay attention to.  In May 2011 CRA noticed that the corporate entity L’Ecole Notre Dame Du Nord Inc had become dissolved.  CRA advised “Upon termination of its corporate status L’Ecole Notre Dame Du Nord Inc. ceased to exist as an entity at law and as such no longer qualifies for registration as a charity under the Income Tax Act, subsection 248(1).”  They were then given 90 days to show “proof that it exists as a corporate entity. Failure to comply will result in the CRA revoking the charity’s registration by publishing the follow notice in the Canada Gazette ...”

Here is an article on the Ontario air ambulance service Ornge which discusses the involvement of legal and accounting firms in the structuring of the transaction. 

Corporations Canada will be having a Client Outreach Session in Toronto, March 8, 2012.  Here is further information.

The Canada Revenue Agency has revoked the registration of Escarpment Biosphere Foundation Inc. as a charity for participating in the Canadian Humanitarian Trust tax shelter gifting arrangement (Donation Program).  The CRA notes “Our audit revealed that the Escarpment Biosphere Foundation Inc. (the Organization) received cash and pharmaceuticals with a purported value of over $407 million as a result of its participating in the Canadian Humanitarian Trust tax shelter gifting arrangement (Donation Program). It is our position the Organization failed to verify the value of the properties and to maintain direction and control over the distribution of the properties. Further, we believe the Organization agreed, for a fee of approximately $1 million, to lend legitimacy to the Donation Program by representing that it had received and distributed the properties in its own charitable programs. As such, it is our position the Organization failed to operate exclusively for charitable purposes by acting as a conduit for the Donation Program and redistributing 99% of the cash received to other parties in the Donation Program.”

There will be another Being Good at Doing Good conference on February 13 and 14, 2012 organized by the Charity Law Information Program - you don’t want to miss this conference.  We will have some of the top experts from Canada, the US and the UK on governance, financial management and compliance.  Here is the registration page: http://www.clipconference.wildapricot.org/  The conference is “Doing Good” at registrations with over 205 people signed up so far.  Here is the Preliminary Conference Schedule

Here is another short article on the Cannon v. Funds for Canada Foundation class action lawsuit.

The Toronto Star has been doing a number of articles on a Canadian registered charity named “ORNGE” which provides air ambulance services in Ontario.  In this article Kevin Donovan, investigative reporter for the Toronto Star, is discussing amounts of legal fees paid by ORNGE and the services provided.

Here is a list of the Largest Gifts from Canadian Charities to other Qualified Donees - 2010.  You might find this interesting.

CRA will be shortly releasing their much anticipated revised Guidance on Fundraising.  Join charity lawyer Mark Blumberg as he presents a webinar on behalf of the Charity Law Information Program entitled “CRA’s New Fundraising Guidance” on Friday, February 10, 2012 at 1PM EST for approximately 1 hour.