We assist Canadian charities, their staff and boards of directors, to understand their legal and ethical obligations when operating a Canadian registered charity and provide insights and information to non-Canadian charities interested in operating or fundraising in Canada.
The charitable sector in Canada has become more challenging. It is highly competitive with over 86,000 Canadian registered charities. As well donors, regulators, media, the public as well as other stakeholders, have increasingly high expectations of charities and how they operate. We assist charities in Canada grapple with these important legal and standards issues.
In a recent decision Mariano v. The Queen, the Tax Court of Canada (TCC) awarded a very large cost award in favour of CRA (who was the respondent in the matter) and against GLGI, the promoter, and some of its investors. The Court ordered costs of $491,136.95 minus the costs of two expert witnesses which will have to be determined. The TCC also noted with respect to CRA "The Respondent was totally successful in the trials of the above matters involving a charitable donation scheme which spanned over 25 days of hearings including one week of oral argument supplemented by detailed written argument given by both sides." Please note they did not say largely succesful - they said "totally" succesful. It is quite clear that the TCC after many many years is getting impatient with listening to arguments in favour of what the CRA used to call "abusive charity gifting tax schemes".
A recent case, Credit Counselling Services of Atlantic Canada Inc. v. The Queen, 2016 FCA 193, dealt with an annulment of a registered charity. CRA had annulled the registered charity status of Credit Counselling Services of Atlantic Canada Inc. in this Notice of Annulment of Registration in 2013 that we had previously posted on our website. Credit Counselling Services of Atlantic Canada Inc had appealed the decision to CRA but CRA confirmed the Notice of Annulment in April of 2015. Credit Counselling Services of Atlantic Canada appealed to the Federal Court of Appeal and in a decision on June 24, 2016 the Federal Court of Appeal upheld the CRA decision and dismissed the appeal. There are really two issues in the case. First, is the 'prevention of poverty' a recognized charitable purpose as opposed to 'relief of poverty' which is one of the four heads of charity. The Court found that prevention of poverty is not a charitable purpose. Second, annulments are far more unusual than revocation as a result of audit and therefore the case provides some clarity standards for review of annulment. Essentially, annulments being contested will be treated by the FCA in a similar way to a revocation.
Markou v. The Queen, 2016 TCC 137 is a super boring case dealing with the jurisdiction of the Tax Court of Canada and whether such court can make a determination as to whether certain proceeds are part of a Quistclose trust. Beyond whether there are or are not enough legal gymnastics in this decision there is lots of interesting background on a complicated tax scheme from 2001 that probably few have heard of. The leveraged donation scheme known as "The Donation Program for Medical Science and Technology" was implemented by Trinity Capital Corporation from 2001 - 2003. An example of one donor is that he put in $3,520,000 and received a tax receipt for $11 million which would save him about $3.2 million in Federal taxes and $1.9m in Ontario taxes.
Deluca v Canada, 2016 ONSC 3865, is an Ontario Court of Justice claim by Mr. Deluca against the CRA. Mr. Deluca had invested over $100,000 in a tax shelter involving a barter network and 'donations' to a registered charity. When CRA denied his donation claims Mr. Deluca sued the CRA because he argued they owed him a duty and they were slow in revoking the status of a registered charity. The courts quite harshly dismissed Mr. Deluca's claim. I guess you can summarize the case as -all because a business and a registered charity encourages you to get involved in a questionable donation scheme and CRA does not accept the validity of the donation you cannot use CRA as an 'insurance policy' to cover your losses by suing CRA.
The Canada Revenue Agency ('CRA') recently revoked the charitable registration of the ACTLAP Children's Foundation (A.C.F.). CRA revoked the charitable status on the basis that the organization had operated primarily for the non-charitable purpose of furthering a tax shelter donation arrangement, the Pharma Gifts International Inc. program. The charity agreed to accept alleged gifts of property from participants in this scheme and act as a receipting agent. Over $64 million dollars in charitable receipts were improperly issued for donations of cash and pharmaceuticals.
The Ontario Court of Appeal has upheld a lower court decision which endorsed the Law Society of Upper Canada's decision to not accredit Trinity Western University's law school because of their "community covenant".