Here is the Blumbergs' Submission to Finance Committee in August 2016 on transparency and accountability.
Here is the Blumbergs' Submission to Finance Committee in August 2016 on transparency and accountability.
The Charities Directorate of the Canada Revenue Agency ('CRA') recently developed an infographic to help charities remember their T3010 filing deadlines. CRA is in the process of introducing new and different ways to encourage voluntary compliance for Canadian registered charities. The T3010 is an annual filing that must be completed annually by registered charities within six months of the charity's fiscal year end.
In May 2016 we found out that Cathy Hawara, the Director General of the Charities Directorate, had received a promotion and become the Deputy Assistant Commissioner of the Legislative Policy and Regulatory Affairs Branch of the CRA. Cathy had been Director General of the Charities Directorate for approximately six years.
The Canada Revenue Agency ('CRA') has recently released a new online questionnaire which is designed to provide the general public with basic knowledge to help make an informed decision when deciding whether or not to apply for charitable registration.
The Blumbergs' Canadian Charity Law Institute 2016 will be held on Friday October 28, 2016 at Oakham House in Toronto. The Institute always has a full day of speakers discussing legal and ethical issues affecting Canadian non-profits and charities. The tentative presentation topics are listed below.
Blumbergs has just released a new website with over 10 years T3010 information for each Canadian registered charity. The site is a beta being tested but if you are interested you can visit the website at www.charitydata.ca It is free and hopefully useful. If you have any feedback just let us know.
In a recent decision of the Tax Court of Canada, Duguay, N. v. The Queen, a taxpayer claimed charitable donations made to a Canadian registered charity providing housing for low-income people and seniors residences but these were denied and the taxpayer decided to appeal the decision.
CRA recently released new information on their position regarding the retention period for church offering envelopes. CRA has indicated that starting in 2016 (and including church offering envelopes for the 2015 tax year), church offering envelopes (when used as a source document) will need to be kept for six years from the end of the tax year to which the envelope relates. Previously these envelopes were only required to be kept for two years.
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 successful - they said "totally" successful. 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".
As a result of the 2016 Quebec Budget, Canadian registered charities are no longer required to complete a separate charitable registration in Quebec in order to be able to issue tax receipts to donors in Quebec.
The Department of Finance has established an advisory committee to review tax expenditures. This will be part of an initiative to reduce "poorly targeted and inefficient programs, wasteful spending, and ineffective and obsolete Government initiatives." What are tax expenditures? Finance notes "The tax system can be used to achieve public policy objectives through the application of special measures such as low tax rates, exemptions, deductions, deferrals and credits. The Department of Finance Canada publishes cost estimates and projections for these measures annually in the Tax Expenditures and Evaluations publication. The tax measures presented in the Tax Expenditures and Evaluations publication are the responsibility of the Minister of Finance."
On the CRA website there is a list of foreign charities that received a gift from the Canadian government. CRA has just released a new Guidance CG - 023 Qualified donee: Foreign charities that have received a gift from Her Majesty in right of Canada which discusses how foreign charities are placed on the list.
The CBC in an article entitled "Charity tax fraud to cost brothers their freedom" how two brothers were each sentenced to over 4 years for being involved in charity fraud over nearly $5 million. It shows how the CRA is increasingly using criminal convictions instead of just revocations. The judge described the fraud as "industrial scale". The article notes "The total number of false claims over the life of the scheme was more than 1,700 for a purported $11.4 million of alleged donations." Keep in mind that this was only issuing $5 million in fraudulent receipts which is a tiny tiny amount compared to some other schemes out there.
The Daily Beast has a rather extensive article on Donald Trump's use of the Trump Foundation entitled Donald Trump Accused of Using His Charity as a Political Slush Fund. It is well worth reading. I have criticized the Clinton Foundation for some lapses when it came to transparency and especially the lame excuses they gave in response to questions. Nothing that the Clinton's have done with their foundation seems to be even close to the seriousness of the allegations leveled against the Trump Foundation.
CRA recently released two new online registered charity information request forms which have been created to simplify the process when requesting certain types of information from CRA. Previously this information was typically requested by sending a letter/fax to CRA. Now it can be done online. This is a giant step forward in making it easier for Canadians to be able to access public information from the CRA's Charities Directorate on Canadian registered charities.
The NPORIP was a major initiative of the Federal government to look at the approximately 80,000 - 100,000 organizations that are non-profits but not registered charities and the extent to which there are compliance issues. In July 2013 the CRA prepared a draft "final" 76 page report (the "July 2013 Report") which we have attached. It is 18 MB so it may take a minute to load.
The IRS recently released a report entitled "Stewards of the Public Trust: Long-Range Planning for the Future of the IRS and the Exempt Community". The Report was prepared by the Advisory Committee on Tax Exempt and Government Entities (ACT), which is an advisory body of the IRS. I was one of the people interviewed for the report in September 2015 and I am glad to see the report finally come out.
It appears that Bill C-239, Ted Falk's private members bill to increase tax incentives for donations, has been defeated on second reading. Both the Liberals and NDP expressed reservations about the private members bill and its potentially high cost. In May I wrote a blog criticizing the bill. A recent report from the PBO confirmed that the cost could be far higher than the projections provided by Mr. Falk.
The PBO has recently released a report entitled Cost Estimate of Bill C-239: An Act to amend the Income Tax Act (Charitable Gifts). Bill C-239 is a private members bill by MP Ted Falk to increase donation tax incentives to match the tax rates given for political donations to charitable donations, but with none of the limits that apply to the amount that you can donate to political parties. The report is well worth reading. It describes the very high cost of passing this private members bill even if more funds are not donated to charity.
Blumbergs and the OCIC will be hosting a program on June 21, 2016 entitled "Recent Changes to the Regulation of Charitable Activities in China that will affect Chinese and Canadian charities". You can register here. It will feature Prof. Mark Sidel, Consultant for Asia at the International Center for Not-for-Profit Law (ICNL) and Doyle-Bascom Professor of Law and Public Affairs at the University of Wisconsin-Madison. Mark Sidel has worked on nonprofit and philanthropic regulatory developments in China for nearly thirty years, and has worked in China for more than four decades. He will outline these recent developments, discuss their implications, and answer questions.
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.