CRA has recently updated their web page on Amalgamations, Mergers and Consolidations.
CRA has recently updated their web page on Amalgamations, Mergers and Consolidations.
The Ontario Superior Court of Justice recently released a decision in R. v. Tennina which demonstrates that Canadian courts are taking a much tougher approach when dealing with tax fraud schemes. The accused in this case was involved in evading over 17 million dollars in tax through a tax fraud scheme. She prepared tax returns for individuals and without their knowledge included false charitable donations and deductions, did not report the income she made from these schemes and did not show up for her trial by leaving the country.
There is an interesting and important report from the Parkland Institute entitled “Shooting The Messenger: The Need For Effective Whistleblower Protection In Alberta”. The report is written by David Hutton. David Hutton is also the Executive Director of, FAIR (Federal Accountability Initiative for Reform). Canada does not have low level corruption like some countries. Have you ever had to pay a bribe at a Canadian airport to get through? However, unfortunately as a result we are complacent and this allows some very well connected people and companies to take advantage of the system and get away with a lot more. You would notice and be offended by a $10 bribe, but you don’t notice billions in inappropriate procurements or billions in inflated receipts which cost you and every Canadian a lot more. With the registered charity sector having $212 billion in revenue it provides an attractive target for some who wish to take advantage of it. From a national security point of view the failure to encourage controlled whistleblowing poses a tremendous threat to the integrity of our intelligence community. If people don’t have a real outlet to expose problems with real protections - they will go to the media or others.
Here is a link to the Blumbergs’ Canadian Charity Law List August 2013
Industry Canada has been sending notices about new corporate services that will be available online for CNCA corporations. As well they are providing a corporate key for non-profits to access those services.
Today the CRA released its long awaited Guidance on Promotion of Health and Charitable Registration. This guidance could potentially impact a number of different types of charitable organizations that deal with health care.
There was an interesting 94 page report entitled “Enhancing Accountability For The Religious And Broader Nonprofit Sector” in December 2012 from the Commission on Accountability and Policy for Religious Organizations . While I certainly don’t agree with many of the recommendations I think there is some interesting discussion in the report and here are some excerpts from the report.
On September 17, 2013 Mark Blumberg will be interviewed on Ted Hart’s The Nonprofit Coach Radio Show.
Bill C-48 (Technical Tax Amendments Act, 2012) which deals with many matters including split receipting received Royal Assent as on June 26, 2013. Some of the amendments affecting charities were announced over 10 years ago. These and many other technical amendments to the Income Tax Act were passed. Hopefully the time between announcing measures and the measures being enacted will never take this long.
The Tax Court of Canada recently released a decision in Bandi v. The Queen which dismissed an appeal by a taxpayer who participated in a charitable giving program in 2003. The taxpayer claimed a charitable donation tax credit which was initially allowed but then disallowed after a reassessment by the Minister. The gift totaled $5,996 and consisted of a cash payment and four software licenses. The Court found that there was no evidence that the software licenses even existed which makes it impossible for the software licenses to have been gifted. The Court also found that the taxpayer could not receive a tax credit for the cash gift that was provided since the cash gift could not be considered in isolation from the overall plan which was not properly implemented.
CRA recently released a letter which discusses whether a capital gain resulting from the sale of real property by an NPO qualifies for the exemption from tax under subparagraph 149(5)(e)(ii) of the Income Tax Act. Income from property (including capital gains) earned from investments and other assets that are not exclusively and directly used in providing the services of the organization will be taxed. The NPO in this circumstance was providing recreational and sporting facilities to its members, however in order to determine whether this was the ‘main purpose’ of the organization is a question of fact. CRA stated the following:
As of January 1, 2012, as of result of amendments to the Income Tax Act, low-cost housing corporations for the aged have to apply for registration to be considered a qualified donee. For many low-cost housing corporations being considered a qualified donee is attractive as it provides the ability to issue official donation receipts and more easily receive gifts from registered charities.
Here is the Blumbergs’ submission to the House of Commons Standing Committee on Finance for their Pre-budget Consultations 2013.
Wayne Gray, Allen Doppelt and myself will be presenting a webinar for the Canadian Bar Association on “Continuance Under the New Canada Not-for-profit Corporations Act”
We have just released the Blumbergs’ Canadian Charity Law List July 2013,
CRA recently released a letter which discusses whether two members of the clergy who are spouses, but own and reside in separate residences may claim the clergy residence deduction for their individual residence. A residential deduction is allowed under the Income Tax Act for clergy, ministers and members of religious orders. CRA determined that where each spouse satisfies the status and function tests for what constitutes a ‘residence’, and can prove that each separate residence was ordinarily occupied by one spouse as their principal place of residence, then each spouse can separately claim the full clergy residence deduction.
I recently received updated numbers from Industry Canada on the CNCA. they show some progress but a lot more needs to be done.
The CRA has updated their charitable donation tax credit calculator. It is interesting to play with the calculator but as we have warned before it can underestimate in some cases the amount of tax savings a person may get from a charitable donation. For example it is dealing with cash and not appreciated marketable securities which may have greater tax savings. Secondly, it does not take into account the surcharges that are in a number of provinces. Therefore, it may indicate that a wealthy Ontarian may get 40% benefit when in reality they may be receiving between 48-65% tax benefit depending on whether they are gifting appreciated marketable securities. That is quite a big difference.
There was an article recently in the Toronto Star regarding a Canada Revenue Agency (CRA) audit of the Islamic Society of North America, a registered Canadian Charity.
The CRA has just posted a new guidance which will be very helpful for Canadian charities. It is called CG-019, How to Draft Purposes for Charitable Registration. Also the CRA has updated their model purposes. The purposes or legal objects of a charity are very important. This guidance will be helpful to those considering setting up new charities. Also with so many Canadian charities needing to do corporate changes under the CNCA or ONCA this provides an opportunity for some charities to update objects which may not be helpful to the organization. If you are a registered charity and considering updating your objects this guidance will be helpful. You may also want to obtain legal counsel as you will need to discuss the changes with CRA. The objects are vital to the scope of the work conducted by a charity and CRA in order to review any revised objects will require a detailed description of activities because the Charities Directorate does not look at objects by themselves.
We have provided the letters from the CRA to the International Relief Fund for the Afflicted and Needy Canada (IRFAN) when they were revoked for cause. IRFAN has now filed a Notice of Appeal with the Federal Court of Appeal to overturn the CRA revocation.
The Charity Commission of England and Wales has published a very helpful guidance “It’s your decision: charity trustees and decision making”. Although there are difference between English and Canadian law the guide provides lots of useful information on how directors of Canadian charities should make decisions.
The National Post today had a story on IRFAN entitled “Relief organization that allegedly supported Hamas suspends operations after CIBC closes bank accounts”.
Mark Rosenman has written an article “Silence Isn’t Golden” for Philantopic of the US Foundation Center. It is well worth reading. “Confronted by headlines about truly questionable practices at a few dozen charities, the response of too many nonprofit leaders has been to bury their heads in the sand and try to pull the hole in after them. What these leaders fail to appreciate is that silence in response to scandalous behavior is neither golden nor in their best interests.”
In the past we posted the revocation letters from the Canada Revenue Agency to various registered charities in the Vancouver area including the Prescient Foundation (and also Essential Grace Foundation, Malachi_3_10_Foundation, and The Gateway Benevolent Society). A number of law firms have written some short notes about the Prescient Foundation decision of the Federal Court of Appeal. Here are some additional documents relating to the case.
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.