For a number of years we have been providing the public with copies of CRA revocation letters. These letters set out the CRA reasons for revocation of charitable status when CRA is alleging cause. This the second part of the series.
In an article entitled "Canada Revenue Agency expands investigations of tax shelters", Kevin Donovan of the Toronto Star discusses how "As many as 12 charity tax shelter promoters are under criminal investigation for schemes that saw donors contribute millions of dollars in return for charity receipts worth six times as much."
Many Canadian non-profit corporations don't know about the Canada Not-for-profit Corporations Act (“CNCA”) which came into force in 2011 and requires that all existing Canada Corporations Act (CCA) non-profit corporations must transition to the CNCA by October 17, 2014. Corporations that do not make the transition by the deadline will be assumed to be inactive and will be dissolved by Corporations Canada. Industry Canada has indicated that the deadline will not be extended and that they will start sending out Notice of Pending Dissolution in October of 2014.
In the Holst case the Honourable Justice Judith Woods rejected certain taxpayers alleged donations to a church. She noted:
This Thursday, Bill 85 - An Act to amend various companies statutes and to amend other statutes consequential to the Not-for-Profit Corporations Act, 2010 will enter its Second Reading by the Ontario Legislature and then be referred to a Standing Committee. This Bill, which had its first reading on June 5, 2013, proposes some amendments to the Ontario Not-for-Profit Corporations Act ("ONCA"). This Bill is similar to the earlier version. There has been a significant delay of the implementation of ONCA and passing this Bill will be an important step in moving the process forward.
CRA recently released a letter which discusses the taxation of amounts donated to a private charitable foundation by parents to assist teachers with certain costs, in particular if the parent donations result in a taxable benefit for the teachers.
CRA recently released a letter that discusses whether monthly payments from a US charitable trust paid to a former employee are taxable.
I have stopped caring about the numbers from Stats Can on charitable giving because they are so out of whack with reality. I think that the note to reader is more important than the numbers. If you would believe the Stats Can version of events Canadians are giving less. In 2011 they gave $8.5 billion and in 2012 they gave $8.3 billion which is a decline of 1.9% according to Stats Can.
I have received some very positive feedback on the disclosure of the list of Ontario non-profit corporations. Here is the list.
Yesterday the Minister of State (Finance) Kevin Sorenson and National Revenue Minister Kerry-Lynne D. Findlay announced that in order to reduce administrative costs associated with charitable lotteries and to allow charities to modernize their lottery systems, there is a proposal in Economic Action Plan 2014 which will amend the Criminal Code to allow charities to sell their lottery tickets online. The current system forces registered charities that conduct lotteries as part of fundraising to process all sales manually and send tickets by mail rather than electronically.
In Johnson v. The Queen the Tax Court of Canada dealt with a case in which Mr. Johnson had made claims in 2002 and 2003 taxation years for donations of $18,550 and $15,500 respectively.
The Department of Finance has released the "Notice of Ways and Means Motion to implement certain provisions of the budget tabled in Parliament on February 11, 2014 and other measures and Explanatory Notes". Some of the provisions were announced in the Budget such as changes to ecological gifts, cultural property, charity parking, gifts from the Iranian and Syrian government (and agents).
The FCA decision in Julie Guindon v. Her Majesty the Queen has been given leave to appeal to the Supreme Court.
The CRA recently released a letter which discusses whether a taxpayer's estate was entitled to donation tax credits claimed for a charitable gift made by an individual in her secondary will. The use of a Primary and Secondary Will may be for a number of reasons, although typically in Ontario the assets that don't require probate are placed in a different will to those assets that do require probate. In this way some of the probate tax can be avoided. The letter discusses various issues such as whether the trustees had the discretion to make a gift to a Charity and the factors considered when determining whether a donation to a charity has been made by a taxpayer in their will.
Here is a list of the Ontario non-profit corporations under the Ontario Corporations Act. There are 59,605 Ontario corporations on the list. The list is 1084 pages long. Some of the Ontario corporations are active and some are inactive. We think that it is important for organizations to be able to have a public list so that they can easily determine whether or not they are an Ontario corporation.
For a number of years we have been providing the public with copies of CRA revocation letters. These letters set out the CRA reasons for revocation of charitable status when CRA is alleging cause. We recently requested from CRA some of the older revocation letters and we have posted them below. It is interesting to see the difference between the current reasons for revocation and those from quite a few years ago.
Is an aboriginal band considered a level of government by CRA? Here is the response I recently received from CRA:
As some people know October 17, 2014 is the deadline set for Canada Corporations Act (CCA) non-profit corporations to move over to the new CNCA or face potential dissolution. It will be 3 years from the date the CNCA came into force. Industry Canada has announced that they will start sending out notices after the October 17, 2014 deadline.
Federal non-profit corporations under the Canada Corporations Act (CCA) have until October 17 to continue/move over to the new CNCA. Here is a short webinar with 15 slides and takes 15 minutes on the CNCA continuance process. If you have not completed the process you need to get moving. Federal non-profits that are dissolved will also end up losing their charitable status with all the related consequences. View WEBINAR
Charities Information Webinar registration for the March 2014 session is now open. The topics are:
What is a Related Business? (CPS-019)
March 11, 2014 – 2 p.m. to 3 p.m., Eastern standard time
How to donate wisely – Information for donors
March 12, 2014 – 2 p.m. to 3:30 p.m., Eastern standard time
Here is an interesting case in which a municipality, that was allegedly involved in a charity scheme, wanted leave to intervene in a Tax Court of Canada matter involving a donor who had made a donation to the municipality. The TCC maintained “The Municipality is in no way subject to a tax assessment related to the one at issue in this appeal and the judgment in this appeal cannot have a financial impact on the Municipality.”
Here are some interesting numbers from the Charities Directorate. 4,456 applications and 2060 of them are registered/reregistered. Most applications are either returned for incomplete information, denied, withdrawn or abandoned. It just reiterates the importance of carefully preparing any charity application and understanding the Income Tax Act requirements for charities and CRA’s guidance and expectations.
The Charities Directorate just posted an important message which provides an update on the Charities Directorate activities. There is discussion of technology, guidances, CNCA, compliance activities but most importantly extensive discussion of political activities.
In the case of Ofori-Darko the CRA disallowed a claim of about $30,000 over 3 years. The people who allegedly made the donation appealed to the Tax Court of Canada and the TCC dismissed the appeal on the basis that there was no proof that those amounts had been donated and also because certain technical elements of the receipt were not included. I am really starting to feel sorry for the TCC judges having to listen to these ridiculous donation cases. I am also feeling sorry for taxpayers who have to pay for Justice to argue these cases and for the operation of the court system.
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.