February 08, 2014

T3010 descriptions of Canadian charities and political activities

About 19,000 Canadian charities have filed their 2013 T3010s so far.  Of those charities some note that they are doing political activities.

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February 07, 2014

G&M “Budget will include measures to expose links between charities and crime, Flaherty says”

In a Globe and Mail article entitled “Budget will include measures to expose links between charities and crime, Flaherty says” there is a discussion of potential items affecting charities in the 2014 Federal Budget set to be delivered on February 11, 2014.

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February 07, 2014

Power and Politics with Evan Solomon deals with Canadian charities and political activities

Last night I was interviewed by Evan Solomon on CBC Power and Politics discussing Canadian charities and political activities.  Other guests included Marlo Raynolds (former Executive Director of the Pembina Institute) and John Bennett of Sierra Club Canada.

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February 04, 2014

Federal Court of Appeal judgment relating to Allen Berg and donation to Cheder Chabad

Mr. Berg made a ‘donation’ to a registered charity, Cheder Chabad, and the registration of that charity has subsequently been revoked.  The Allen Berg case is important because it discusses “donative intent” and the Friedberg decision.  It upholds Marechaux and Kossow.  The FCA overturned a Tax Court of Canada decision in which the TCC had said that for the cash portion of Mr. Berg’s ‘donation’ he was entitled to a tax credit.  The Court concluded with respect to donative intent “...Mr. Berg did not intend to impoverish himself by transferring the timeshare units to Cheder Chabad. On the contrary, he intended to enrich himself by making use of falsely inflated charitable gift receipts to profit from inflated tax credit claims. He consummated the “deal” solely with that objective, and he acted from beginning to end in a manner intended to achieve that result.”

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January 29, 2014

Cheder Chabad is revoked on January 18, 2014

Last year the Federal Court of Appeal in Cheder Chabad v. The Queen, ordered CRA to delay the publication of a notice of intention to revoke the charitable status of the registered charity by four months.  It appears that CRA revoked the charity for cause on January 18, 2014.

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January 29, 2014

CRA clamping down on late T3010 returns and innaccurate information

If you search the CRA Charities Listing under revoked for cause charities it provides a list of Canadian charities that have been revoked for cause.  I noticed recently that Assemblée de Dieu de Montreal-Nord has had its charity status revoked for cause and all the reasons cited in the summary relate to late filing of T3010s and providing inaccurate information.

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January 28, 2014

BCSC Judgment in TLC The Land Conservancy of British Columbia Inc.

The BC Supreme Court recently dealt with a case involving TLC The Land Conservancy of British Columbia Inc. and whether certain assets may be used to satisfy creditors.  TLC is having financial problems and trying to restructure under the Companies’ Creditors Arrangement Act (the “CCAA”).  This case involves whether the property is subject to a special purpose trust.  BC has specific legislation dealing with these type of scenarios. The decision has been released and it will be interesting to see if it is appealed.

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January 28, 2014

CRA letter on Indian Band -Public Body & Function of Government

CRA recently released a letter which discussed whether an Indian Band is a public body performing a function of government within the meaning of 149(1)(c) and therefore exempt from income tax on the interest income received from a GIC. The CRA found that the Indian Band was governed by an elected chief and band council, performed several functions of government and had passed by-laws under section 83 of the Indian Act. As such, it was determined to be a public body performing a function of government in Canada and therefore exempt from paying income tax and any tax on the interest from the GIC included in its income.

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January 28, 2014

CRA letter on taxability of scholarship funds received by employees

CRA recently released a letter which discussed whether scholarship funds received by an employee are taxable as employment income under subsections 5(1) or 6(1) of the Income Tax Act. CRA examined a situation where a registered charity (the “Foundation”) received a donation from an unrelated person (the “Donor”). The purpose of the Foundation was to raise and maintain funds for an organization and under the terms of the donation agreement between the Foundation and the Donor, the Foundation created a scholarship for employees of the organization pursuing post-graduate degrees in specific areas of study.

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January 28, 2014

CRA news release - Tax preparer and charity director convicted of fraud

On January 10, 2014 David Ajise, a former tax preparer operating in Toronto, was sentenced to a 30 month jail term for fraud over $5,000. Ajise is the former proprietor of Datronix Solutions, a tax preparation service. A CRA investigation revealed that, Ajise and Eto Ekpenyong Eto participated in a scheme which generated $5,023,456 in fraudulent charitable donations between 2003-2005. 

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January 28, 2014

CRA letter - Is a member a shareholder of a not-for-profit corporation

CRA released a letter which discusses whether a member of a not-for-profit corporation without share capital is a “shareholder” within the meaning of that term in subsection 248(1) for purposes of subsection 15(1) of the Income Tax Act. CRA’s view was that members of a non-profit corporation without share capital, in this case a family recreational club, will be considered shareholders thereof for purposes of subsection 15(1) of the Act, notwithstanding that they are not entitled to receive dividends.

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January 27, 2014

The Globe and Mail: ‘Forever’ falls out of fashion in charitable giving

The Globe and Mail recently had an article which discusses the concept of perpetual endowments as well as the use of donor advised funds and bequests. Read article >

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January 27, 2014

Which Canadian Registered Charities Received the Most Money from Municipal Governments in 2012?

We recently reviewed the T3010 information for 2012.  We looked at government funding and specifically which Canadian registered charities received the most funds from municipal governments. Please review my caveats at the end about the reliability and usage of T3010 information.

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January 11, 2014

Which Canadian Registered Charities Received the Most Money from Provincial Governments in 2012?

We recently looked at government funding and specifically which Canadian registered charities received the most funds from provincial governments in 2012.  Most government funding is from the provincial level of government and therefore provincial funding is vital for the Canadian charity sector.

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January 11, 2014

Did the University of Windsor spend $285 million on political activities in 2012

Probably not.  Otherwise that would be about 5-10 times more funds than all Canadian registered charities spent on political activities in 2012.  In fact, when we reviewed who spent the most on political activities it appears to me that the top 6 organizations were all mistakes.  Either CRA or the charity messed up when inputting the numbers.  All charities, but especially larger charities, should carefully review their T3010 before filing and also check that the CRA got the information correct a few months after filing.

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January 11, 2014

Shocking CRA press release on Canadian charity gifting tax shelters

The problem of “abusive charity gifting tax schemes” continues.  These are schemes that promise that if you put in say $1000 through a complicated scheme you will end up with a $5000 receipt and therefore you can save $2500 in taxes.  CRA notes that two additional strategies will be used to prevent Canadians from investing in these schemes.  The first is that CRA will not assess tax returns until after the tax shelter scheme has been reviewed.  That means a person who claims tax benefits under one of these schemes and then files a tax return may have to wait a couple years for a refund.  Also as per the 2013 budget CRA can collect 50% of the taxes owing of an amount in dispute.  What is shocking from the press release is apparently over 182,000 taxpayers have participated in these schemes.

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January 05, 2014

CRA releases list of “municipal or public body performing a function of government in Canada”

There is a category of qualified donee, ie. organizations that can issue tax receipts, called “municipal or public body performing a function of government in Canada”.  This group is largely first nations bands but also could include school districts or certain other types of entities.  CRA has just released the list and it contains 60 groups.  Hopefully the number will rise.  It is important for Aboriginal groups that need funding from foundations or wish to issue official donation receipts for gifts consider obtaining this status.  Here is a list of “municipal or public body performing a function of government in Canada”:

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January 04, 2014

Which Charities Received the Most Money from the Federal Government - 2012

I recently compiled a list of which Canadian charities received funds from the Canadian Federal Government.

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January 04, 2014

Largest Gifts from Canadian Charities to other Qualified Donees - 2012

We recently reviewed the 2012 T3010 Registered Charity Information Returns for largest inter charity gifts.  Here is a list of all gifts over $500,000 from the 2012 T3010.

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December 22, 2013

Blumbergs 2013 Receipting Kit for Canadian Registered Charities

We have updated the Blumbergs’ 2013 Receipting Kit.

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December 19, 2013

CRA requests “Donate wisely this holiday season!”

CRA is putting out better notices on donating wisely.  I particularly like this advice “Get to know the charity.” Start by visiting the charity’s website to learn about its activities and how it’s managed. You can also review its financial information and activities by looking at its information returns using the CRA’s Charity Quick View at www.cra.gc.ca/charitylists. One of the best ways to learn about a charity is to volunteer.”

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December 18, 2013

Prescient Foundation leave to appeal dismissed with costs by SCC

On November 28, 2013 the Supreme Court of Canada denied leave to appeal in the case of Prescient Foundation v. Minister of National Revenue.  The SCC awarded costs against the appellant.

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December 08, 2013

Kossow appeal dismissed by Federal Court of Appeal - another abusive donation scheme crashes

The Federal Court of Appeal has decisively dismissed the Kossow appeal.  Kossow dealt with what CRA would term an “abusive charity gifting tax scheme”.  Kossow is the second major case dealing with these schemes, the first one being Marechaux.  The Federal Court of Appeal found this scheme was almost identical to Marechaux.  The FCA concluded that the Tax Court judge was correct in concluding that as in Maréchaux there was no gift for purposes of the Income Tax Act.  The FCA also dismissed other arguments such as that the TCC judgement was ‘not sufficient to permit meaningful appellate review’ or that including certain materials that were not admitted into evidence prejudiced the appellant.  The court was also not impressed with an argument that a family law case (McNamee) dealing with a gift has any relevance to a gift under the Income Tax Act.  According to the CRA there are over $6 billion in receipts issued under different abusive charity gifting tax schemes.

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December 07, 2013

Interesting US article on churches and transparency/accountability

John Montague has written an article entitled “The Law and Financial Transparency in Churches: Reconsidering the Form 990 Exemptions” in the Cardozo Law Review.  In the US, churches don’t have to file the Form 990 annual return, however, in Canada almost all churches that are registered charities need to file the T3010 on an annual basis.  The US Form 990 provides the US public with far more information than the T3010 in Canada.  That being many of the points raised by Mr. Montague about church governance, accountability and transparency are relevant to Canada.  It is important in Canada that we review the T3010.  We should improve the T3010 to provide important information to donors, volunteers and others about registered charities.  While the T3010 does provide a fair amount of information, it tends to focus too much on certain issues while ignoring others.

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December 04, 2013

Partial exclusion for Canadian registered charities from anti-spam legislation

Industry released today draft regulations to Canada’s Anti-spam Legislation (CASL) which will now come into effect on July 1, 2014.  An important exclusion that will be welcomed by registered charities is that the Act does not apply to an electronic message “(g) that is sent by or on behalf of a registered charity as defined in subsection 248(1) of the Income Tax Act and

the message has as its primary purpose raising funds for the charity”.  Keep in mind that if a charity is sending a commercial electronic message and this or other exclusions do not apply, then CASL will apply to the registered charity.  The exclusion “its primary purpose raising funds for the charity” was introduced to cover situations were a fundraising email involved some commercial activity such as the sale of a gala dinner ticket.  However, if the email fits in the definition of a commercial electronic message but it has a number of purposes, and raising funds is not the primary purpose, and another exclusion does not apply, then CASL applies.  The key takeaway for registered charities is that they are not exempted from CASL and that they should try and ensure that they have express consent from as many people as possible.

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Do you require legal advice with respect to Canadian or Ontario non-profits or charities?

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Charity Lawyer Mark Blumberg

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.

mark@blumbergs.ca
416.361.1982
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