Here are some of the upcoming charity law seminars I will be presenting through the Charity Law Information Program.  More dates and details will be announced.  For obvious budgetary reasons I can only visit some places every 2-3 years, so check the list and avoid disappointment!!  http://www.capacitybuilders.ca/clip/clip-training-events.php  A full day session is $40 - great value for charities, their staff and boards of directors

Here is information on some upcoming presentations I am doing with the Certified Management Accountants of Ontario on Top Compliance Issues for Canadian Registered Charities and their Directors in the GTA including Toronto, Mississauga, Markam, in the Kitchener-Waterloo area, in London, and in Ottawa.

It is good to see that the problem of abusive charity gifting tax shelter in 2009 has been further reduced.  Here are the stats from CRA:

One of the categories of qualified donees under proposed legislation is a municipal or public bodies performing a function of government in Canada.  Here is a CRA letter on whether an Indian band is a public body performing a function of government as is used in paragraph 149(1)(c) of the Income Tax Act?  It also discusses whether a subsidiary is tax exempt.

A bill to impose a salary cap on Canadian registered charties has passed 2nd reading and will shortly be reviewed by the Finance committee of the House of Commons.  As they say there is usually one simple solution to a complex problem that is totally wrong.  To have a single cap for all Canadian charities means that Canadian hospitals, research institutions, and universities will not even have a chance of being able to compete with other similar institutions around the world.  While it sounds appealing to cap salaries at $250,000 it is actually when you drill down to the details a very problematic piece of legislation.  You see it is not about what charities want to pay for things - every charity would ideally want everything for free.  Charities need to able to recruit people to accomplish their mission.  Charities should never pay more than they need to.  They should never pay more than fair market compensation.  But you cannot just put a one-size fits all number on what it is?  When there are only a few neurosurgeons you cannot pay what you want - you need to pay something related to the going rate for neurosurgeons or be prepared to do without them.  If you are a small community in the North and you want to have a specialist in your community you may have to pay that person more than a comparable hospital in Toronto or Chicago.

Here is a list of CRA 2010 Charities Information Sessions http://www.cra-arc.gc.ca/chrts-gvng/chrts/cmmnctn/sssns/nvttn-eng.html

I will be doing a number of programs for the Institute of Chartered Accountants of Ontario (ICAO) including on Top Compliance Issues - Registered Charities, Directors, CAs; Charity Fundraising and Receipting Rules and Recent Legal Developments Affecting Registered Charities.

I will be one of the presenters at an upcoming PFC program called Global Giving - Possibilities and Pitfalls.

Tomorrow, the Humanitarian Coalition will launch an appeal for flooded Pakistan. Here is a link to their website http://tiny.cc/rr9x7  For those who have not heard of the Humanitarian Coalition it is “a network of Canadian NGOs determined to unite in cases of humanitarian crises. Four of Canada’s leading aid organizations have founded the Humanitarian Coalition: CARE Canada, Oxfam Canada, Oxfam-Québec and Save the Children Canada.”

Here is the segment (2.5 minutes) with Sean O’Shea, a consumer reporter for Global TV.  Mark Blumberg, moi, is being interviewed along with much more serious, important, and influential characters such as Marcel Lauzière of Imagine Canada   http://www.globaltoronto.com/Video+Donor+beware/3378491/story.html 

The case involves the CRA denial of EFILING privileges to Mr. Christopher Paterson, an individual who prepares clients’ returns because he assisted them with a “scheme” in which the applicant “accepted money from taxpayers who wished to “donate” to these charitable organizations in exchange for an “enhanced receipt” for tax purposes (the scheme). The receipt provided to the taxpayer would reflect a much larger sum of money than was actually paid and would then be used in the preparation of the client’s tax return to provide the client with sizeable deductions from their taxable income.”  Mr. Paterson had objected to the CRA determination and the Federal Court upheld the CRA decision.  The CRA Chief of Appeals had noted “[The applicant’s] conduct was disreputable in nature because of [his] involvement in selling charitable donation receipts to [his] clients for gain. Further, [he] knowingly prepared returns using these donations receipts from which there were no actual contributions to the registered charities. As a result, [the CRA] find[s] that [his] conduct in this matter does not reflect positively on the integrity of the EFILE program…”  The court noted “While the applicant may not have had any reason to question the authenticity of the receipts his clients were being supplied, he most definitely knew that the amounts paid by his clients were not equal to the amounts they were given credit for when he was completing their income tax returns. There was evidently some sort of wilful blindness on the part of the applicant. The mere fact that the applicant did not believe this to be fraudulent does not detract from his admission that he participated in a scheme whereby taxpayers were making claims for the deduction of sums of money they never paid to these charitable organizations. As it is often said, ignorance of the law is no excuse.”

The Kootenay Doukhobor Historical Society v. The Queen case illustrates quite well that even if a non-profit and a staff person agree that the staff person is an independent contractor, there is an independent contractor agreement, and the staff person has considerable latitude in carrying out the tasks, the staff person can be found to be an employee. It is vital that non-profits and charities properly categorize staff. Failure to consider someone an employee when they really are an employee, and failure to withhold EI, CPP and income tax amounts, can result in considerable liability for a non-profit or charity. As well, directors of the non-profit or charity can be on the hook for the outstanding amount and this is probably the most common reason that the directors of a non-profit or charity would ever have personal liability.

Here is a list with the 2008, 2009 and 2010 major deregistrations along with a link to the CRA press release and scanned copies of the actual letters sent by CRA to the charities outlining their reasons for revoking or annulling their charitable status.

CRA has just released a new guidance called “Canadian Registered Charities Carrying out Activities Outside Canada”.  http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cgd/tsd-cnd-eng.html  Although the name suggests “foreign activities” this document deals with a lot more than foreign activities.  It covers the relationship between a Canadian charity and any non-qualified donee, whether in Canada or abroad.  If a Canadian charity has dealing with, for example, a non-profit that does not have charitable status then the same rules apply as a Canadian charity dealing with a foreign entity.  Essentially, almost all organizations outside of Canada are non-qualified donees.  If you are going to transfer resources to them you need to maintain “direction and control” over those resources.  This documents helps a Canadian charity understand what is required for direction and control. Failure to maintain direction and control can result in a 105% penalty of the amount transfered and/or revocation of charitable status.

Alberta requires some charities to register under its Charitable Fund-raising Act including those who raise $25,000 or more per year, or use a fundraising business to fundraise for the charity.  There are exclusions if your charity only fundraises from family or members, you only ask for in-kind goods (rather than cash) or you only do gaming such as bingo under the Alberta Gaming and Liquor Commission.  If you meet the registration requirements, and do not fit within one of the exceptions, then your charity must register with the Alberta government, even if you are registered with the Charities Directorate of the Canada Revenue Agency.

Here is a press release in which CIDA Minister Bev Oda announces further steps to achieve aid effectiveness. http://www.acdi-cida.gc.ca/acdi-cida/ACDI-CIDA.nsf/eng/CEC-722111726-KXG  There is also a backgrounder.  This document is a must read for any organization receiving CIDA funds or hoping to one day.  There is a lot in this document and it will be interesting to see if practically this make any real difference at CIDA.

With the recent changes in the 2010 Federal budget including the elimination of the 80/20 expenditure rule it became necessary for CRA to revise the T3010 Registered Charity Information Return. 

Here is a copy of my presentation to the Ontario Council For International Cooperation (OCIC) on “Advocacy and Political Activities for Canadian International Development Charities: Some Legal and Ethical Perspectives”.

There was recently an interesting case “Innovative Gifting Inc. v. House of the Good Shepherd” that involved charities.  This was not a case involving the Federal Court of Appeal or Tax Court - the usual places charity law issues are dealt with.  This case was in the regular Ontario court system - some “fundraisers” called Innovative Gifting were trying to enforce an agreement they had with a number of Canadian charities.  The long and the short of it, the court would not enforce the agreements as they found them to be void or voidable because they were counter to public policy and the agreements were “vague, uncertain and filled with inherent inconsistencies”.

Chris Sorensen of Macleans just wrote a piece entitled “An artful scheme: One firm’s pitch to help people use a tax shelter by buying and then donating old photos is raising eyebrows in the art world and words of caution from experts”.  It discusses a scheme called VIA (Vintage Iconic Archives) Project.

Here are some questions and answers from the CRA relating to the Application of the GST/HST to Canadian Registered Charities

Here is a revised version of the Canadian Charity Law Checklist by Mark Blumberg.
Canadian_Charity_Legal_Checklist_by_Mark_Blumberg.pdf

The Charities Directorate of CRA has added a number of new pages dealing with revoking registrations of Canadian registered charities.  Theses pages will help a charity that is either proposed to be revoked or has been revoked understand its rights and obligations.  Here is What’s New http://www.cra-arc.gc.ca/chrts-gvng/chrts/whtsnw/menu-eng.html and here is the section on revocation: http://www.cra-arc.gc.ca/chrts-gvng/chrts/rvkng/menu-eng.html

It is good to see more Federal and provincial cooperation in the charity area.  Here is a pamphlet jointly put out by Revenue Quebec and CRA entitled Charitable Donations and Gifts - Giving Wisely by Revenue Quebec and CRA.  It will be useful for donors.

The CRA is cracking down on tax preparers and others who issue false charitable donation receipts.

The Tax Court of Canada case Nantel, M. et al. v. The Queen provides an interesting discussion of valuation of art.  The court dismissed the taxpayers appeals and sided with the Canada Revenue Agency.

According to a press release from the CRA, a Canadian registered charity has had its status revoked for being part of a support network for a listed terrorist organization. 

The Department of Finance Canada has published “Legislative Proposals Notice of Ways and Means Motions” and “Explanatory Notes”.  Many readers will find the explanatory notes more helpful to understand the effect of these changes.  These proposals will generally try to incorporate many changes that have been previously announced over the last 8 or so years but have not made it into the Income Tax Act.  This includes changes dealing with ecological gifts, the definitions of charitable organizations/public foundation/private foundation, limited-recourse debt with gifts, provisions on gifting to a non-qualified donee, split receipting, deemed fair market value, greater disclosure and transparency about RCAAAs, including in the definition of qualified donee a “public body performing a function of government in Canada” and intercharity transfers.

IC84-3R6 Gifts to Certain Charitable Organizations Outside Canada was released and this circular cancels and replaces Information Circular
84-3R5, Gifts to Certain Charitable Organizations Outside Canada, dated May 31, 2000.  This is an update on the previous document and only allows Canadian charities to give to about 4 foreign charities and is therefore of little use to understanding how Canadian charities can work abroad. 

Here is my July 2010 Blumbergs Canadian Charity Law List.  To sign up just provide your e-mail address at: http://www.canadiancharitylaw.ca/index.php/pages/subscribe/

The CRA has laid charges against a promoter of an art donation scheme in which there was a donation of overvalued artwork to the Municipality of Larouche.  Municipalities are qualified donees entitled to issue official donation receipts just like registered charities.  It will be interesting to see if some of the promoters of similar schemes involving charities are also charged?

The world changed on July 14, 2010.  Well at least all links to the Charities Directorate website changed that day - so if you have an old link in most cases it will take you to a referral page and show you the right web address/URL.

This case involves an accountant, Mr. Michael George Perris, recommending a charity tax shelter scheme to his client that was unsuccessful.  The case deals with whether this accountant is a fiduciary and if so whether he breached his fiduciary duties to his client.  In this case the court found that the accountant had a fiduciary relationship with the client.  The accountant had received a fee from the promoters for referring the matter,had not appropriately disclosed the “secret commission” and the court found that he did not act in the best interest of his clients. The judge noted “The legal opinions, which lent apparent legitimacy to the scheme, were carefully crafted and laid out assumed sets of facts that bore little resemblance to the circumstances of the actual transactions that were recommended.”  The court found that despite the plaintiffs being sophisticated business people “The Lembergs were vulnerable, in the sense that they trusted Mr. Perris’s integrity, and the independence of his advice.”  It will be interesting to see if there are more cases against professional advisors such as lawyers, accountants and investment advisors, who may have recommended that their clients participate in such schemes.  There are already 3 class action lawsuits against law firms for providing the opinion letters in different charity gifting tax shelter schemes

In this letter CRA discusses “Whether the adjusted cost basis is a reasonable proxy for “cost” of an interest in a life insurance policy in applying the deeming provisions of 248(35) with respect to a gift to a qualified donee in certain circumstances.”

This article entitled “With social media, know potential risks and plan ahead” provides some tips for charities interested in using social media.  The article appeard in Canadian Fundraiser and Philanthropy, July 15, 2010.

CRA has just released a new guidance called “Canadian Registered Charities Carrying out Activities Outside Canada”.  http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cgd/tsd-cnd-eng.html  Although the name indicates “foreign activities” this document deals with a lot more than foreign activities.  It covers the relationship between a Canadian charity and any non-qualified donee, whether in Canada or abroad.  If a Canadian charity has dealing with, for example, a non-profit that does not have charitable status then the same rules apply as a Canadian charity dealing with a foreign entity.  Essentially, almost all organizations outside of Canada are non-qualified donees.  If you are going to transfer resources to them you need to maintain “direction and control” over those resources.  This documents helps a Canadian charity understand what is required for direction and control. Failure to maintain direction and control can result in a 105% penalty of the amount transfered and/or revocation of charitable status.

Here is a sample contractor agreement for a Canadian registered charity conducting foreign activities.  One of the elements of having direction and control for a foreign intermediary is to have a written agreement.  Therefore it is important that charities have such a written agreement.

The CRA has just released a revised version of their document “Donations to Prescribed Universities Outside Canada”.  It has helpful information for foreign universities interested in being designated a “prescribed university”.  Although this document just hints at it - it is vitally important that these prescribed foreign universities strictly follow the Canadian rules dealing with providing an official donation receipt for a “gift”.  Failure to do so could result in your donor not getting the Canadian tax benefits they had hoped for.  As well prescribed universities can be removed from the list and if that happens it is unlikely they will ever be recommended for return.  I have prepared webinars and presentations on the subject if you are interested and if you want a basic webinar on appropriate receipting you can find it at: http://www.capacitybuilders.ca/clip/clip.php

Here is a link to the upcoming Ottawa seminar http://capacitybuilders.ca/files/resources/July_8_Brochure_-_Mark_-_United_Way_Ottawa_1277220137.pdf

here is CRA’s Charities Connection #3 http://www.cra-arc.gc.ca/chrts-gvng/chrts/cmmnctn/nwslttrs/cnnctn/cnnctn03-eng.html

Here is the Blumbergs Canadian Charity Law List - June 2010 -if you would like to be on our mailing list you can do so at: http://www.globalphilanthropy.ca/index.php/pages/subscribe/  If you find the information useful please forward to friends.  There is no charge and you will receive about 1 e-mail per month or two.

Here is a note by Wayne D. Gray and Lydia Wakulowsky of McMillan on Bill 65, the Ontario Not-for-Profit Corporations Act, 2010.  It provides a short summary of the legislation.

Industry Canada last week released draft regulations for the CNCA, the new Federal non-profit act.  There is also a “Notice from the Director — Consultation on proposed Canada Not-for-profit Corporations Regulations” dated June 25, 2010 which contains an explanatory note and a “Consultation on proposed Canada Not-for-profit Corporations Regulations”.  Industry Canada is launching a consultation on proposed
regulations under the Canada Not-for-profit Corporations Act.  Industry Canada has requested that comments on the Canada Not-for-profit Corporations Act (CNCA) be submitted by October 1, 2010.

I will be leading two new workshops for the Charity Law Information Program (CLIP) on two hot legal issues - Fundraising Compliance and Appropriate Receipting.  One can attend them both, plus a networking lunch, for $50, or each workshop is $25.  Many thanks to Canada Revenue Agency for supporting this initiative as part of its Charities Partnership and Outreach Program (CPOP).  The workshop takes place July 5, 2010 in Toronto.  The brochure is here http://tinyurl.com/2aeaddm  (for information on a similar workshop in Ottawa see http://capacitybuilders.ca/files/resources/July_8_Brochure_-_Mark_-_United_Way_Ottawa_1277220137.pdf )

Here is a copy of my article “How Much Should A Canadian Charity Spend on Overhead?” which was just published in the Canadian Donor’s Guide at http://www.donorsguide.ca/pdfs/Blumberg.pdf

The US-based Hudson Institute has released its 2010 Index of Global Philanthropy and Remittances. It contains lots of statistics about official development assistance (ODA), international philanthropy and remittances. On the plus side if you add ODA, international philanthropy and remittances together Canada scores second to Sweden in terms of overall GDP spent, with Canada spending 1.26% of GDP. “Canada jumps from fifteenth to second place, mainly as a result of the large remittance outflows from Canada to developing countries, which alone make up .83% of Canada’s G.N.I. [Gross National Income]” (see page 15 of the report)

The long anticipated report by Commissioner John C Major entitled “Air India Flight 182: A Canadian Tragedy” was released today. 

CRA in a letter discusses certain issues that were posed at the 2008 STEP National Conference.  Question 12 dealt with Third-Party Civil Penalties and it noted that as of April 21, 2008 12 such cases existed of which “2 relate to an offensive donation arrangement”.  Since then there have been other Third-Party Civil Penalties against those involved with abusive charity donation schemes.

In this letter CRA discusses “Will a corporation that is being incorporated under provincial non-profit legislation be tax-exempt under paragraph 149(1)(l) of the ITA?”  CRA notes “Paragraph 149(1)(l) of the Act (set out below), provides an exemption from tax for organizations that meet certain criteria.  The term “non-profit organization” does not have a specific meaning for federal income tax purposes; the Act does not define or use the term “non-profit organization”.  However, we understand that it is common to refer to organizations qualifying for this tax exemption as “non-profit organizations”.  Unfortunately, this can lead to confusion, as it means that an organization can be incorporated by a federal or provincial statute that uses the term “non-profit organization” (or something similar), but still not qualify for the tax exemption.  In other words, the method of creating the organization does not affect whether the organization qualifies for the tax exemption.  The tax exemption only applies if all the required conditions of paragraph 149(1)(l) are met, no matter how the organization is otherwise described or how it is set up. 

The UK Charity Commission has published some revised guidance for UK charities on risk management, financial difficulties and insolvency, financial reserves and internal financial controls.  While UK law is not identical to Canadian law these documents provide very helpful information for Canadian charities.

I frequently receive e-mails from people, or relatives of people, who have been involved in an abusive charity gifting tax shelter.  I thought I would share one of those e-mails and also my response.  Abusive charity tax shelters - it is more than a legal issue (they don’t work), it is more than an ethical issue (they are highly unethical), there is a huge emotional toll associated with these schemes and the 10 or so year process of worry and uncertainty.  I received the permission of the person to reproduce the e-mail exchange.

CRA has updated the form for Canadian registered charities to file with CRA if the charity has made errors in its T3010 Registered Charity Information Return and related forms.  The form can be found at: http://www.cra-arc.gc.ca/E/pbg/tf/t1240/README.html  It is important that Canadian registered charities not only file their T3010 but also complete it accurately.  Many donors and funders look at the T3010 and errors on that form can undermine a charity’s ability to obtain donations and funding.

Not all public appeals are from registered charities.  Sometimes these appeals are spontaneous in response to a disaster or tragedy.  The Uniform Law Commission of Canada has circulated a consultation paper on the topic and the ULCC tries to encourage more uniform and better legislation across the country.  Here is a copy of the consultation paper.

This press release from CRA reminds donors that they can use CRA’s database of charities to check whether a charity is registered and also that CRA deregisters charities who are seriously non-compliant.

The Honourable Keith Ashfield, Minister of National Revenue, announced today contribution funding for seven new projects dealing with fundraising, transparency and false receipting under the Charities Partnership and Outreach Program (CPOP) of the Canada Revenue Agency (CRA).  One of the registered charities that received funding was the Ontario Community Support Association and its Charity Law Information Program (CLIP).  I have been involved with CLIP programs since last year and you can find out more about CLIP at http://www.capacitybuilders.ca/clip/clip.php including some archived webinars that I did in the last year.

Here is an article I wrote for Charity Village entitled “Is it legal and ethical to take over a dormant Canadian charity? ”  http://www.charityvillage.com/cv/archive/aeth/aeth10/aeth1006.asp

This CRA letter discusses the clergy residence deduction and “Is an Executive Director of a charitable organization eligible for a clergy residence deduction pursuant to paragraph 8(1)(c) of the Act.”

Another class action lawsuit has been launched in Canada with respect to a charity donation tax shelter arrangement.  The class action law suit concerns Donations Canada Charitable Donation program which was a program marketed by Parklane Financial Group Limited.

The CRA revoked the registered status of the Canadian Lacrosse Association “For issuing more than $60.7 million in donation receipts for abusive transactions arising from its role as a participant in tax shelter arrangements that, in the opinion of the Minister, do not qualify as gifts…”

CRA just revised its “Goods and services tax/harmonized sales tax (GST/HST) checklist for charities”. 

The Charities Directorate has added some new web pages about the process of a revoked charity re-registering for charitable status.  The process for re-registering a charity can be far more difficult than setting up a new charity and it is important that the charity fully understand what is required of it and the importance of meeting certain timelines. 

Here is an article by FLA Group entitled “Legacy Marketing Overview March 2010”  The article has some interesting statistics and thoughts on the importance of encouraging bequest giving. I agree that Canadian charities do not spend enough time doing this type of planned gift and we are far behind places like the UK.  Hopefully this article will encourage some to put more time and resources into this area. 

The CRA recently discussed “Whether in the particular circumstances, financial assistance provided by an employer to its employees’ extended families in the XXXXX who were directly affected by the hurricanes and typhoons in XXXXX, would be taxable to the employees.”  The CRA concluded “Probably not, as long as it is a one-time payment that is not remitted to the employees directly and will not result in the employees foregoing any present or future employment compensation as a result thereof.”  CRA went on to state that “In these specific facts and circumstances, it is likely that the financial assistance is made in a personal capacity, for philanthropic reasons and not as a payment for services performed by, or conferred as a benefit to, the employees.”  CRA also noted that these funds in this circumstance would not be deductible to the Corporation either as a charitable donation under section 110.1 of the Act or “deductible under paragraph 18(1)(a) of the Act,  as the payments are not outlays or expenses made or incurred for the purpose of gaining or producing income from the Employer’s business.”

Members of a board of directors of a charity should not be compensated for their work. In Ontario, generally directors of charities are not entitled to compensation for serving on the board of a charity. In fact, by being a director of a charity that operates in Ontario you are very much constrained in terms of any dealings you have with the charity. 

Here is a short article Leaving a Bequest to a Canadian Charity - using a lawyer to avoid common legal problems with bequests - June 2010, which discusses the value of using an estate lawyer who is knowledgeable about bequests.