June 14, 2013
The CRA has just released its new process for recognizing “municipal or public bodies performing a function of government in Canada”. This will be of particular interest to Aboriginal bands, school boards and others who may wish to obtain this recognition as it makes them a qualified donee and therefore able to issue official donation receipts and also more easily receive funds from other Canadian charities. We hope that this new process will facilitate philanthropy in the Aboriginal space. There are probably over a thousand organizations that could one day be listed on the CRA website, which will make donations to them far simpler and easier. It is important to note that as of January 1, 2014 for a group to be recognized under the category “municipal or public bodies performing a function of government in Canada” it cannot self-assess but must be on the list. Some organizations will want to proceed quickly with the process as CRA has not set out a service standard yet and therefore it is difficult to know how long the process will take. It is also interesting to note that “...organizations that apply before January 1, 2014, and that can show that they met the requirements to be a municipal or public body performing a function of government in Canada as of January 1, 2012, will be given qualified donee status retroactive to that date.” Although a lawyer is not required to send the letter to CRA some organizations may wish to retain legal counsel to assist with this and other matters such as appropriate issuance of receipts and required books and records.
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June 12, 2013
The Federal Court of Appeal (FCA) has overturned a Tax Court of Canada (TCC) decision in Guindon. The FCA found that, in this case in which no notice of constitutional questions was served by Guindon, “the Tax Court did not have the jurisdiction to find that section 163.2 of the Income Tax Act creates an offence, triggering the rights under section 11 of the Charter.”
The Court notes “[9] Ms. Guindon is a lawyer, practising mainly in the area of family law and wills and estates. She became involved in a charitable donation scheme called “The Global Trust Charitable Donation Program.” [10] Ms. Guindon provided a legal opinion vouching for the scheme. She signed tax receipts on behalf of the charity. In her legal opinion, she represented that she had reviewed certain documentation. She had not. The scheme was a sham. A full account of the facts appears in the reasons of the Tax Court.” The CRA assessment of penalties of $564,747 was upheld by the FCA.
The FCA explains the background of the Third-Party Civil Penalties and discusses in detail the penalties and even responds to some academic articles on the provision. The FCA noted “[37] In my view, the assessment of a penalty under section 163.2 is not the equivalent of being “charged with a [criminal] offence.” Accordingly, none of the section 11 rights apply in section 163.2 proceedings. In this regard, I disagree with the Tax Court’s conclusion on this question of law. [38] The Income Tax Act contains a complex web of provisions constituting a discrete regulatory and administrative field of endeavour with unique characteristics. Justice Wilson of the Supreme Court of Canada described it in this way: A chief source of revenue for the federal government is the collection of income tax. The legislative scheme which has been put in place to regulate the collection of tax is the Income Tax Act. The Act requires taxpayers to file annual returns and estimate their tax payable as a result of calculations made in these returns. In essence, the system is a self-reporting and self-assessing one which depends upon the honesty and integrity of the taxpayers for its success. (R. v. McKinlay Transport Ltd., [1990] 1 S.C.R. 627.) [39] The provision of accurate information that permits the proper calculation of tax is another aspect of self-compliance. This is achieved through tax returns, reports, certificates, forms and other information supplied. Timely elections, designations, reports and payments also allow for the efficient administration of the tax system. [40] Conduct that is antithetical to the proper functioning of this system must be deterred. Compliance and order within this self-assessment system must be maintained. This is done – in this administrative field of endeavour as in many others – through the imposition of administratively simple sanction or, as the Act calls them, penalties. Given the complexity and breadth of the discrete regulatory and administrative field of endeavour set up by the Act, the sanctions must be administratively simple. [41] Seen in this way, penalties under the Act are not about condemning morally blameworthy conduct or inviting societal condemnation of the conduct. They are not among the “most serious offences known to our law”: Wigglesworth, supra, at page 558. Rather, the penalties are about ensuring that this discrete regulatory and administrative field of endeavour works properly. [42] In my view, section 163.2 is mainly directed to ensuring the accuracy of information, honesty and integrity within the administrative system of self-assessment and reporting under the Act. The imposition of a section 163.2 penalty by way of assessment and the subsequent procedures for challenging the assessment are proceedings of an administrative nature aimed at redressing conduct antithetical to the proper functioning of the administrative system of self-assessment and reporting under the Act. Put another way, proceedings under section 163.2 aim at maintaining discipline, compliance or order within a discrete regulatory and administrative field of endeavour. They do not aim at redressing a public wrong done to society at large.”
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June 10, 2013
In March 2013 we published the “Blumbergs Canadian Charity Sector Snapshot 2011”. Now here is Blumbergs Canadian Charity Sector Snapshot for 2010 which will allow those who are interested to compare the 2010 and 2011 snapshots.
Posted by Mark Blumberg on 06/10 |
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Transparency
A final report entitled “Evaluation of the Tax Policy Branch” has been prepared by the Internal Audit and Evaluation of the Dept. of Finance. Those interested in tax policy may find it interesting.
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June 06, 2013
The Ontario Government has introduced The Companies Statute Law Amendment Act, 2013 on June 5, 2013 which “contains proposed consequential, clarifying and transitional amendments which are necessary to support proclamation of ONCA, which received Royal Assent in October 2010 and is targeted to come into force no earlier than January 2014.” Thanks to Cliff Goldfarb for the heads up.
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June 03, 2013
The Federal Court of Appeal released a judgment on May 1, 2013 relating to the revocation of the Prescient Foundation.
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June 01, 2013
The CFC 2013 Conference will be held in Winnipeg. I will be delivering a presentation on dealing with non-qualified donees. In honour of the conference and as part of the Sean Blumberg Transparency Project we have prepared some statistical information on the community foundation sector in Canada. Community Foundations in 2011 had $3.1 billion in assets ($3,128,321,435.00) and revenue of $338,109,753 and expenditures of $199,872,591.00. In total they are spending about 6.4 percent of assets on charitable and other expenditures.
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May 31, 2013
On October 15, 2013, Blumbergs will be having the 2nd Annual Blumbergs’ Canadian Charity Law Institute in Toronto. It will be a full day of practical legal and ethical compliance information geared toward charities, professional advisors and those interested in regulatory issues affecting charities.
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Here is a CRA letter from its Income Tax Rulings Directorate to the Charities Directorate on “municipal or public body performing a function of government” and the information and documents the Charities Directorate should request as part of an application process. The 2011 Federal Budget, CRA was allowed to publish a list of entities that are “municipal or public body performing a function of government”. They are qualified donees and can issue receipts. In this letter they discuss what is “municipal” and what is “public” and what is a “function of government”.
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Here is a CRA letter from the Income Tax Rulings Directorate to the Charities Directorate. It discusses “1) proposed eligibility criteria for application process to qualified donees list; and 2) application process and documentary requirements.”
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