Here is a press release from CRA relating to a tax preparer who pleaded guilty to fraud for filing false income tax returns with false charitable donation receipts.
I was on a panel today at the Green Living Show. There was an interesting discussion on the environment, political activities, and charities.
The Toronto Star covered the story of a tax preparer from Vaughan, Ontario who is a fugitive after having prepared thousands of tax returns with fraudulent charitable donation receipts amounting to millions of dollars. Most interesting is that the CRA cannot release a photo of the woman even though she is a fugitive. I think S. 241 of the Income Tax Act (confidentiality provisions) needs to be modified to allow CRA to release more information on charities and now tax preparer fugitives. I have sent submissions to Finance on that and lets wait and see.
Canadian registered charities must file the T3010 Registered Charity Information Return within six months of the end of their fiscal year, although some are not able to meet that deadline and file soon thereafter. It is a very important form because despite its limitations it is really the only uniform way to obtain information on all registered charities in Canada. Some people are surprised to find out that answers on the T3010 are not always reliable. I am going to make a few comments on the reliability of the T3010 and specifically with respect to questions relating to “political activities”.
The Charities Directorate of CRA has a guidance entitled “Political Activities” for Canadian registered charities. CRA notes in the guidance that it”... provides information for registered charities on political activities and allowable limits under the Income Tax Act (the Act). It also provides a framework that explains how we distinguish between political and charitable activities. In addition, it seeks to clarify the extent to which charities can usefully contribute to the development of public policy under the existing law. The guidance in this policy statement is based on subsections 149.1(6.1) and 149.1(6.2) of the Act and on general principles of charity law and court decisions that define what is charitable and what is political. This information applies to all registered charities.” While CRA’s Guidance is pretty good and will probably be improved over the next few months or years - it is of little assistance to a charity if they don’t know it exists or don’t read it.
Whether I like it or not the involvement of Canadian charities in political activities has become a major issue. Therefore, I am creating a new blog category on Canadian charities and political activities. The discussion has been squarely on environmental groups and the oil pipelines. It is interesting because environmental groups actually have very little funding compared to other far better funded charities and perhaps some environmentalists wish that all those funds can be used for political activities but in fact a tiny percentage of their funds of environmental groups receive are spent on political. If you are looking for the big bucks and political activities you are going to have to look elsewhere. The media in Canada will eventually wake up and follow a more balanced approach. In fact I will blog further on the US and UK - the big money and scrutiny has been on certain right wing groups using almost all their money on funding political activities - some of which are decidedly partisan. I guess one could say that a Pandora’s box has been opened and it will be interesting to see where it goes. It is important that Canadian charities follow the rules - whether environmental groups, “business” think tanks or religious organizations.
In an article by The Chronicle of Philanthropy by Caroline Preston entitled “Update: IRS Levies Fine on Food for the Hungry Over Drug Valuations” it describes how the US IRS has levied a penalty against a charity that misreported donations on its annual return.
Kathryn Blaze Carlson of the National Post has written another article on charities and political activities entitled “The politics of charity: When is a tax-exempt organization too political?”
Here is a short summary of the major provisions relating to charities in the 2012 Federal Budget - tried to keep it to 100 words but I did not make it.
The Globe and Mail published an article “New rules in budget ‘create more fear’ among politically active charities”.
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If you require legal advice with respect to Canadian or Ontario non-profits or charities please contact Mark Blumberg at .(JavaScript must be enabled to view this email address) or at 416-361-1982 x237 www.canadiancharitylaw.ca