What's New from the Charities Directorate of CRA
May 23, 2013
CRA sending “Notice of Filing Omission” to Canadian charities who don’t file financial statements
The CRA has been sending out a “Notice of Filing Omission” to charities who don’t file their financial statements with the T3010. This is an important reminder that you don’t have to just file the T3010 - you also need to complete it properly and attach necessary schedules and financial statements.
The notice states:
“This notice is to advise that the Form T3010, Registered Charity Information Return, recently filed on behalf of the charity for its fiscal period ending ..... , did not include a copy of the charity’s own financial statements. To comply with the filing requirements, you must send in a copy of these financial statements within 30 days from the date of this notice. Failure to comply with this requirement could result in a range of actions up to and including revocation of the charity’s
registered status.
Mail the financial statements to:
Charities Directorate
Canada Revenue Agency
Ottawa ON K1A OL5
You can also send them by fax to 613-957-8925.
FOR IDENTIFICATION PURPOSES, PLEASE ATTACH THIS NOTICE TO YOUR REPLY.
At a minimum, financial statements consist of a statement of assets and liabilities, and a statement of revenue and expenditures for the fiscal period. They should show the different sources of a registered charity’s revenue and how it spent its money.
By law, the Canada Revenue Agency can now make these financial statements available to the public upon request.
If you have questions about this notice, please write to the Charities Directorate at the address given above. You can also reach the Directorate by calling:
1-800-267-2384
1-800-665-0354 for TTY service for persons with a hearing or speech impairment.
Visit our Web site at http://www.cra.gc.ca/charities.”
May 12, 2013
FCA dismisses appeal by Gateway City Church
In Gateway City Church and The Minister of National Revenue, the Federal Court of Appeal dismissed Gateway’s appeal to prevent the Minister from revoking its charitable status. CRA revoked the registered charity’s registration for 3 reasons namely “Failure to maintain adequate books and records, failure to devote all of its resources to its own charitable activities, and provision of personal benefits to a proprietor, member, shareholder, trustee or settlor”. The Court noted ”...the Church’s application can be granted only if the Church meets the test for the granting of stays and injunctions. The Church must show as per (RJR-MacDonald v. Canada (Attorney General): it has an arguable case against the revocation, it will suffer irreparable harm if the revocation is allowed to happen, and the balance of convenience lies in its favour.” The FCA found that Gateway did not meet the test for irreparable harm and dismissed the application. The FCA provided a detailed analysis of the irreparable harm requirement including some tangible examples of why Gateway did not meet the test.
In terms of “irreparable harm” the Court noted:
“[13] If the Church’s registration as a charity is revoked, it will not be able to issue receipts for donations. Future donors will not be able to claim deductions for their donations. The Church says donations will fall off, preventing it from doing essential work for its congregation and the wider community.
[14] Such a general assertion is insufficient to establish irreparable harm: Holy Alpha and Omega Church of Toronto v. Canada (Attorney General), 2009 FCA 265 at paragraph 22. That sort of general assertion can be made in every case. Accepting it as sufficient evidence of irreparable harm would unduly undercut the power Parliament has given to the Minister to protect the public interest in appropriate circumstances by publishing her notice and revoking a registration even before the determination of the objection and later appeal.
[15] General assertions cannot establish irreparable harm. They essentially prove nothing:
It is all too easy for those seeking a stay in a case like this to enumerate problems, call them serious, and then, when describing the harm that might result, to use broad, expressive terms that essentially just assert – not demonstrate to the Court’s satisfaction – that the harm is irreparable. (Stoney First Nation v. Shotclose, 2011 FCA 232 at paragraph 48.) Accordingly, “[a]ssumptions, speculations, hypotheticals and arguable assertions, unsupported by evidence, carry no weight”: Glooscap Heritage Society v. Minister of National Revenue, 2012 FCA 255 at paragraph 31.
[16] Instead, “there must be evidence at a convincing level of particularity that demonstrates a real probability that unavoidable irreparable harm will result unless a stay is granted”: Glooscap, supra at paragraph 31. See also Dywidag Systems International, Canada, Ltd. v. Garford Pty Ltd., 2010 FCA 232 at paragraph 14; Canada (Attorney General) v. Canada (Information Commissioner), 2001 FCA 25, 268 N.R. 328 at paragraph 12; Laperrière v. D. & A. MacLeod Company Ltd., 2010 FCA 84 at paragraph 17.
[17] In this case, the evidence tendered by the Church falls short in a number of respects:
● The evidence shows that the Church’s members seem loyal and have donated much in past years. Much is said about the Church’s importance and value to its congregation and the community. Will donors suddenly reduce their donations to zero because they cannot obtain a charitable receipt?
● There is no evidence from donors in the record. It is speculative to conclude that donations will fall off to such an extent that the Church’s existence is imperilled.
● Even if donations fall off to some extent, there is no evidence showing how this will affect the Church’s overall budgetary position. What is the Church’s budgetary position? What assets does it have? What liabilities does it have? Between now and the ultimate determination of the Church’s objection or later appeal, what financial events will take place? The record is silent.
● The Church asserts that it will no longer be able to rent facilities for its services and Bible classes. It adds that benevolence assistance to local food banks and single-parent households in need will stop. It says that other beneficial payments it makes will stop. But without information about the financial circumstances of the Church and the size of these expenditures, these assertions cannot qualify as irreparable harm.
[18] Irreparable harm must be demonstrated, not just asserted. Demonstration is achieved by supplying particular information that empowers the Court to find the existence of harm that cannot be repaired later. In the record before this Court, there is only assertion, not demonstration.
[19] Counsel for the Church fairly conceded that particularity was missing from the evidence the Church tendered. However, he urged the Court to view this in the context of this application – a proceeding brought urgently, with little time to prepare.
[20] I accept there was urgency in bringing this application. However, to some extent, the urgency was created by the Church’s delay in retaining and instructing counsel.
[21] In her notice of intention, the Minister told the Church it had thirty days to apply to this Court for relief. Thirty days was more than enough time for the Church to retain counsel and file evidence disclosing the particular information known to it and readily at hand.”
Here is a copy of the Federal Court of Appeal decision:
Gateway City Church v. Minister of National Revenue_.pdf
CRA letter responding to questions from 2011 CTF National Conference CRA Round Table
CRA has released a letter providing responses to the questions posed at the 2011 Canadian Tax Foundation National Conference. CRA provides comments on the NPO Risk Identification Project and various comments on previous Interpretation Bulletin’s regarding NPO’s that have been released. It is interesting to note CRA identifies that there “39,000 entities that file T2, T3 and/or T1044 returns.” There are a large number of non-profits that do not need to file such returns and presumably some NPOs that are supposed to file but don’t. The bulletin also discusses profit that is “incidental” and what are reasonable operating reserves for a non-profit.
CRA letter responding to questions from 2011 CTF National Conference CRA Round Table.pdf
LANGIND E
DOCNUM 2011-0426111C6
AUTHOR Burnley, Pamela
DESCKEY 20
RATEKEY 2
REFDATE 111127
SUBJECT 2011 CTF Question re NPOs
SECTION 149(1)(l)
SECTION
SECTION
SECTION
$$$$
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu’exact au moment émis, peut ne pas représenter la position actuelle de l’ARC.
PRINCIPAL ISSUES: General questions about 149(1)(l)
POSITION: General positions provided.
November 27-29, 2011 CTF (Canadian Tax Foundation) Question regarding paragraph 149(1)(l)
1. At the 2010 CTF National Conference CRA Round Table, the CRA commented that the findings of the NPO Risk Identification Project would “increase the CRA’s information about the NPO sector and […] assist in the determination of: - the level of non-compliance in the sector; - any significant data gaps that may require mandatory filing of prescribed forms; and – whether recommendations to the Department of Finance for more robust legislation are necessary”.
a) Can the CRA provide an update on the status of the NPO Risk Identification Project?
CRA’s response
* The CRA, through the Non-Profit Organization Risk Identification Project (NPORIP), has identified about 39,000 entities that file T2, T3 and/or T1044 returns claiming exemption under this provision. The CRA will audit 1,440 randomly selected NPOs over three years, approximately 480 files each year.
* The Project is currently in its second year.
* The audits start as a review of the organizations’ tax-exempt status, followed by a full-scope audit of the corporate file. The majority of organizations will not be re-assessed.
* Should an entity claim but not qualify for the exemption under 149(1)(l) of the Income Tax Act , the CRA will conduct a full compliance audit of the corporate file and associated amounts reported on the T1044, T2 and T3 returns.
* The results of the NPORIP will allow the CRA to determine the compliance risk in the sector and recommend courses of action if required.
* The results of the audit findings will be compiled in a report to assist with the development of a compliance strategy.
* As this is a research project, it would be premature at this time to comment on the results of the pilot and what further courses of action would be recommended.
b) Will the CRA be recommending changes to the relevant legislation?
CRA’s response
If the NPO Risk Identification Project identifies particular areas of concern within the NPO sector, this information will be shared with the Department of Finance.
2. In 2009, the CRA issued a number of technical interpretations that appeared to signal a more restrictive approach to paragraph 149(1)(l) than that set out in Interpretation Bulletin IT-496R, “Non-Profit Organizations”.
Does IT-496R continue to reflect the views of the CRA?
CRA’s response
Interpretation Bulletin IT-496R, “Non-Profit Organizations”, generally continues to reflect the views of the CRA. Interpretations issued since the bulletin was written in 2001 clarify and, in limited cases, modify our comments in the bulletin.
3. The interpretation of the requirement in paragraph 149(1)(l) that an organization be “organized and operated exclusively for social welfare, civic improvement, pleasure or recreation or for any other purpose except profit” has proved particularly contentious.
In one 2011 document (2010-0380581I7), the CRA stated that “[l]imited fundraising activities involving games of chance (e.g., lotteries, draws), or sales of donated or inexpensive goods (e.g., bake sales or plant sales, chocolate bar sales), generally do not indicate that the organization as a whole is operating for a profit purpose” (emphasis added).
However, the CRA has also stated that, in its view, the use of the word “exclusively” in paragraph 149(1)(l) indicates that while an organization may have many purposes, none of those purposes may be to earn a profit such that, where an organization intends, at any time, to earn a profit, it will not be exempt from tax under paragraph 149(1)(l) even if it expects to use or actually uses that profit to support its not-for-profit objectives.
How should these statements be reconciled?
CRA’s response
Profits from fundraising activities described in the 2011 document are usually incidental when viewed in terms of the amounts involved and in relation to the operations of an organization as a whole. Consequently, the CRA does not view these activities as indicating a profit purpose. Earning profits that are not incidental may indicate that an organization has a profit purpose even if the profits are destined to support the not-for-profit objectives of the organization or another organization.
4. When will the CRA consider profit to be “incidental” to an organization’s exclusively not for-profit purposes? For example, assume an organization – that is not a charity – is organized exclusively for a purpose other than profit.
a) Could the organization put on an event connected to its not-for-profit activities that is intended to generate a profit?
b) Would the amount of the profit (in absolute dollars or relative to the organization’s other revenues or expenses) be relevant?
c) Would it make a difference if the profit generated by the event were used to (i) pay down long-term debt, (ii) establish a reserve for future years, or (iii) defray the organization’s general operating expenses such that, on the whole, the organization operates on a break-even basis for the year?
CRA’s Response
An organization can put on an event connected to its not-for-profit activities and earn a profit as long as the profit is incidental. Whether profit is incidental depends on the amount involved and the scope and nature of the activities compared to the operations of the organization as a whole.
The amount of the profit, both in absolute dollars and especially relative to the organization’s other revenues and expenses, is relevant.
If the profit generated by the event is incidental, it does not matter how the profit is used to meet the organization’s not-for-profit objectives, as long as the income is not payable to, or otherwise available for the benefit of members. Any reserve established for future years should be limited to identified, specific (operational or capital) needs; a reserve established for the purpose of generating investment income will likely indicate that the organization is not operating exclusively for a purpose other than profit.
5. The CRA has stated that “[m]aintaining reasonable operating reserves or bank accounts required for ordinary operations will generally be considered to be an activity undertaken to meet the not-for-profit objectives of an organization” (2010-0380581I7).
Can the CRA provide a rule of thumb as to the quantum of accumulated income that the CRA would generally consider to be acceptable?
CRA’s Response
No. As explained in Interpretation Bulletin IT-496R, “Non-Profit Organizations”, the amount of accumulated excess income considered reasonable in relation to the needs of an organization to carry on its not-for-profit activities and goals is a question of fact in each situation to be determined with regard to the organization’s particular circumstances.
Pamela Burnley
2011-042611
CRA letter on “municipal or public bodies performing a function of government in Canada”
CRA recently released a letter that provides general comments and suggested information that needs to be submitted to the Charities Directorate of the CRA when municipal or public bodies performing a function of government in Canada are applying to be a ‘qualified donee’. This new requirement to apply and be registered on a publicly available list of qualified donees came into effect on January 1, 2012. This category is particularly relevant to the Aboriginal community such as Indian bands. The CRA is still developing the process for applying for registration. However, this letter provides groups with an idea of the information that CRA would require.
CRA letter on “municipal or public bodies performing a function of government in Canada”
LANGIND E
DOCNUM 2011-0428491I7
AUTHOR Burnley, Pamela
DESCKEY 26
RATEKEY 2
REFDATE 130307
SUBJECT Paragraph 149(1)(c)
SECTION 149(1)(c), 149(11), 149.1(1)
SECTION
SECTION
SECTION
$$$$
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu’exact au moment émis, peut ne pas représenter la position actuelle de l’ARC.
PRINCIPAL ISSUES: Request for our views on a “municipal or public body performing a function of government in Canada” within the meaning of paragraph 149(1)(c) of the Act for the purpose of the definition of “qualified donee” in subsection 149.1(1) of the Act.
POSITION: General comments and suggested information/ documentation to be submitted to the Charities Directorate for registration purposes given.
REASONS: Municipal or public bodies performing a function of government in Canada must apply to the Charities Directorate to be a “qualified donee” to be able to issue charitable donation receipts for gifts received.
March 7, 2013
Charities Directorate Headquarters
Policy, Planning and Legislation Income Tax Rulings Directorate
P. Burnley
Attention: Susan Mott (613) 957-8961
2011-042849
Qualified Donee – Municipal or Public Body Performing a Function of Government in Canada
We are writing in response to your request for our views with respect to a “municipal or public body performing a function of government in Canada” pursuant to paragraph 149(1)(c) of the Income Tax Act (the “Act”). Your request has arisen due to the requirement that, as of January 1, 2012, a municipal or public body performing a function of government in Canada must apply for registration with the Canada Revenue Agency (“CRA”) in order to become or remain a qualified donee in subsection 149.1(1) of the Act.
Specifically, a municipal or public body performing a function of government in Canada that has applied to and is registered by the Minister of Revenue, is a “qualified donee” pursuant to subparagraph (a)(iii) of the definition of “qualified donee” in subsection 149.1(1) of the Act. Sections 118.1 and 110.1 of the Act provide that within specified limits, and if supported by official receipts, individual taxpayers may claim a credit against taxes payable, and corporations may claim a deduction in computing taxable income, respectively, for an eligible amount of a gift made to a “qualified donee”. The qualified donee must be shown on a list maintained and made public by the CRA. The requirement to apply for, be registered, and be maintained on a publicly available list became effective January 1, 2012.
We understand that the Charities Directorate is currently developing a process for a municipal or public body performing a function of government in Canada to apply for registration as a qualified donee and is seeking our assistance in this regard.
Our comments
Municipal or public body performing a function of government in Canada within the meaning of paragraph 149(1)(c) of the Act
Municipal body
The term “municipal body” is not defined in the Act. However, we consider a municipal body to have similar characteristics to a municipality. In this regard, a municipal body is typically considered to be a body established or exercising a power under a municipal act or a similar statute of a province or territory with respect to governing the affairs or purposes of a geographic area and is accountable to those governed by it.
Public body
The term “public body” is also not defined in the Act. A public body is typically a body that acquires both its existence and its authority from a statute enacted by a legislature, and whose functions and transactions are for the benefit of, and affect the whole community of, persons to which its authority extends. Generally, a public body has a governance purpose and is accountable to those governed, regulated or represented by it.
Generally, a public body is:
1. An Indian band as defined in the Indian Act with procedures to elect Chief and council.
2. Other Aboriginal governments with election procedures.
3. A body (whether incorporated or not, the members of which may be elected or appointed) established under or as a result of implementing a statute with specific authorization and duties assigned by the statute to the body to develop, administer or regulate governance functions.
Further, in our view, if a public body is incorporated, the federal government or a provincial or territorial government, or the “public” that the corporation is serving or representing should have some specific control over the actions and operation of the corporation and the corporation should be accountable to either that government or that public.
Performing a function of government in Canada
In addition to being a municipal or public body, an entity must also be performing a “function of government” in Canada in order to qualify for the exemption from tax provided by paragraph 149(1)(c) of the Act. Again, the term “function of government” is not defined in the Act and reference must be made to the ordinary usage of this term.
A government typically taxes its residents and sets laws for the orderly management of the area over which it has jurisdiction. As part of managing the area, the government provides a wide variety of services. It is important to note that any particular service provided by a government is not necessarily equivalent to a “function of government”.
In our view, a function of government generally means an activity or group of activities undertaken to meet a governance role or purpose within a geographic area. Historically, the CRA has required that to be performing a function of government an entity must have the ability and powers to govern, tax, pass by-laws and/or provide municipal- or provincial-type services to its members/citizens.
The CRA has accepted that providing a range of municipal-type services, such as water, sewage removal, the pick-up of garbage and the maintenance of infrastructure such as roads, sewers and public buildings is a function of government. Further, providing a key service traditionally offered by the provinces or territories such as social services, overseeing of the environment, health services, and education is generally considered to constitute performing a function of government. The CRA also accepts that negotiating a treaty with the federal government, or a provincial or territorial government, is a function of government.
Accordingly, performing a function of government may be demonstrated by the following:
* Laws and Taxation
- Enacting and enforcing laws, by-laws or rules which all citizens (or, in the case of an Indian band or other Aboriginal government, all of the band’s or other Aboriginal group’s citizens or members) must follow.
- Imposing and collecting taxes.
* In the case of an Indian band or other Aboriginal government:
- Negotiating and implementing a treaty or self-government agreement with the Crown (e.g., a federal, provincial or territorial government), and continued administration of the agreement.
- An Indian band has passed by-laws under both sections 81 and 83 of the Indian Act.
- An Indian band has passed by-laws under both section 81 of the Indian Act and subsection 5(1) of the First Nations Fiscal and Statistical Management Act.
* Being responsible for and providing provincial-type services or a range of municipal-type government services as follows:
Provincial-type services
* Education
* Health care
* Protection of the environment
* Natural resources
* Designation of park land and other special use property
Municipal-type services
* Sewage removal
* Waste disposal
* Water treatment and delivery
* Building of infrastructure
* Maintenance of infrastructure (such as sewers, public buildings and maintaining and clearing of roads)
* Public transit
* Fire protection services
* Police services
* Paramedic/ambulance services
* Recreational services
* Social services
* Library services
Note that any one of these activities or services may not be sufficient for the entity to be considered a municipal or public body performing a function of government; it depends on the scope of the service or activity.
Geographical boundaries
As mentioned, we would expect a municipal or public body performing a function of government in Canada to have a governance role or purpose within a geographic area.
Proposed subsection 149(11) of the Act provides that the geographical boundaries of a municipal or public body performing a function of government to be either:
“…(a) the geographical boundaries that encompass the area in respect of which an Act of Parliament or an agreement given effect by an Act of Parliament recognizes or grants to the body a power to impose taxes; or
(b) if paragraph (a) does not apply, the geographical boundaries within which that body has been authorized by the law of Canada or a province to exercise that function…”
The explanatory notes explain that proposed subsection 149(11) of the Act is added to define, for the purposes of section 149, the geographical boundaries of a municipal or public body performing a function of government in Canada. The explanatory notes state:
“For example, if a particular self-governing First Nation meets the definition of “a public body performing a function of government in Canada,” it is intended that the relevant geographic boundary would delineate the area where the self-government agreement, or the statute enacting self-government powers, provides the First Nation authority to impose direct taxes. As a second example, if a particular Indian Band meets the definition of “a public body performing a function of government in Canada,” it is intended that the geographic boundary of the Indian Band be the band’s reserves as defined in the Indian Act. Similarly, if a particular school board meets the definition of “a municipal or public body performing a function of government in Canada” it is intended that the geographic boundary of the school board be the area of jurisdiction of the board as defined by provincial legislation or regulation.”
Application process
As mentioned, your Directorate is currently developing the process for a municipal or public body performing a function of government in Canada to apply for registration as a qualified donee (the “Applicant”). You have requested assistance with respect to the documentation required of an Applicant for registration as a qualified donee.
In our view, an Applicant must clearly provide support to indicate that it is a municipal or public body performing a function of government in Canada. Presently, as there is no prescribed form to apply for registration, an Applicant should submit a letter to the CRA (Charities Directorate) and include documentation such as the following:
* Identifying information of the Applicant, i.e., name, mailing address, business number, tax services office and tax centre servicing the entity.
* A statement as to whether, to the best of the Applicant’s knowledge, the issue of whether the Applicant is a municipal or public body performing a function of government in Canada, within the meaning of paragraph 149(1)(c) of the Act, is being considered or has previously been considered by the CRA.
* If the Applicant has previously been determined by the CRA to be a municipal or public body performing a function of government in Canada, a copy of the determination letter or of the advance income tax ruling letter, or any other relevant correspondence previously issued by the CRA.
* A complete description of the Applicant. The description should include:
* an explanation of how the Applicant was created and how it is organized (how the officials are elected or appointed);
* the Applicant’s purpose;
* the geographical area over which the Applicant has responsibility and authority;
* an explanation of the persons that the Applicant is governing and accountable to; i.e., the residents and members for which the Applicant is responsible in its authorized area; and
* an explanation of the responsibilities and powers of the Applicant and of the programs and services offered by the Applicant. The description of programs and services should explain what the Applicant is actually performing, not simply what it is empowered to do.
* A statement as to how the Applicant meets the criteria as a municipal or public body performing a function of government in Canada.
* An explanation of the source of revenues of the Applicant, including any funding received from other governments.
* If relevant, a description of any other activities carried on by the Applicant, such as business activities. The Applicant should also advise if any activities are carried out by a subsidiary entity(s) of the Applicant.
* Copies of supporting documents and agreements supporting the Applicant’s request as necessary. Some of these supporting documents are shown in the examples below.
* A summary of the relevant facts contained in the supporting documents and agreements.
It should be noted that the above information should not be considered an exhaustive list. Additional information may be required as each application is reviewed. In addition, all of the documentation suggested may not be necessary in every situation.
We provide the following two examples for your assistance:
Example: An Indian band that is a public body performing a function of government in Canada
Generally, the CRA has accepted that an Indian band or Indian organization that clearly provides government services and is accountable to either the federal, or a provincial or territorial government, or directly to the band members it represents, is a public body. An Indian band is considered to be performing a function of government if it demonstrates that it performs functions and provides services in a manner generally exhibited by a government.
Along with the general information described above, information and documentation that support an Indian band’s application would be:
* The fact that the Indian band is a band as defined in subsection 2(1) of the Indian Act. This information can be verified on the Aboriginal Affairs and Northern Development Canada website.
* A statement with respect to the members of the band and the reserves over which the band has responsibility, or in the case of a self-governing First Nation, the lands transferred to it pursuant to a land settlement agreement or self-government agreement.
* A description of the election procedures of the Chief and council (generally the election procedures are in accordance with the provisions of the Indian Act).
* If the Indian band has section 81 and 83 bylaws passed pursuant to the Indian Act, or section 81 of the Indian Act and section 5 of the First Nation Fiscal and Statistical Management Act, copies of the bylaws should be submitted.
* If applicable, information explaining that the Indian band is involved in the negotiation of a settlement agreement with Canada or a province or territory and will continue to be involved in the administration and implementation of the settlement agreement. This can be evidenced by documentation such as letters of intent to negotiate a treaty, information relating to the stage of the treaty negotiation, or agreements entered into relating to the implementation of taxes.
* A description of the programs and services for which the First Nation is responsible and is providing. These programs and services may be supported with a copy of agreements between Health Canada and/or Aboriginal Affairs and Northern Development Canada.
Example: Other organization that is a municipal or public body performing a function of government in Canada
Along with the general information described above, information and documentation that support an organization’s application may include:
* Creating documents, such as the Act of Parliament or an agreement given effect by Parliament, or the authority that recognizes or grants to the body the power to impose taxes, or gives power and authority to the entity to govern in a geographical area.
* Financial statements, including a statement of revenue and expenses and a statement of assets and liabilities. The statement should be descriptive of the sources of the entity’s income and the main expenditures of the entity.
R. Albert, CA
Manager
Non-Profit Organizations and Aboriginal Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
May 10, 2013
Charities Program Update from Cathy Hawara, Director General of the Charities Directorate
The Charities Directorate is launching a new Charities Program Update bulletin. It will be sent to the 23,000 subscribers to the Charities Directorate email list. Lots of interesting information and statistics are contained in the Update.
Here is the text of the Update:
http://www.cra-arc.gc.ca/chrts-gvng/chrts/bt/chrtsprgrm_pdt-eng.html
“Charities Program Update Director General’s message
Communicating with our many stakeholders is critical to maintaining strong relationships and fostering mutual understanding and support for the regulation of charities. Every year, the Charities Directorate communicates in many ways: through information sessions, newsletters, press releases, and webinars and directly with our clients and their representatives. In addition, we make sure our programs are transparent through the annual reporting to Parliament the Canada Revenue Agency (CRA) does.
Charities Program Update is another way for the Directorate to communicate with the charitable sector and those who have an interest in it. It stems from our renewed commitment to enhance external communications following the Charities Directorate’s Strategic Directions exercise, which you will read about in this issue. Charities Program Update is also a chance for the Directorate to talk about things in an informal yet informative format. It will be produced periodically, posted on our Web pages, and distributed through our Charities and Giving electronic mailing list, which, I am pleased to announce, now has over 23,000 subscribers.
I hope that by sharing a little more about the Charities Directorate’s programs and activities, by highlighting the resources that are available to both charities and donors, and by presenting some of our analysis and statistical data, you will be assured (and maybe even a little impressed) that the Charities Directorate is transparent, accountable, and doing good work.
Registered charities benefit communities in diverse and inspirational ways. That is why the Charities Directorate takes its responsibility to protect the integrity of the registration system for charities—and the charitable sector—very seriously.
Cathy Hawara
Canada Revenue Agency, Charities Directorate
Who we are, what we do
While we’re called the Charities Directorate, did you know that we’re actually responsible for administering the provisions of the Income Tax Act that regulate a broad range of organizations authorized to issue official receipts for gifts they receive?
For the sake of simplicity, we sometimes refer to all tax-receipting entities as charities. However, not every tax-receipting entity is a charity.
The CRA’s Charities Directorate registers charities, Canadian amateur athletic associations, and other qualified donees.
We are also responsible for regulating the tax-receipting privileges of qualified donees and for providing donors with information about registered charities so that they can give wisely.
Our vision
The Charities Directorate will be recognized and respected by charities, stakeholders, and the Canadian public for its knowledge, integrity, and fairness, resulting in client-oriented service and compliance.
Our mission
Our mission is to promote compliance with the income tax legislation and regulations relating to charities through education, quality service, and responsible enforcement, thereby contributing to the integrity of the charitable sector and the social well-being of Canadians.
Register
Each year, the Charities Directorate receives approximately 4,000 applications for registration as a charity.
We assess every application individually, on its own merit, to determine if the organization is eligible for charitable registration. We make decisions on these applications based on common law, the Income Tax Act and its regulations, and CRA policy.
When it appears that an applicant is unlikely to qualify for registration, we send an administrative fairness letter outlining our observations and concerns. If the applicant does not respond to the letter within 60 days, we will confirm that its registration has been refused. If the applicant responds, we will consider the new information submitted when making our decision.
In 2011/2012, final decisions were made on 4,562 applications for registration. Those final decisions included: 2,124 registration and re-registration approvals; and 377 denials. As well, 299 applications were withdrawn by the applicants.
Over the course of the year, many applications are returned to the applicants because of incomplete or missing information. In 2011/12, 1,762 or 39% of the 4,562 applications reviewed were returned to the applicants.
As part of its commitment to providing fair, courteous, and efficient service when processing applications, in 2011 the Charities Directorate published its application service standards on the CRA Web site. The service standards outline what an organization can expect once it has submitted a complete application to the Charities Directorate: a review and response within two months for straightforward applications and within six months for regular applications, 80% of the time. These standards are monitored carefully throughout the year and resources are reallocated as needed to make sure the Charities Directorate delivers excellent service.
Reaching out, staying connected
Online, social media, or in-person – Oh the places you’ll find us!
Our education programs speak to all registered Canadian charities. We provide resources, information, and advice to employees and volunteers of charities, their accountants and legal advisors, donors, and all other Canadians young and old. We recently updated our leaflet for donors, How to Donate Wisely, and it is available in more than a dozen languages.
Here are just some of the ways we make information available:
YouTube: We recently posted a new video called Charities and the CRA: Make the Connection. Stay tuned because we have plans to add more!
Webinars: From anywhere in Canada you can register for live, interactive webinars or view recorded webinars on issues like political activities, receipting, fundraising, and payroll.
Twitter: Stay up to date with the CRA, including getting information about charities, by following the CRA on Twitter at @CanRevAgency.
Charities and Giving: http://www.cra.gc.ca/charities is the charities part of the CRA Web site and is our primary vehicle for information, resources, policies, forms, and publications. While you’re there, sign up for our electronic mailing list!
Outreach: At pavilions, conferences, and over 60 information sessions across the country, we came face-to-face with more than 24,000 Canadians interested in and operating registered charities.
Charities and Giving RSS feed: Add the “What’s new” RSS feed to your feed reader.
Publications: 7.5 million Canadians viewed ads about our program with their morning coffee in Maclean’s, L’Actualité, and Money Sense, as well as in articles published in over 45 other media outlets.
Working together
Research and online tools
The Charities Directorate has recently taken steps to increase its engagement with the academic community studying the charitable sector in Canada. We have attended several conferences to learn how research projects might tell us more about the sector and to offer our input on the research that is being done. Our director general spoke at the 2012 Association for Nonprofit and Social Economy Research (ANSER) Conference in Waterloo, Ontario, about the benefits of collaborating with researchers, for example, to address data integrity challenges with the T3010 annual information return database.
In addition, the Charities Directorate funded a study aimed at identifying what organizational factors might influence charities to request voluntary deregistration. In August 2010, the Institute for Nonprofit Studies at Mount Royal University released its research report Bowing Out: A data-base analysis of the voluntary deregistration of Canadian charities.
A Canadian charity appears to be more at risk of voluntary revocation if it has:
•existed for more than 18.4 years;
•annual income below $5,000;
•experienced a gradual drop in revenue and assets over a two-year period; and
•a declining ratio of fixed assets to income.
The Charities Directorate provided funding to Imagine Canada to support the development of a Web site to make the financial information and activities of registered charities more transparent. The site, called CharityFocus, incorporates and builds on the information available publicly from all registered charities’ charity information returns filed with the CRA, as well as information from the charities themselves.
With the introduction of CharityFocus, charities can now:
•upload information to tell their stories and connect in a new way with their supporters;
•upload mission statements, program information, social media feeds, annual reports, and financial statements;
•access Charity Tax Tools to better understand CRA regulations; and
•get help filling out their charity information return (Form T3010) using QuickPrep.
Access to this supplemental information about registered charities will also enable donors and the general public to better analyze financial and program information.
Staying on the right side of the CRA
Why audits?
Audits are an important tool for ensuring compliance. They help maintain public confidence in the fairness and integrity of the registration system for charities. Audits also provide insight into the charitable sector and help guide the Charities Directorate’s policy development and operations.
Office audits—also called desk audits—are conducted at CRA Headquarters. Field audits are conducted at the charity’s premises.
The purpose of an audit, whether conducted at a charity’s premises or in our office, is to assess the level of compliance with the Income Tax Act’s requirements for registration.
How do we decide which charities to audit?
Referrals – Most of our audits are triggered by referrals. Internal referrals come from within the CRA. For example, an employee working on individual tax returns may observe an irregularity with a taxpayer’s claimed donation of a gift in kind to a charity and tell us about it. External referrals can come from anywhere, for example, from the public, charities, donors, or the media.
Projects – Sometimes we identify particular risks to the integrity of the registration system, such as abusive tax shelters or fraudulent receipting.
Random – Some charities are chosen for audit on a purely random basis. The purpose of these random audits is to monitor overall compliance in the sector and to identify issues and trends.
What happens after an audit?
Research shows that rates of compliance are positively affected by how easy it is to access the information, tools, and assistance that encourage charities to meet their obligations. And the vast majority of registered charities comply with the requirements without our intervention.
That said, as the level of non-compliance for a charity increases, so does the level of CRA involvement. What happens when we discover non-compliance with the requirements of registration depends on a number of factors, including whether or not the non-compliance was deliberate or if it was serious.
We have a range of actions we can take after an audit, including:
•educating the charity about the requirements for maintaining registered status;
•requiring the charity to subscribe to a compliance agreement that outlines the non-compliance issues and the remedial actions that the charity has agreed to take;
•imposing penalties and sanctions; and
•where warranted, revoking a charity’s registration.
Some of the more common reasons we revoke a charity’s registration include failing to devote resources to charitable purposes and activities; failing to maintain adequate books and records; failing to maintain direction and control over resources; participating in tax shelter arrangements; and issuing fraudulent donation receipts.
Our Compliance Division completed 713 audits in 2011/2012, resulting in 58 requiring no action, 400 education letters, 198 compliance agreements, 3 penalties, 17 revocations for cause, 12 voluntary revocations, 5 annulments, 2 re-registration/pre-re-registration reviews, and 18 recorded as having “other” outcomes.
Loss of registered status
Each year, a significant number of charities request voluntary revocation of registration. Otherwise, the most common reason for revocation of charitable status continues to be failure to file the annual T3010 information return. Revocation of charitable status may also occur in cases where a charity fails to maintain its status as a legal entity. In 2011/2012, 830 charities were revoked voluntarily, 1,104 charities were revoked for failing to file their annual T3010 information return, and 21 were revoked for failing to maintain their status as a legal entity.
To try and improve the timeliness of T3010 filing, a number of new initiatives have been introduced.
•We conducted a survey to see why charities file when they do, so the Directorate can better target their efforts to help them file on time.
•We changed the timing of the first notice that charities receive reminding them to file their return. Before, the notice was sent one month before the return was due. Starting in October 2012, the notice is sent three months before the return is due.
•We now send email reminders about two months before the return is due to those charities that have given us their email address.
Strategic direction
All good organizations are well served by strategic objectives to guide their decision‑making and operational plans. That’s why the Charities Directorate has established a set of strategic directions to guide its business planning over the next few years. The Strategic Directions Plan is intended to make sure that, while meeting its day‑to‑day operational responsibilities, the Directorate evolves in a manner that will allow it to respond to the increasing complexity of its internal and external environment.
In the last fiscal year, the Charities Directorate did an analysis of its internal and external environments. As a result of its consultations with staff and representatives from the sector and its internal research, the Directorate established the following directions to guide business planning over the next few years:
•to improve its information management framework;
•to strengthen compliance;
•to ensure quality and consistency of decisions;
•to enhance its external communications framework; and
•to evolve its service delivery model.
Profile in numbers
The environmental scan done as part of the strategic directions exercise involved extensive research and engagement with staff and stakeholders.
We’d like to share some of the trends we identified in the charitable sector based on our data and the T3010 data reported by registered charities from 2000 and 2008.
6% … the number of registered charities increased by 6%—from 79,652 to 84,615
67% … the part of the sector’s revenue originating from direct government sources in 2008—up from 54% in 2000
83% … growth in expenditures on charitable programs. This corresponds with growth in reported revenue from all sources. The total expenditure on charitable programs in 2008 was about $130 billion.
73% … the part of total expenditures spent on charitable programs in 2008
This compares to a low in 2003 of 62% and a high of 74% in 2006.
Last word
Did you know… the CRA gets audited too?
The 2010 Fall Report of the Auditor General of Canada had a whole chapter on registered charities and the CRA.
The Auditor General found that our registration process is thorough and that we communicate well with charities and donors. Our significant progress in reducing participation in abusive tax shelter arrangements was also noted.
In response to the Auditor General’s report, we are taking steps to enhance our monitoring program, particularly for charities that do not file their annual return on time. We also developed more detailed internal guidance for our compliance team.
“We are pleased to note that the Agency is doing a good job administering the Income Tax Act as it relates to charities.”
Office of the Auditor General, 2010 “
May 04, 2013
CRA revokes the registration of The Life Centre Word of Faith Ministries Inc.
The CRA has revoked the registration of The Life Centre Word of Faith Ministries Inc. as a charity. The Globe and Mail covered this story in “Toronto pastor, wife charged in alleged $8.6-million Ponzi scheme” http://soa.li/mVtmmlY
Here is the CRA press release:
http://www.cra-arc.gc.ca/nwsrm/rlss/2013/m05/nr130503-eng.html
“The Canada Revenue Agency revokes the registration of The Life Centre Word of Faith Ministries Inc. as a charity
Ottawa, Ontario, May 3, 2013. . .
The Canada Revenue Agency (CRA) will revoke the registration of The Life Centre Word of Faith Ministries Inc., a Toronto-based charity. The notice of revocation will be published in the Canada Gazette with an effective date of May 4, 2013.
On March 25, 2013, and in accordance with subsection 168(1) of the Income Tax Act, the CRA issued a notice of intention to revoke the registration of The Life Centre Word of Faith Ministries Inc. as a charity. The letter stated, in part, that:
“The Canada Revenue Agency’s (CRA) audit has revealed that the Organization is not complying with the requirements of the Income Tax Act. In particular, it was found that the Organization failed to maintain adequate books and records to substantiate its reported revenue and expenditures, as well as to support its charitable activities. The audit revealed that the Organization’s resources were not devoted strictly to charitable activities, and were used to confer undue benefits on a director and his family. The Organization was found to have participated in a series of improper investments with corporations owned and operated by its Director, Mr. Marlon (Gary) Hibbert and his family.
During the course of the audit, Mr. Marlon (Gary) Hibbert was found by the Ontario Securities Commission (OSC) to have “perpetrated a fraud on investors contrary to subsection 126.1(b) of the Act [Securities Act R.S.O. 1990 c.S.5] and contrary to public interest; and Hibbert misled Staff contrary to subsection 122(1)(a) of the Act [Securities Act R.S.O. 1990 c.S.5] and contrary to public interest.” While we are not relying on the OSC decision as grounds for revocation, our audit findings are consistent with those of the OSC to the extent that Mr. Hibbert used the funds of the charity for his own private gain.”
A copy of the notice of intention to revoke and other letters relating to the grounds for revocation are available to the public on request, in the language they were originally written, by calling 1‑800‑267‑2384.
An organization that has had its registration as a charity revoked can no longer issue donation receipts for income tax purposes and is no longer a qualified donee under the Income Tax Act. The organization is no longer exempt from income tax, unless it qualifies as a non-profit organization, and it may be subject to a tax equal to the full value of its remaining assets.
Registered charities perform valuable work in our communities, and Canadians support this work in many ways. The CRA regulates these organizations through the Income Tax Act and is committed to ensuring that they operate in compliance with the law. When a registered charity is found not to comply with its legal obligations, the CRA may revboke its registration under the Income Tax Act.
For more information about the registration of Canadian charities, go to the CRA’s Charities and Giving Web page at http://www.cra.gc.ca/charities.
FOR BROADCAST USE:
The Canada Revenue Agency has announced that it will revoke the registration of The Life Centre Word of Faith Ministries Inc., a Toronto-based charity. The revocation will come into effect on May 4, 2013.
MEDIA ENQUIRIES:
Noël Carisse
Media Relations
Canada Revenue Agency
(613) 952-9184
CRA revokes Trinity Global Support Foundation as a charity
The Canada Revenue Agency has revoked the charitable registration of the Canadian registered charity Trinity Global Support Foundation. The London Free Press has written extensively on this charity and we have covered here: “FCA case on Trinity Global Support Foundation - CRA wins again” http://www.globalphilanthropy.ca/index.php/blog/comments/fca_case_on_trinity_global_support_foundation_-_cra_wins_again
Here is the CRA press release:
http://www.cra-arc.gc.ca/nwsrm/rlss/2013/m05/nr130503b-eng.html
“The Canada Revenue Agency revokes the registration of Trinity Global Support Foundation as a charity Ottawa, Ontario, May 3, 2013. . . The Canada Revenue Agency (CRA) will revoke the registration of Trinity Global Support Foundation, a London-based charity. The notice of revocation will be published in the Canada Gazette with an effective date of May 4, 2013.
On February 1, 2013, and in accordance with subsection 168(1) of the Income Tax Act, the CRA issued a notice of intention to revoke the registration of Trinity Global Support Foundation as a charity. The letter stated, in part, that:
Our audit revealed that the Organization devoted a significant portion of its resources to the promotion of the Mission Life Financial Inc. and Canadians Care donation arrangements. As a result of its participation in these arrangements, between June 1, 2007 and May 31, 2010, the Organization reportedly received nearly $25 million in cash and in-kind property.
With respect to the Mission Life Financial Inc., a registered tax shelter, the Organization issued tax receipts exceeding $1.13 million for cash contributions and $16 million for pharmaceuticals. Of the cash contributions received, the Organization paid nearly $1.03 million to the promoters of the tax shelter and to the Organization’s directors or related parties. It is our position the Organization issued the tax receipts improperly, particularly given our finding that the $16 million recorded for the pharmaceuticals were grossly inflated. As a result, we conclude neither contribution qualifies as gifts at law.
With respect to the Canadians Care promoted donation arrangement, the Organization issued tax receipts exceeding $7.8 million for leveraged cash contributions. The Organization invested over $7 million into investments held by corporations related to its directors and also related to the donation arrangement. These funds were subsequently lost due to the actions of those corporations. The Organization was also found to have improperly paid over $865,000 to individuals and corporations related to the Organization’s directors.
A copy of the notice of intention to revoke and other letters relating to the grounds for revocation are available to the public on request, in the language they were originally written, by calling 1‑800‑267‑2384.
An organization that has had its registration as a charity revoked can no longer issue donation receipts for income tax purposes and is no longer a qualified donee under the Income Tax Act. The organization is no longer exempt from income tax, unless it qualifies as a non-profit organization, and it may be subject to a tax equal to the full value of its remaining assets.
Registered charities perform valuable work in our communities, and Canadians support this work in many ways. The CRA regulates these organizations through the Income Tax Act and is committed to ensuring that they operate in compliance with the law. When a registered charity is found not to comply with its legal obligations, the CRA may revoke its registration under the Income Tax Act.
The CRA is reviewing all gifting tax shelter schemes (for example, schemes that typically promise donors a tax receipt worth more than the actual amount of the donation), and it plans to audit every participating charity, promoter, and investor. For more information about tax shelters, go to the CRA’s Tax alert Web page at http://www.cra.gc.ca/alert.
For more information about the registration of Canadian charities, go to the CRA’s Charities and Giving Web page at http://www.cra.gc.ca/charities.
FOR BROADCAST USE:
The Canada Revenue Agency has announced that it will revoke the registration of Trinity Global Support Foundation, a London-based charity. The revocation will come into effect on May 4, 2013.
MEDIA ENQUIRIES:
Noël Carisse
Media Relations
Canada Revenue Agency
(613) 952-9184 “
April 30, 2013
Blumbergs’ Canadian Charity Law Institute 2013 - corporate law, CRA compliance and more
On October 15, 2013 we 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.
Some of the topics (tentatively) will include:
CNCA Progress and Challenges
Growing up and becoming Canadian - Ontario (OCA) to Federal (CNCA) continuance
The ONCA Update
Abusive Schemes, Class Action Lawsuits and Legal Opinions
Update on CRA changes
Ontario charitable environment
Governance
Top Employment Mistakes for Charities to Avoid
Trends in Philanthropy and Fundraising
Here is the tentative information on registration http://charitylawinstitute.eventbrite.ca
April 25, 2013
FCA case on Trinity Global Support Foundation - CRA wins again
In this case Trinity Global Support Foundation (the “Foundation”) asked the court to delay CRA publishing a notice of intention to revoke the registered charity status until the Foundation’s other legal claims have been dealt with. The FCA ruled against the Foundation because the Court determined that “there is no substantive evidence that the Foundation or its clients will be forced to shut down or be significantly affected prior to its notice of objection being considered.” The Court also did not think that losing its charitable status caused irreparable harm as “It is clear from the evidence that the reputation of the Foundation has already been subject to intense public scrutiny for reasons distinct from the notice of intention to revoke. As such, I see no basis upon which to conclude that any possible further harm to the Foundation’s reputation will be such as to amount to irreparable harm.” The judge does not mention the London Free Press coverage but presumably that is what is being referred to. The conclusion of the FCA decision is important “Given my conclusions with respect to irreparable harm, I need not consider the balance of convenience element of the test. However, it is clear that serious allegations have been raised in the context of the proposed revocation. It is clear from the Foundation’s own evidence that it has been engaged in fundraising activities using tax shelter arrangements, which have been an activity of legitimate concern generally to the Minister. As such, in my view the public interest in the Minister protecting the integrity of the charitable sector outweighs the Foundation’s interest in staying revocation and I see no reason for the Court to grant an equitable remedy to the Foundation.”
Here is the text of the Federal Court of Appeal (FCA) case Trinity Global Support Foundation v. Minister of National Revenue:
Date: 20130423
Docket: A-73-13
Citation: 2013 FCA 109
Present: NEAR J.A.
BETWEEN:
TRINITY GLOBAL SUPPORT FOUNDATION
Applicant
and
MINISTER OF NATIONAL REVENUE
Respondent
Heard at Toronto, Ontario, on April 18, 2013.
Order delivered at Ottawa, Ontario, on April 23, 2013.
REASONS FOR ORDER BY: NEAR J.A.
Date: 20130423
Docket: A-73-13
Citation: 2013 FCA 109
Present: NEAR J.A.
BETWEEN:
TRINITY GLOBAL SUPPORT FOUNDATION
Applicant
and
MINISTER OF NATIONAL REVENUE
Respondent
REASONS FOR ORDER
NEAR J.A.
[1] This is an application by Trinity Global Support Foundation (the “Foundation”) pursuant to paragraph 168(2)(b) of the Income Tax Act, R.S.C. 1985, c.1 (5th Supplement) (the “ITA”), for an order extending the period of time that must expire before the Minister of National Revenue (the “Minister”) is permitted to publish a copy of the notice of intention to revoke the registration of the Foundation as a registered charity until the conclusion of the process that may commence with the filing by the Foundation of a notice of objection to the Minister’s notice of intention to revoke, pursuant to subsection 168(4) of the ITA. The Minister gave its notice of intention to revoke the registration of the Foundation’s charity status on February 1, 2013 in accordance with subsection 168(1) of the ITA.
[2] The Foundation must establish that each of the requirements of the tripartite test set forth in RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311 have been met (see International Charity Association Network v. Minister of National Revenue, 2008 FCA 114). The Foundation must demonstrate that there is a serious issue to be tried, that it will suffer irreparable harm if the requested order is not granted and that the balance of convenience favours granting the order.
[3] The Crown does not dispute that the serious issue element of the test is present and I share the view that, given the low threshold with respect to this element, a serious issue has been raised by the Foundation.
[4] The Foundation argues that revocation will cause it irreparable harm as it will collect fewer donations from fewer donors and thereby lose revenue. It also argues that clients of the Foundation will be seriously impacted if the Foundation is unable to continue to fund their charitable activities. The evidence submitted by the Foundation in this regard is not convincing with respect to its outstanding future funding obligations or to the impact upon client charities. In my view, there is no substantive evidence that the Foundation or its clients will be forced to shut down or be significantly affected prior to its notice of objection being considered. Indeed, the Foundation in its own material claims to have liquid assets that would enable it to carry on its activities, albeit perhaps at a reduced level, for a period of time (see generally Holy Alpha and Omega Church of Toronto v. Canada (Attorney General), 2009 FCA 265).
[5] Further, even if the Foundation receives less money from donations, it will simply have to disburse smaller amounts to a smaller number of recipients. In my view, this does not constitute “compelling evidence of irreparable harm” to the Foundation (see Chosen Kallah Fund of Toronto v. Canada (Minister of National Revenue), 2008 FCA 311).
[6] The Foundation submits that there will be harm to its reputation if revocation occurs. It is clear from the evidence that the reputation of the Foundation has already been subject to intense public scrutiny for reasons distinct from the notice of intention to revoke. As such, I see no basis upon which to conclude that any possible further harm to the Foundation’s reputation will be such as to amount to irreparable harm.
[7] Given my conclusions with respect to irreparable harm, I need not consider the balance of convenience element of the test. However, it is clear that serious allegations have been raised in the context of the proposed revocation. It is clear from the Foundation’s own evidence that it has been engaged in fundraising activities using tax shelter arrangements, which have been an activity of legitimate concern generally to the Minister. As such, in my view the public interest in the Minister protecting the integrity of the charitable sector outweighs the Foundation’s interest in staying revocation and I see no reason for the Court to grant an equitable remedy to the Foundation.
[8] For the foregoing reasons, the requisite elements for a stay have not been met and the application for such an order is dismissed, with costs.
“D.G. Near”
J.A.
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-73-13
STYLE OF CAUSE: Trinity Global Support Foundation v. Minister of National Revenue
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: April 18, 2013
REASONS FOR ORDER BY: NEAR J.A.
DATED: APRIL 23, 2013
APPEARANCES:
Duane Milot
FOR THE APPLICANT
Johanne Hill
FOR THE RESPONDENT
SOLICITORS OF RECORD:
MILOT LAW
Toronto, Ontario
FOR THE APPLICANT
William F. Pentney
Deputy Attorney General of Canada
FOR THE RESPONDENT”
Here is a link to the original decision: http://decisions.fca-caf.gc.ca/en/2013/2013fca109/2013fca109.html
April 24, 2013
CRA letter on Clergy Residence Deduction
CRA released a letter that discussed the issue of whether a member of the clergy who performs occasional liturgical services would satisfy the “function test” of ministering to a congregation, diocese or parish on a part-time or assistant basis. The CRA said no and stated that, “Where ministering duties performed by a member of the clergy are incidental to and not an integral part of his or her overall job responsibilities, it is our view that the function test would not be satisfied and that he or she would not be eligible to claim the clergy residence deduction provided for in paragraph 8(1)(c) of the Act.”
Here is a PDF of the CRA letter on Clergy Residence Deduction.pdf
Here is the text of the CRA letter:
“LANGIND E
DOCNUM 2012-0447881E5
AUTHOR Baltkois, Thomas
DESCKEY 25
RATEKEY 2
REFDATE 130205
SUBJECT Clergy Residence Deduction
SECTION 8(1)(c)
SECTION
SECTION
SECTION
$$$$
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu’exact au moment émis, peut ne pas représenter la position actuelle de l’ARC.
PRINCIPAL ISSUES: 1) Whether a member of the clergy who performs occasional liturgical services would satisfy the function test of ministering to a congregation, diocese or parish on a part-time or assistant basis.
POSITION: 1) No.
REASONS: 1) With respect to the function test, the ministering activities performed by a member of the clergy must be an integral part of his or her employment responsibilities, regardless whether they are employed on a full-time or part-time basis.
XXXXXXXXXX
2012-044788
T. Baltkois
February 5, 2013
Dear XXXXXXXXXX:
Re: Clergy Residence Deduction
We are writing in response to your letter of May 11, 2012 in which you requested our comments as to whether an ordained priest ordinarily residing and performing employment duties in Canada and, who has been assigned to work in another country to XXXXXXXXXX, would satisfy the function test where he also provides occasional liturgical services to parishes in that country.
The facts provided further indicate that this individual resides and performs employment duties in another country XXXXXXXXXX months of the year, returns to Canada for the XXXXXXXXXX months, and files a Canadian tax return. While living and working abroad, his employer provides him with a monthly stipend to assist with his living expenses.
In your letter, you have stated that the individual satisfies the status test as a member of the clergy. At issue is whether providing occasional liturgical services could be considered ministering to a diocese, parish or congregation on a part-time or assistant basis as discussed in paragraph 14 of Interpretation Bulletin IT-141R (Consolidated), Clergy Residence Deduction, for purposes of the function test.
Our Comments
The phrase “ministering on part-time or assistant basis” in paragraph 14 of IT-141R concerns whether an individual’s employment is part-time in nature and is not in reference to the amount of ministering an individual performs. For purposes of satisfying the function test, the ministering activities performed by a member of the clergy must be an integral part of his or her employment responsibilities and expectations, regardless whether they are employed on a full-time or part-time basis.
In the situation described, a member of the clergy has been assigned the responsibility of XXXXXXXXXX by his employer and also performs occasional liturgical services in addition to these responsibilities. Where ministering duties performed by a member of the clergy are incidental to and not an integral part of his or her overall job responsibilities, it is our view that the function test would not be satisfied and that he or she would not be eligible to claim the clergy residence deduction provided for in paragraph 8(1)(c) of the Act.
We trust these comments will be of assistance to you.
Yours truly,
Nerill Thomas-Wilkinson, CPA, CA
Manager
for Director
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch “
