What's New from the Charities Directorate of CRA

April 10, 2010

Improved turnaround time for Canadian charity applications at CRA with backlog removed

According to CRA “Thanks to changes in processes, more resources, and the dedication of staff and management in the Directorate’s Assessment, Determinations and Monitoring Division, it now takes significantly less time to process applications for registration as a Canadian charity.”  More complicated applications that I file that used to take 6-9 months to now being responded to in 6-9 weeks - it is an amazing improvement which is welcomed by all those involved with applications for charity status.  On a sad note after four years in the Charities Directorate, David Moore, the Director of the Determinations Division, and instrumental in reducing the backlog has moved to the Treasury Board Secretariat (TBS) from the Charities Directorate. David Moore was responsible for establishing the Client Interface and Service Division and led the work on the Small and Rural Charities Initiative which was and continues to be very successful in making CRA more responsive to the needs of small and rural charities. David will be missed. I understand that Linda Desrochers, will become the interim Director of the Determinations Section.

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April 09, 2010

Mark’s mini poll at AFP Conference on CRA’s Fundraising Guidance

In December 2009 I delivered a presentation on “CRA’s Fundraising Guidelines –Legal, Ethical and Practical Issues” to the Association of Fundraising Professionals (AFP) GTA Congress 2009.  Prior to giving the presentation I handed out a mini poll to the 100 or so attendees at my session and about 47 of them returned the poll to me.  The attendees were almost all fundraisers and probably the fundraisers who had the greatest interest in the topic.  This is certainly not scientific.

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April 08, 2010

Public Sector Compensation Restraint to Protect Public Services Act freezes certain charity salaries

The Ontario government in the Public Sector Compensation Restraint to Protect Public Services Act, 2010, has proposed to freeze the salaries at certain Ontario charities.  The bill has passed first reading [now second reading].  It includes school boards, hospitals, universities and colleges.  It also applies to non-profits and charities that received at least $1,000,000 in funding from the Government of Ontario in 2009, as determined for the purposes of the Public Sector Salary Disclosure Act, 1996.  It freezes salaries for a period of 2 years, although there is an exception for those covered under a collective agreement and a few other narrow exceptions.

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April 06, 2010

Gordon Pape warns against charitable donation tax shelters

In a recent article by Jonathan Chevreau of the National Post, Gordon Pape warns Canadians not to be involved with charity tax shelter schemes that promise an official donation receipt greater than your cash contribution.

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April 06, 2010

Is a particular First Nation band a public body performing a function of government?

This letter from CRA discusses whether a particular First Nation band is a public body performing a function of government? 

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April 06, 2010

CRA letter on Canadian students attending Canadian campus of foreign university/distance education

This letter from the Canada Revenue Agency discusses the issue of “Are students who attend classes at a Canadian campus of a foreign institution “enrolled at an educational institution in Canada” for purposes of 118.5(1)(a) of the Act? and also “Do students who are taking distance education courses (internet) from a foreign university with a Canadian campus rely on 118.5(1)(a) or 118.5(1)(b) for the tuition tax credit?

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April 02, 2010

Fundraising rules for Canadian registered charities

The most important document for Canadian registered charities to understand their obligations for fundraising is the CRA’s Fundraising Guidance.  You can see the document in English at:  http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cps/cps-028-eng.html and in French at:
http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cps/cps-028-fra.html To make it more convenient for some the Charity Law Information Program (CLIP), which is supported in part by funding from the Canada Revenue Agency, has taken the main document and inserted the content of the “Additional Information” directly next to the part of the Guidance it is referring to. A reader can read the guidance from beginning to end without having to jump backwards and forwards between the two documents. The CLIP version of Fundraising Guidance is at: http://www.capacitybuilders.ca/files/resources/CRA_Fundraising_Guidance_1259599283.pdf
Whatever version you wish to use - this is a guidance document that anyone involved in governance and fundraising of charities should review.

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April 02, 2010

Confirmed that Charities Directorate gets more calls than my son Ethan gets from Gerald

Well I was wondering whether the Charities Directorate got more calls from the public than my son Ethan gets from his friend Gerald.  It appears that CRA wins by a slight margin because it gets 120,000 calls per year!  I cannot wait for Ethan to become a teenager!  Client services staff also answered 11,000 written enquiries which according to CRA now means the backlog in written enquiries has been eliminated.  For CRA to be responding to written requests more quickly is very important because some issues require a written communication from CRA.  By eliminating the backlog in responses to written communication CRA will be helping charities more efficiently and effectively comply with their legal obligations and move ahead with operational issues.

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April 01, 2010

CRA publication “What’s the Scoop 2010” - Information for Canadian Registered Charities

The Charities Directorate of the Canada Revenue Agency has recently mailed out a one-time direct mail piece to Canadian registered charities.  For an electronic copy see the English edition of RC296E What’s the Scoop 2010 or the French version RC296F En exclusivité 2010 Renseignements pour les organismes de bienfaisance enregistrés

April 01, 2010

CRA’s Charities Partnership and Outreach Program

The Charities Partnership and Outreach Program (CPOP) is an important CRA initiative to enhance Canadian charity’s understanding of their compliance obligations.  Over the last few years there have been about 20 programs run by Canadian registered charities and funded in part by the CRA.  One of the projects that I worked on, the Charity Law Information Program of the Ontario Community Support Association, has received funding from the CRA.

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April 01, 2010

Budget 2010, Disbursement Quota Changes and Anti-Avoidance Provisions

There are some that are wondering how the budget, revisions to the disbursement quota, some changes to the T3010 and new anti-avoidance will affect their charity.  Cathy Hawara, the Acting Director General of the Charities Directorate recently provided some information, requested feedback and will be putting out a “Questions and Answers” on the subject shortly.

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March 31, 2010

Coleman v. The Queen - CRA wins case that no donation when children/grandchildren benefit from gift

I think that some people assume that if a tax avoidance scheme is sufficiently complicated or “grey” and sufficiently well documented that the courts will allow those schemes.  If you make that assumption you might want to read Coleman v. The Queen, 2010 TCC 109 (January 25, 2010) as this case may change your mind.  Coleman discusses in detail whether a “donation” to a charity that provides a scholarship or bursary through a scheme to their child or grandchild should be receiptable.  The decision is 45 pages long which will be presumably ‘welcomed’ by those who complain that some of the recent Federal Court of Appeal decisions are too short!  Blake Bromley of Benefic Law Corporation argues for the unsuccessful appellants.  Mr. Justice Campbell J. Miller of the Tax Court of Canada decides for the CRA in this very well written case in which he decides that there is no donation when the children or grandchildren of a donor benefit from the gift.  In addition to the pure legal issues in this case there are also some interesting ethical issues raised by the conduct of the registered charity (National Foundation for Christian Leadership) and the donors.

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March 31, 2010

Objects and Activities of Canadian charities - CRA discusses importance when registering charity

The CRA discusses questions including 1.What is meant by broad and vague objects? 2.What is the problem with broad and vague objects? 3.Is there a way to keep our objects broad and still be eligible for registration as a charity? 4.What is the difference between purposes (or objects) and activities? 5.Why are purposes and activities important?  6.What is “sufficient” information?

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March 30, 2010

Charities Directorate Website will have new look to home page separating charities + donor section

CRA will be updating the Charities and Giving home page.  Here is a note on the What’s New section of the CRA website. [The Changes have now taken place - see http://www.cra-arc.gc.ca/chrts-gvng/chrts/menu-eng.html as of April 9, 2010]

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March 22, 2010

Lockie v. The Queen - courts side with CRA again on charity gifting tax shelters -FMW=what you paid

In Lockie v. The Queen, 2010 TCC 142 (March 18, 2010) the Tax Court of Canada ruled that with a donation scheme involving pens and toothbrushes that were donated to a charity as part of a charity gifting tax shelter scheme that the fair market value of the items is not the retail fair market value of the items as suggested by the taxpayer but is the amount paid by the taxpayer for the items.  That is how a $20,043 tax receipt should only have been $3,800.  Every year there are a number of new gifting tax shelter schemes that argue they are different than earlier schemes.  It is interesting to see how carefully the judges went into detail to discredit the valuation provided in support of the taxpayer position and there is no reason to believe that with any tax shelter gifting arrangement that I have seen the result would be any different.

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March 22, 2010

Social enterprise and Canadian charities - are recent changes to DQ + Charitable Gifts Act enough

Will Recent Legal Changes that make social enterprise for registered charities easier in Canada be enough?

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March 17, 2010

CRA discloses substantial penalty against promoter of tax shelter gifting arrangement

In this recent press release from CRA they noted that “Promoters and other third?party representatives are penalized when they make false statements involving schemes that are against the law. Currently, there are 71 audits involving promoters. Recent examples include a scheme involving RRSPs, for which the promoter was assessed a penalty of $1.8 million, and a tax shelter gifting arrangement case where the Canada Revenue Agency (CRA) proposed two penalties of $24 million against the promoters involved.”

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March 17, 2010

CRA publishes GI-067 Basic GST/HST Guidelines for Charities as well as for public institutions

The CRA has just released a brochure entitled GI-067 Basic GST/HST Guidelines for Charities http://www.cra-arc.gc.ca/E/pub/gi/gi-067/README.html This will be helpful especially to charities in BC and Ontario that are moving to HST on July 1, 2010.  They have also put out GI-066 How a Charity Calculates the Net Tax to be Reported on its GST/HST Return at http://www.cra-arc.gc.ca/E/pub/gi/gi-066/README.html CRA has also put out a brochure for “Public Institutions” which includes registered charities that are a “school authority, a public college, a university, a hospital authority, or a local authority determined by the CRA to be a municipality” and it is located at http://www.cra-arc.gc.ca/E/pub/gi/gi-068/README.html.

March 16, 2010

Recent CLIP communique on disbursement quota (DQ) reform, fraud and cases

Here are some recent items from the Charity Law Information Program (CLIP) Communique.

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March 15, 2010

2010 Federal Budget enhances anti-avoidance rules for Canadian charities

The 2010 Canadian Federal budget had some changes to the Income Tax Act to prevent transactions by registered Canadian charities that “may reasonably be considered that a purpose of the transaction was to avoid or delay unduly the expenditure of amounts on charitable activities”.

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March 11, 2010

10 Most Useful Features of the CRA’s Charities Directorate Website for Canadian Charities

Here is a copy of an article I wrote for the newsletter “Charitable Thoughts” of the Ontario Bar Association Charity and Not-for-Profit Law Section

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March 04, 2010

Canadian Budget 2010 announces disbursement quota reform for Canadian charities

The Canadian federal government announced disbursement quota reform in the 2010 Budget to remove the 80/20 expenditure requirement for registered Canadian charities.  For many charities this will have no real impact - they were handily satisfying their disbursement quota requirements and for those that were not (except in extreme cases) CRA was not using the DQ to revoke charitable status.  As one observer noted on the changes “No more 80/20 ordinary gift. No more enduring property, including 10 year gifts. No more specified gifts. No more intercharity transfer rules based on original DQ designation. Just a simple obligation to use the equivalent of 3.5% based on previous 24 month market average for charitable purposes. ... The 3.5% obligation doesn’t kick in for charitable organizations until there is $100k in assets, while for foundations it stays at $25k.”  We will probably have a revised T3010 at some point to reflect these changes and one can expect with the simpler formula that in the future CRA will more vigorously enforce the DQ provisions as this will be easier to understand.  There is no cost associated with this change and a number of other proposals to increase tax incentives from some organizations were not included in the budget, which makes sense in light of the difficult fiscal situation in addition to other reasons.

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March 04, 2010

Charities Directorate of CRA now displaying T3010 information for revoked charities

The CRA has just announced that “The Charities Directorate is now displaying T3010 returns for revoked charities, and detail pages for annulled charities in the Charities Listings.”

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March 02, 2010

CRA comments on gift to charity under will that is poorly drafted

This letter from CRA is a reminder that when leaving funds to a registered charity under a will the drafting is important.

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February 24, 2010

International Pentecostal Ministry Fellowship of Toronto v. The Queen - (FCA) important case

In International Pentecostal Ministry Fellowship of Toronto v. The Queen (FCA) located at http://decisions.fca-caf.gc.ca/en/2010/2010fca51/2010fca51.html the Federal Court of Appeal confirmed CRA’s jurisdiction over Canadian charities registered under the Income Tax Act (Canada).  In quite a strongly worded statement the decision states “We have not been persuaded that there is any merit to the Appellant’s argument that the provisions of the ITA dealing with the registration and deregistration of charities are an unconstitutional infringement on provincial legislative authority. In our view, these provisions relate, in their pith and substance, to federal taxation, and accordingly they are intra vires the Parliament of Canada under subsection 91 (3) of the Constitution Act, 1867. Both the advantages of registration and the drawbacks of revocation relate solely to the tax treatment of charities and their donors. They do not impermissibly affect the affairs of charities in any other way, nor do they impede provinces from otherwise regulating charities.”  The court also rejected the charity’s argument that CRA by going to revocation did not follow its own guidance.  The court noted that CRA’s “decision falls squarely within the range of acceptable outcomes.” and that “it was reasonably open to the Minister to find the breaches sufficiently serious as to warrant revocation.”  This is important victory for charities and CRA in that it makes it clear that CRA can remove the charitable status of a sufficiently non-compliant charity. The public in Canada expects CRA as a regulator to regulate and sometimes that means removing the registered charitable status of groups that do not comply with the basic requirements of being a charity.  I would also commend the Federal Court of Appeal for the length of decision.  When a charity is making an argument that lacks “any merit” you don’t need a 20 page decision and a couple pages will do.

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

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Charity Lawyer Mark Blumberg

Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.

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