CRA’s document “Gifts and Income Tax” (P113(E) Rev. 09) is helpful for Canadian charities understanding what is a “gift” that can be receipted. The document is located at http://www.cra-arc.gc.ca/E/pub/tg/p113/p113-e.html
Third party fundraisers, especially if run by volunteers, can be a very effective and efficient way to fundraise. However, charities are not allowed to just outsource receipting functions. Here is a document from CRA on third party fundraisers and receipting
No. Here is CRA’s view on why such a payment cannot be receipted.
Chris Sorensen of Macleans recently wrote a piece entitled “An artful scheme: One firm’s pitch to help people use a tax shelter by buying and then donating old photos is raising eyebrows in the art world and words of caution from experts”. It discusses a scheme called VIA (Vintage Iconic Archives) Project.
The CRA is cracking down on tax preparers and others who issue false charitable donation receipts.
The CRA has laid charges against a promoter of an art donation scheme in which there was a donation of overvalued artwork to the Municipality of Larouche. Municipalities are qualified donees entitled to issue official donation receipts just like registered charities. It will be interesting to see if some of the promoters of similar schemes involving charities are also charged?
This case involves an accountant, Mr. Michael George Perris, recommending a charity tax shelter scheme to his client that was unsuccessful. The case deals with whether this accountant is a fiduciary and if so whether he breached his fiduciary duties to his client. In this case the court found that the accountant had a fiduciary relationship with the client. The accountant had received a fee from the promoters for referring the matter, had not appropriately disclosed the “secret commission” and the court found that he did not act in the best interest of his clients. The judge noted “The legal opinions, which lent apparent legitimacy to the scheme, were carefully crafted and laid out assumed sets of facts that bore little resemblance to the circumstances of the actual transactions that were recommended.” The court found that despite the plaintiffs being sophisticated business people “The Lembergs were vulnerable, in the sense that they trusted Mr. Perris’s integrity, and the independence of his advice.” It will be interesting to see if there are more cases against professional advisors such as lawyers, accountants and investment advisors, who may have recommended that their clients participate in such schemes. There are already 3 class action lawsuits against law firms for providing the opinion letters in different charity gifting tax shelter schemes
Do you require legal advice with respect to Canadian or Ontario non-profits or charities?
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.