Here is an interesting series of letters from CRA to the Corban Foundation in the 1990s relating its revocation as a registered charity.  It deals with the meaning of a gift,  and various programs to provide tuition assistance to those attending Christian schools.  It provides CRA’s views on the legal arguments and cases.

Here are some excerpts from the CRA letter although the whole letter is worth reading:

“Based on the audit findings, it appears that the primary purpose of Corban’s charitable
gifts coupons program is, in fact, to circumvent the restrictions placed under the
Department’s Information Circular 75-23 on the portion of a parent’s payment for
tuition that may be receipted as a charitable donation to a private religious school.
This intention also appears to be evident from the promotional brochures and
newsletters for this program outlined in Appendix B. We also found a letter from
Dick L. Kranendonk on Corban Foundation letterhead which contains the following
explanation of the charitable gift coupons program:

“These coupons can be used to pay for the religious education costs of
children attending religious schools. Typically, OACS member religious
schools have a religious cost-per-pupil of between 40% and 50% of total
fees paid to the school. For parents with more than one child in a
religious school, this program can result in making full payments to the
school by means of these coupons. The result is that 100% of donations
made to Corban are acknowledged with official charitable donation
receipts which can be used to claim your charitable donation tax credit
when filing your income tax return.”

Grant Programs ·- ~ ·
Based on the audit evidence, it appears that, typically, someone seeking financial
assistance through any of the grant programs offered by the Corban Foundation is
aware that he or she must make, or arrange for someone else to make, a contribution
to Corban to cover the amount of the grant to be received from the Foundation. The
Foundation retains 10% of the amount contributed and returns the rest back as a grant
to the contributor or to the grant recipient being sponsored by that contributor. The
prospective grant recipient is aware that 90% of the funds directed to Corban as a ·
result of his or her fund-raising efforts will be allocated by Corban to the approved
grant payout. This sequence of transactions clearly indicates that the contributor
makes a contribution with the expectation that a particular individual, usually the
contributor himself or a dependent family member, will receive a pre-determined
grant amount.

In its first five months of operation, Corban awarded $329,269 in Debt Reduction
grants. Of this total, $322,344 were grants linked to corresponding “donations”.

During this same period, Corban awarded a total of $78,913 in Education grants. All
of these grants were tied to corresponding “donations”. Our audit analysis of
receipted donations for Corban’s 1993 and 1994 years shows that a direct link can be
made between “donations” received and grants paid out the same day, or within one
or two days, in 279 cases totalling $2,001,931 in receipted donations. In most of
these cases, the grant amount is exactly 90% of the “donation” made to the
Foundation.

The attempt made in Corban Foundation publications to break the link between gifts
made to the Foundation and grants to designated individuals by stating that gifts made
to the foundation are unrestricted in nature is, in our view, contradicted by the
overwhelming number of cases where a direct connection can be made.

For example, we discovered that most of those who have received education grants
from the Foundation are minor children of donors to the Foundation. A scenario has
a payment being made by a parent at the same time that a grant cheque for exactly
90% of this payment is paid out to the child. The grant cheque is endorsed by both
the child and the parent. Essentially, in return for a 10% commission, the
Foundation’s education grant and student assistance programs appear to be a vehicle
for parents to convert non-deductible education expenses into deductible charitable
donations. The criteria used to determine eligibility for these forms of financial
assistance do not take into account the income or assets of an applicant’s parents,
even when the applicant is a dependent child.

Following is one example of an education grant transaction examined during our
audit.
A taxpayer’s child made an application for an education grant to attend an
educational institution. Five months later, the child signed a grant agreement.
The same day, the taxpayer (parent) transferred $9,000 from his line of credit
to his personal chequing account and wrote a certified cheque to Corban
Foundation for $10,000. The Foundation deposited the cheque on the same day
and later issued an official receipt for income tax purposes to the taxpayer for a
$10,000 donation. Again the same day, the Foundation wrote a cheque to the
taxpayer’s child for $9,000. The cheque, which was endorsed by the child and
the taxpayer, was then deposited to the taxpayer’s account on the same
day. This amount was then used to pay down the taxpayer’s line of credit.
These transactions indicate that no gift was made to Corban. It appears that the
taxpayer financed a payment to Corban from his line of credit solely to obtain a tax
receipt, with the full knowledge that he would be able to repay 90% to his line of
credit immediately and that the 10% shortfall would be more than offset by the
charitable tax credit.
They also indicate that Corban used its authority as a registered charity to issue
official donation receipts to provide the taxpayer with a better tax advantage than
permitted under the Income Tax Act provisions governing the deductibility and
transfer to a supporting person of tuition payments and related education expenses
(see s.118.5(1), s.118.6(1)&(2), and s.118.9(1)&(2)).

Similarly, in most instances when a debt assistance grant has been given, the person
receiving the grant has made a concurrent contribution to Corban or is related to
someone who has made a contribution to Corban which coincides in timing and
amount with the grant paid out. As with the education grants, it appears that these
are arrangements where the donor anticipates consideration in the form of a debt
assistance grant being provided, either to themselves or to a relative, in return for a
payment to the charity acknowledged with an official donation receipt for tax
purposes. Since the contributor in these situations is almost always the same person
receiving the grant, or is an immediate family member, it appears that there is, in
effect, a circular flow of funds with the Foundation interposed simply to provide a tax
benefit. Except for the 10% surcharge, no property is actually transferred for the
benefit of the charity.  …”