Canada: 2013 Tax Update for Charities

BLG's Charities and Not-for-Profit Group held its 14th Annual Sector Update for Charities and Not-for-Profit Organizations on November 13, 2013 in its Toronto office.  Given the increased activity of the Canada Revenue Agency ("CRA") in the charity sector, my tax update was primarily charity-focused and included a discussion of the following topics, which charities should keep in mind when reviewing their operations:

  • Bill C-48, which contained numerous long-standing proposed amendments to the Income Tax Act (Canada), received Royal assent on June 26, 2013.  Measures implemented that will be relevant to registered charities include the split-receipting rules, amendments to the definitions of public foundation and private foundation and revocation for gifts to non-qualified donees.  Keep in mind that the CRA has generally been administering these measures as if they were law, so, in practice, many charities should not see much of a difference as a result of the passage of this bill into law.
  • The CRA released a number of new policies and guidances recently, including:
  • Guidance CG-019, How to Draft Purposes for Charitable Registration, released July 25, 2013;
  • Guidance CG-020, Charitable Purposes and Activities that Benefit Youth, released June 24, 2013;
  • New "Amalgamations, mergers, and consolidations" web page, released August 26, 2013; and
  • Guidance CG-021, Promotion of Health and Charitable Registration, released August 27, 2013.
  • Recent charity law cases released include:
  • Prescient Foundation v. Minister of National Revenue, which was an appeal to the Federal Court of Appeal ("FCA") regarding revocation of Prescient Foundation's registered charity status.  Two notable issues dealt with by the FCA in this decision were whether transfers to foreign non-qualified donees by a registered charity are allowable under Article XXI of the Canada-U.S. Tax Treaty, which the Court declined to rule on, and the standard that must be met by the CRA when alleging that a charity has failed to keep adequate books and records.  At our update, we noted that leave to appeal the FCA's decision had been appealed to the Supreme Court of Canada. Leave has since been denied (see our blog posting on this here: http://blog.blg.com/nfp/Lists/Posts/Post.aspx?ID=183).
  • Cheder Chabad v. Minister of National Revenue, which is a rare (and perhaps the only!) decision in which the FCA granted a registered charity's application for an extension of time with respect to the publication of a notice of revocation of its registered charity status by the Minister.  The registered charity in this case was a religious school and the Court's decision was premised primarily on the harm that would have been suffered by the school's students were the extension of time requested in this case not granted.
  • Sohwah v. R, which was an appeal by a donor regarding a charitable donation tax credit claim.  The CRA alleged in this case that the charitable donation receipt issued by a registered charity was insufficient and that the donor could not prove in any event that the donation had actually been made.  This case serves as a good reminder that donation receipts must meet all eleven mandatory requirements under Income Tax Regulation 3501(1) to be valid.

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