On April 1, 2018, Ontario Regulation 112/18 came into effect amending O. Reg. 4/01 (Approved Acts of Executors and Trustees, hereinafter “Regulation”) [i] under the Charities Accounting Act (the “CAA”).  The new provisions modify the existing Ontario common law rule that prohibited a charity from making payments to a director (or any person related to him/her) for any reason (other than reimbursement of expenses) without first obtaining a court order. Prior to this charities in ...
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The economic statement tabled by Finance Minister Morneau on November 22 had a couple of welcome announcements which will touch on at least certain parts of the sector. But there was very little detail available about implementation and we suspect that we’ll have to await the next federal Budget to get those details. The Social Finance Fund To encourage innovative approaches to persistent and complex social challenges, the Government is creating a Social Finance Fund ...
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There has been a lot of concern over whether Canadians are saving enough for retirement. One reaction to this is the gradual enhancement of the Canadian Pension Plan, which starts in 2019. Another is the new defined benefits pension plan for the Ontario nonprofit sector, OPTrust Select, which was launched April 2018. OPTrust Select is run by a legal trust which exists at arm's length from both the Ontario Public Service Employees Union (OPSEU) and ...
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Those that have been following the political activities saga will be happy to know that after years of promises, a court case, a blue ribbon Panel, and some annoying dithering the Federal Government has finally tabled legislation in Parliament to allow charities to engage more fully in  ‘Political Activities’. In a previous article on this topic Political Activities…Revisited … Again we explored the history of the issue up to the release of proposed legislation in ...
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One of the clearest items of charity law is that action for the relief of poverty are considered to be charitable.[1] But the ongoing problem for many charities is to try to identify an income level which can be used as a measure of who is poor. This is not always an easy task as most guides dealing with this issue are simplistic in the extreme, not usable in many situations. For example, some years ...
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Much has been written about the recent court case and the subsequent proposed Income Tax Act amendments concerning political activities of registered charities.  Organizations that are not registered charities but just non-profit organizations, may have not given the issue much thought as all, except perhaps, pause to consider if the perceived relaxation of political activities for charities might open the door for charitable registration to non-profit organizations that would not have qualified before.  The answer ...
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Along with tax professionals all over Canada, Drache Aptowitzer LLP has noticed the increasing processing delays in every department of the Canada Revenue Agency (CRA). The backlog can be extreme. In the last three years, the processing time for charitable applications may have as much as doubled. And there have been similar delays in resolving even minor tax disputes. We know this backlog at the CRA is frustrating to our clients. Many of our clients’ ...
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One of the most important aspects of operating a non-profit is to have a board which can give direction to the organization. Without being comprehensive in terms of board duties, it must set policy, manage investments, handle personnel issues, raise funds and make strategic decisions, both long term and short term. But it should be pointed out that every board need not deal with every issue. A fully funded organization need not worry about fundraising ...
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Readers of a certain age will recall the damage and the aftermath of Hurricane Katrina.  Hurricane Katrina hit the Gulf Coast of the United States in August 2005.  In the aftermath of the Hurricane the levees in New Orleans broke and flooded much of the city.  The damaged areas were primarily the poorer parishes of New Orleans which mean that those most affected by the hurricane were of low income. There was a great deal ...
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Kids are expensive. There’s no doubt about that. The Canadian government provides a small subsidy by allowing a limited amount of child care expenses to be deducted from income taxes. In 2016, Mr. Kwan had a 10-year-old and a 12-year-old. He and his spouse enrolled their kids in a large number of activities, including chess programs, math tutoring classes, Chinese language classes, a ski class, and a summer camp. The couple also hired multiple babysitters ...
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A recent Court decision and the response to the decision by the Canadian Cultural Property Export Review Board (“CCPERB”) have significantly impacted the criteria that certain donations have to meet in order to qualify as cultural gifts within the meaning of the definition in subsection 118.1(1) of the Income Tax Act (“ITA”). In mid-June, the Federal Court of Justice issued its decision in Heffel Gallery Limited v. The Attorney General of Canada, 2018 FC 605 ...
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The issue of charities engaging in political activities has been a hot item since 2012. In that year the Harper Government gave $8 million to the CRA Charities Directorate to begin what has been termed the “political activity audits”. Budget 2012 also tightened up the political activity rules which were already in place. It is important to remember that this discussion begins with the Scarborough Legal Services case in 1985 which held that activities intended ...
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By:  C. Yvonne Chenier, Q.C. Recent Court cases have reinforced my belief in the importance of the wording of governing documents of charities and not-for-profits organizations. Whether it is trying to ascertain what the members have agreed to in the rules of membership, the specific procedures contained in bylaws or the actual wording of the often outdated charitable purposes of a registered charity, the words used (or not used) are in focus when a dispute ...
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By: Adam Aptowitzer A recently released decision of the Tax Court of Canada illustrates some of the problems with donations of gifts in kind and their valuation. Donors typically accept the valuation on receipts as accurate. For donations of cash this is not a problem - particularly where the donation is one of cash. However, where the donation is a gift in kind (i.e. a gift of an item rather than cash) the valuation of ...
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By: Arthur Drache In mid-July, Mr. Justice Ed Morgan of the Ontario Superior Court of Justice determined that the Income Tax Act legislation and the CRA’s administrative practices relating to political activities of charities was contrary to the Charter of Rights when restrictions were applied to the (non-party partisan) political activities of charities.[1] The decision creates some huge problems for the federal government which is now faced with (a) lodging an appeal or (b) amending ...
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 By: Alexandra Tzannidakis With the Ontario general election coming up on June 7, registered charities should take a moment to review the restrictions on political activities. It is key to remember that registered charities are totally prohibited from engaging in partisan political activities. They can only engage in non-partisan political activities, and only to a limited extent. The CRA’s Advisory on partisan political activities[i] is a succinct refresher on the existing policy[ii], and in fact expands on it ...
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By: Adam Aptowitzer For many years tax and charity professionals calculated the after tax cost of a donation based on certain principles. One of those principles was that, at the top brackets both Federally and Provincially, the credit for the donation offset the tax owing for a dollar of income earned and then donated. As the so-called 1% movement became more vocal, governments felt they had a license to tax higher income earners (although they ...
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By: C. Yvonne Chenier The title for the mid-day address of the Canadian Bar Association Charity Law Annual Symposium is usually the “CRA Comes to Lunch”. Lunch is served before we hear from the Director General, Charities Directorate, Canada Revenue Agency. At the May 11, 2018, Symposium, the morning sessions focussed on revisiting the meaning and impact of the case of Vancouver Society of Immigrant and Visible Minority Women v. M.N.R., [1999] 1 S.C.R. 10, ...
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The following question was asked of the CRA by the Tax Executive Institute in connection with its December 5, 2017 liaison meeting with CRA representatives.  If the CRA is ultimately unwilling to provide the administrative concession described in the question below[1], would the Department of Finance be willing to consider a legislative amendment to the same effect? “An employer is generally required to withhold and remit tax on stock option benefits realized by an employee ...
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Floods and fires and tragic accidents keep hitting close to home in the West. Ice storms and power outages and horrific weather causing vehicle pile-ups are happening in the East. Any of these terrible events could involve volunteers, staff or service users of a charity or not-for-profit organization. As these incidents play out on national television and newspapers and infiltrate social media, I am reminded that planning for a crisis and responding to a crisis ...
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Last week, 14 environmental charities met with Finance Minister Bill Morneau to discuss promised changes to the political activities restrictions on charities, and they appear to have come away worried. The federal Liberals campaigned in 2015 on a promise of reforming the stringent political activity limitations that had led to widespread audits of charities under the previous federal government. We wrote previously about the details of the restrictions and how the new Minister of National ...
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By:  Adam Aptowitzer For many years the Income Tax Act contained a method by which certain foreign universities could attain ‘qualified donee’ status in Canada. That standing effectively amounted to being a Canadian registered charity. This allowed Canadian donors a tax credit for donations to these schools, and for Canadian charities to transfer funds directly to the foreign university. Mostly, these universities were treated differently than registered charities, but new changes to the Income Tax ...
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By:  Adam Aptowitzer In our review of Budget 2018, we made some comments related to the concept of prescribed universities. Readers may recall that the Income Tax Act has, for many years, contained an allowance that certain foreign universities would be considered as qualified donees in Canada (akin to registered charities) if they met certain requirements. Several years ago, Parliament effectively created a secondary registration mechanism for these types of foreign universities. And in the ...
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By: Kara Johnson Receipt Requirement Change In our January (2018) newsletter, we highlighted the importance of charities producing receipts for charitable donations that conform to the requirements of the law for proper receipting. Justice Campbell Miller reiterated the seriousness of a failure to comply with the Regulations of the Income Tax Act in Madamidola v. the Queen 2017 TCC 245. One element that must be present on an official receipt is the name and website ...
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By:  Arthur Drache A recently published technical interpretation from the CRA [1] gives some answers to always vexing questions about the tax treatment of gifts to charities made by executors under a will.  It deals with three possible scenarios. The querying letter described a basic scenario whereby a taxpayer (the “deceased”) died in 2016. His Will named his three sons as equal beneficiaries and co-executors, with no designation of amounts to be given to charitable ...
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By: Alexandra Tzannidakis Whether you have suddenly inherited a bank account overseas, or have owned foreign real estate for years, Canada requires you to report your foreign assets and income on your annual federal tax returns. Many people are wary of this portion of their return, thinking to themselves: why do they want to know? Are they going to tax me even more? The truth is that most people won’t owe any additional tax as ...
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By: Arthur Drache Now that budget leaks are not a sin punishable by political death, it has become the norm that a lot of carefully planted “hints” from the government side give us a preview of what is to come. This year the focus of the “leaks” was to address social issues, not the economy. But it was also clear that many of the approaches would be incremental. For example, a national Pharmacare programme will ...
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By: Adam Aptowitzer From the perspective of the charity and not-for-profit sector Budget 2018 was a relatively quiet affair dealing mostly with technical matters. However, in enacting changes to the regime which deals with donations to foreign universities the Budget has created an immediate issue for anybody that donates to these schools. What is unknown is whether this was intentional. For many years the Income Tax Act contained special provisions which allowed foreign universities that ...
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By: Alexandra Tzannidakis The federal government’s 2018 Budget, tabled a little early this year on February 27, has few proposals that will affect charities and non-profits. But the ones it has are interesting and in some cases quite helpful. They are a combination of technical fixes, new investments, and indicators of future developments. Political Activities Remain to be Clarified The federal government previously convened an expert panel to make recommendations on the topic of reforming ...
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By: Arthur Drache The recent melt-down of the world-wide equity markets may have a negative impact on charities which are (were?) fortunate enough to have substantial investments, particularly where income from those investments is used to fund the charitable activities on an ongoing basis. But if there is a cash squeeze, directors should be aware that there are limits as to what can be done to conserve cash. Those readers who have followed the subject ...
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By:  Adam Aptowitzer Readers of this newsletter will easily recall that charities must maintain control and direction over all of their funds, particularly on projects outside of Canada’s borders. Typically, where the Canadian charity is supplying 100% of the funds, yet working with a foreign intermediary, the relationship is structured as a principal/agent relationship. However, it is unreasonable for the Canadian charity to demand control and direction over the entire project if they are only ...
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by: Sylvie Lalonde Recent litigation relating to an insurer’s obligation to defend an additional insured under a Commercial General Liability (CGL) policy serves as a useful reminder that organizations should carefully review how they transfer or allocate risk when entering into service agreements with subcontractors. A common way for organizations to mitigate risk when retaining the services of a third party is to include clauses in the subcontracting agreement that impose obligations on the service ...
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By: C. Yvonne Chenier, Q.C. In the legal profession, we know what to do if we have made a mistake. Those that regulate us (Law Societies across the country) remind us about our professional obligations, how to control the damage and the importance of seeking help as soon as a mistake is discovered. So, what do we advise our non-profit and registered charity clients when they tell us they have made a mistake, or more ...
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By: Arthur Drache Towards the end of last year the CRA “published” an on-line video dealing with the question of “who the true donor of a gift is”.[1] We found is moderately interesting but nowhere nearly comprehensive if one were to judge by the questions we often get. We regularly are asked questions by charities about their legal obligations when issuing receipts. By this we do not mean the statutory requirements such as the retention ...
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By: Adam Aptowitzer A recent decision of the Tax Court illustrates a concept whose importance is only matched by the universality to which it is ignored. The case of Lichtman involved a number of Orthodox Rabbis teaching at an Orthodox Jewish school in Vancouver. The Rabbis claimed what is known as the “Clergy Residence Deduction” and ultimately lost their case. However, in a surprisingly lengthy decision the principles to take from this case are universal ...
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By:  Kara Johnson When average Canadian taxpayers pay attention to the receipts issued to them by Canadian charities to which they have donated, it is probably for two reasons:  to ensure they actually have them all in hand at tax filing time, and to identify the dollar amounts therein so that they can put them down on their income tax return. Beyond the “bottom line,” it is not likely that donors typically scrutinize the form ...
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By: Kara Johnson Employers who don’t want to seem like Scrooge and instead partake in a gift-giving spirit, might want to be aware of potential payroll tax implications.  The law clearly taxes benefits provided by an employer to an employee in the context of their work relationship. However, that relationship may also be fertile ground for a friendship, and in those circumstances an employer may want to give the employee a gift for the holidays ...
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By: Alexandra Tzannidakis In the public mind, the idea of tax credits for giving to ‘good causes’ sometimes leads to confusion and conflation of charitable tax credits and political tax credits. The truth is that charities and political causes are legally very distinct concepts (there is no such thing as a political charity) and although an individual can get tax credits for donating to both, the schemes that govern the reporting and calculation of these ...
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By:  C. Yvonne Chenier, Q.C. Santa Baby [1] Santa baby, send a CRA[2] Agent, to me I've been an awful good girl, Santa baby Governing my charity right Santa baby, a Charities Education Program[3], too, so cute Well I'll wait up for you, dear, Santa baby So hurry down your list tonight, yeah Think of all the gifts I've missed Think of the revenue I haven't list Next year I could be just as good If you ...
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By: Adam Aptowitzer In writing on the donation of capital assets such as publicly traded securities we often describe the adjusted cost base in static terms. Indeed, when discussing donations of assets where there is no tax on the disposition, such as publicly traded securities, certified cultural property or environmental property the cost base is rather irrelevant. But this simply serves to highlight the fact that the adjusted cost base (the “ACB”) of other assets ...
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By: Arthur Drache For myriad reasons circumstances may arise where a community may be threatened by a loss of services and may have to turn to outside sources to help. A few decades ago, for example, the Province of Manitoba had a programme which helped provide dental services to small towns which had no accessible dentists. A good friend of ours accepted a deal where the province paid for his entire dental education in exchange ...
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By: Alexandra Tzannidakis Many larger charities are structured in such a way that there is a head organization with subordinate divisions operating below it. For example, a charity that operates across the country may do so by way of local ‘chapters’ overseen by a main organization, or a religious governing body may have several related parishes. In certain circumstances, these subdivisions of a charity will be permitted by the CRA to have their own charitable ...
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By: Alexandra Tzannidakis Among other things, Bill 154 (the proposed Cutting Unnecessary Red Tape Act) makes significant changes to the Charities Accounting Act (“CAA”). The changes give charities increased freedom and certainty in making “social investments” where the focus is mission-related results rather than financial benefit to the charity. A brief backgrounder is in order before we dive in to the substance of the changes. First, despite its name, the CAA applies to all corporations ...
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By: Karen Cooper On September 14, 2017 the Honorable Brad Duguid (irony?), Ontario’s Minister of Economic Development and Growth introduced Bill 154, Cutting Unnecessary Red Tape Act, 2017, (“Bill 154”) as part of a government initiative to reduce red tape – red tape is an idiom that refers to excessive regulation or formal rules.  Bill 154 enacts, amends, and/or repeals many Acts, including the Charities Accounting Act, the Ontario Corporations Act (the “OCA”), and the ...
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By: Sylvie Lalonde Those of us who work in the not-for-profit sector have been eagerly waiting for some developments with respect to the Ontario Not-for-Profit Corporations Act, 2010 (the “ONCA”). On September 14, 2017, the Ontario government introduced Bill 154, Cutting Unnecessary Red Tape Act, 2017, which contains the enabling legislation that will allow the ONCA to eventually be proclaimed into force. Although this is progress, the road to actual proclamation into force of the ...
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By: Adam Aptowitzer The tax proposals currently the subject of much public discussion have more or less bypassed the charities sector. Indeed, the changes will not directly affect the regulation of donations or the charities themselves. However, indirectly, the reduction of taxable income in the hands of Canadians will undoubtedly lead to a reduction in donations across the board. Nevertheless, the situation presents a golden (literally) opportunity for charities. The proposed tax changes focus on ...
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By: Kara Johnson Raffles (or, properly speaking, raffle lotteries) can be a fun, efficient, and relatively non-labour-intensive means of making moderate amounts of money for a not-for-profit or charity.  Did you know, however, that the regulatory framework governing raffles (charitable gaming) ultimately flows from the Criminal Code?  That’s right; if you don’t want to get sent up the river for sending a flotilla of little rubber ducks down the river, you need to fulfill your ...
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By: C. Yvonne Chenier Those of us, who deal with the Canada Revenue Agency Charities Directorate (the "CRA") on behalf of clients on a regular basis, have often lamented about the old fashioned ways of communicating and filing that they use, i.e. telephone, fax and snail mail or courier. But similar to how businesses and individuals can now use “My Account” or “My CRA Mobile App”, soon registered charities and their representatives will have electronic ...
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Ontario’s Regulatory Change to the Payment of Directors By: Adam Aptowitzer  The system of Charity Law which Canada inherited from Britain upon Confederation was focused on the need to protect charitable property. Part of this system included rules which forbade those with control of such property from benefiting from it. These rules are still in place across the country but Ontario has taken a progressive attitude in this regard. Newly proposed regulations make Ontario’s system ...
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