By Adam Aptowitzer
The name “Parklane Charitable Donation Program” will be familiar to those that follow the news in the charitable sector. Originally the Program, like others, involved an out of pocket expense and charitable donation tax receipt, the former being several times less than the latter. In the case of Parklane the receipt generally came from a Registered Canadian Amateur Athletic Association (an “RCAAA”) rather than a charity. Predictably, the CRA shut down the Program and revoked most of the RCAAAs involved – including some large ones like Little League Canada and Wrestling Canada[1]. Most recently Parklane has been in the news as various law firms in Toronto have filed class action lawsuits against the promoters of the program and related parties.
Of course the most impactful litigation in terms of volume are the appeals of the tax assessments received by the participants in the Program. Now it seems that even this litigation is newsworthy.
Those of us who litigate at the Tax Court are well aware that adjournments and extensions are, if not de rigueur then certainly common. So it is unusual to see the recent decision in Edwards v. HMQ[2], a recent decision of Justice Woods at the Tax Court.
Mr. Edwards was the lead case of a group of nine “test” cases related to the Parklane Program. A trial of these cases was originally scheduled for February 2010 but several weeks before the trial the Appellant requested that it be held in abeyance pending a resolution of the Maréchaux matter[3]. The Department of Justice objected to the adjournment but on a motion it was granted by Chief Justice Rip. In February 2012 Chief Justice Rip pressed the Appellant to set down dates for the trial but the Appellant maintained that another adjournment was necessary.
The motion for that adjournment forms was the subject of the Edwards decision. Counsel for the Appellant argued that the split receipting provisions of the Income Tax Act which were originally tabled in 2002 were an issue in the case. The provisions in question have been administered by the CRA as law but have not yet received Royal Assent. The taxpayer submitted that under the circumstances the CRA’s interpretations of these provisions cannot be challenged in Court and so it is to the taxpayers benefit to wait for these provisions to be passed into law. Moreover, in the Appellant’s submission, recourse to these provisions might make settlement more likely. And, at any rate, waiting one year -with a promise not to ask for another adjournment – was in the interests of justice. Indeed, in the most recent Federal budget the government announced its intention to finally pass into law this legislation.
Predictably, Counsel for the Minister argued that a further delay would not be in the interests of justice and that there was no way to know whether Royal Assent could be expected and when that might happen.
Interestingly, Justice Woods acknowledged Counsel for the Appellant’s arguments that the taxpayers may be prejudiced by proceeding to trial at this point but after consideration of the case law ordered the matter to move forward.
The matter is of interest to both the tax community and the charity community for the same reason. The principle of administering provisions not yet passed into law is fundamentally improper – although usually remedied by passing the provisions retroactive to their date of proposal. But the interminable delay in even their retroactive passage means that the decisions of large numbers of Canadians made under laws that were tabled years ago have had time to wend their way to Tax Court – indeed more than enough time. The problem is exacerbated by the sheer number of tax provisions involved[4] and the obvious uncertainty as to whether they will ever be passed in the form in which they were tabled.
Fortunately, for the taxpayers involved the wheels of justice move slowly, and there are in fact several wheels. One would imagine that an appeal of the Court’s decision is pending (and potentially another appeal after that if the taxpayer loses the motion) so that even if after having lost the motion for adjournment at the Tax Court it may still be years before the matter is heard.
[1] One wonders what effect the Parklane matter may have had on Canada’s Olympic medal count.
[2] 2012 TCC 264
[3] Maréchaux v. HMQ 2006-410(IT)G dealt with donations through another tax shelter program.
[4] As noted by the auditor general.